Singapore Property Review

The property market in Singapore is “very exciting” for property investors, it has been claimed.

Rhiannon Williamson, director of Amberlamb.com, explained that while prices have been rising since the middle of 2006, they are yet to reach the heights they did prior to the Asian financial crisis.

“This suggests that there is maturity and common sense in the market, which gives both domestic and international buyers a great deal of confidence in Singapore,” she said.

Ms Williamson added that “intense” demand and “incredibly” low interest rates, as well as the fact that rental rates are expected to rise by up to 20 per cent in some areas, mean that the country is a “very healthy market” for overseas investors.

“Analysts from leading financial institutions are all in agreement that Singapore’s real estate market will remain highly buoyant and successful throughout 2008,” she concluded.

Figures released by Global Property Guide show property prices in Singapore increased by 24 per cent in real terms during the first nine months of last year.

This made it the world’s best performing housing market, the website added.

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Economic uncertainty has deflated house price inflation in the west, while returns in emerging countries have bounded ahead, figures show.

Global house price inflation in quarter four of 2007 stood at an annualised 8.2 percent, down from 9.7 percent a year ago, the Knight Frank global house price index shows.

Bulgaria topped the index with growth of 33.7 percent, followed by Russia at 30 percent.

In the Far East, Singapore and Hong Kong also outperformed the market, with annual growth of 31.3 percent and 22.3 percent respectively, as did China, where prices grew 10.5 percent overall and by 20 percent in some cities.

 See full article…

Source: Javno - (March 17)

Macquarie Global Property Advisors (MGPA) says it expects office rentals in Singapore to remain hot, jumping by 10 to 25 percent this year.

The Australian private equity real estate fund management firm is converting two plots of land at Marina View into twin office blocks. The two towers, expected to be completed in 2012, will also house a luxury five-star hotel.

These land parcels drew top dollars from Macquarie Global Property last year. Costing a total of S$3 billion, the sites will soon enjoy a S$5 billion makeover.

Site B, which Macquarie won last December for just under S$953 million, and Site A, for S$2 billion in September - are both on a 99-year lease.

Formerly known as Marina View Parcels A and B, the two-hectare site will be transformed into twin luxury office buildings, one of which will also house a 220-room five-star hotel.

Macquarie expects to announce in the next 3 to 4 months who they will be working with on the hotel.

It says the towers, due to be completed between 2011 and 2012, are well-timed to catch the growing demand for office space.

Simon Treacy, CEO, Asia Investments, MGPA, said: “I think around Asia, we are extremely busy - we see good value emerging around the region. In Singapore, we also think that there will be increased demand in the office sector - rents are likely to grow 10 to 25 percent this year.

“I think over the medium term, people will be surprised because they’ve underestimated the demand in Singapore for modern international grade office space.

“And we’ve seen that in Japan for 2003 and this year in Hong Kong. And, I think it’s a reflection of the solid economy of Singapore and the ongoing growth in a lot of the financial service sectors and wealth management in particular.”

The towers will be more than 40 storeys high and designed by Australian architect Denton Corker Marshall, who also designed the Melbourne Museum and the Australian Embassy in Beijing.

About 60 percent of both buildings will be set aside for office use: Tower A will house 130,000 square metres, and Tower B, 113,580 square metres.

Besides this project, Macquarie Global Property says it is looking out for other bargains.

Mr Treacy said: “I think over the last two years, a lot of investors have probably overlooked and undervalued Southeast Asia. I think now people are seeing very good fundamentals down here, and I think our timing was very good in making a number of acquisitions. We still think there is a very good value in buying… over the next 6-9 months.”

Office rentals in Singapore have been surging because of growing demand and a lack of supply. But more office space is expected to enter the market.

The government is targeting to double office space in the Central Business District to an estimated 2.82 million square metres. - CNA/ch

Source: Channel NewsAsia - 18 Mar 2008

Related Link: Forbes says “Macquarie Global Property to spend 2 bln sgd to develop Singapore sites - report“

BusinessTimes online writes that “Property may be big gainer as real interest rates plunge“, published 26 Nov 2007:

“(SINGAPORE) Rising inflation may be starting to worry policymakers and the man on the street, but it has had an interesting side effect. It has pushed down the real interest rate dramatically and is expected to drive the property market as buyers and borrowers take on more mortgages, which are costing them very little in real terms”

 It highlights that inflation may make putting money in the bank not really a good move:
“As OCBC’s Selena Ling put it: ‘There is no free lunch - our savings are also likely fetching a very low if not negative real return currently (calculated by subtracting the inflation rate from the nominal interest rates). The savings rate is about 0.25 per cent, while the 12-month fixed deposit rate is about 0.83 per cent.”

 In fact with the high rental market, if one look hard enough, one may able to find properties with high-rental yield. One example is Medge in D11 (Novena), in which rental yield is more than 5%. A 2rm unit today is around $900k, commanding rental around $3800-$4000. A 1rm unit at $699k, already comes with $3k rental.

That means, instead of letting you money in the bank earning 1-2% interest rate being erroded by inflation rate of 2-3%, you better off park it in property earning 5%. Not forgetting, you can also leverage on bank (current interest can be as low of 3.5% only).  Supposing you have $500k cash in bank (earning only 1%), you can just borrow from bank additional $200k to buy a $700k property with $3000 rental yield. The net effect, is $500k of your own money now grow 5% annually, and the borrowed $200k may even net 1% (minus interest), that’s additional bonus!  Moreover, you may even see capital appreciation in years to come as our IR becomes ready (that should cover all the misc cost like stamp-duty, legal cost, effectively). For those of you lamenting that your CPF is locked away, which not use it to buy property and generate addition cash income every month?

Rather than lamenting about inflation, why not be pro-active think about ways to cope with inflation, or even profit from it! Food for thought!

You might want to check out Adam Khoo’s blog about the returns on investment from Singapore properties.