SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

HOME GROUND ADVANTAGE  How have ordinary Singaporeans benefited from the new scheme of things? In the previous property market bull run in 2007, some 2,837 individuals who bought a private property in the secondary market used a HDB flat address as the forwarding address (we generalise them as ‘the HDB upgraders’). They plonked a total of $2.778 billion down on almost 4 million square feet (i.e. 3,997,760 ft2) of private non-landed home units; and the total transactions of the entire year worked out to be an average of 1,410 ft2 per unit purchased by a HDB upgrader, or an average of $695 psf per unit. The official URA record shows that in the same year, 2,718 new private home units were sold to HDB upgraders, and together they spent $2.716 billion on slightly over 3 million square feet (i.e. 3,103,627 ft2) of new private non-landed homes; and that worked out to be an average of 1,141ft2 or an average of $877 psf for each HDB upgrader. Within the same year, new home prices were dearer than resale prices by an average of $182 (or 26.2%).

HOW HAS THE FORTUNE OF ORDINARY SINGAPOREANS CHANGED IN THE AFTERMATH OF  THE LAST TWO PROPERTY BULL‐RUNS IN 2007 AND 2011?  Earlier at Page 3, I asked whether local folks believed that the drastic cooling-off measures were meant for Singaporeans to ‘catch up and close the gap’. But, regardless of whether there was really such a policy intention, will such unintended effect materialise – now that we have the ‘home ground advantage’? This upcoming case study adopts a longer time perspective by covering the historical 5-year period between 2007 and Q1 2012 to ascertain whether ordinary Singaporean wage earners (including middle-class Singaporeans and the pretenders) have, over the 5 years period, become more affluent, more sophisticated and possess stronger purchasing powers to benefit from the ‘home ground advantage’ made possible by the recent imposition of the 10% Additional Buyer’s Stamp Duty (ABSD); and how do such Singaporeans fare vis-à-vis permanent residents (SPR) and foreigners not domicile here in terms of the abovementioned attributes (i.e. affluence, sophistication etc), which could be told by the locations they have bought into.

APPROACH & ASSUMPTIONS OF THE CASE STUDY   Ascertaining Singaporean’s Market Share In each of the 5 years selected for this study, 3 sets of statistics will be examined so as to quantify the market share of Singaporeans vis-à-vis other purchasers/investors of By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

other NATIONALITIES and RESIDENCE STATUS; and at the end of the day ascertain whether ordinary Singaporeans are indeed becoming more affluent. is simply defined as the ability to enjoy greater personal space, to finance greater personal comfort and convenience, to engage in quality pursuits outside one’s work life, and, the most important of all, to preserve greater privacy for one.

AFFLUENCE

 Basic Assumption [I] – 80% of HDB Flat Dwellers are Singaporean citizens The assumption used in this case study is that the 80% majority of HDB flat dwellers are Singaporeans, and therefore the total number of private home buyers with HDB addresses will provide a telling indicator of the strength in upward mobility in terms of housing quality and the general economic well-being of the ordinary Singaporean families.  Basic Assumption [II] – Private Home Owners comprise primarily middle-class Singaporeans, other nationalities and entities

On the other hand, I would assume that the vast majority of property buyers who used private property addresses as their forwarding address (presumably living in them) comprise *middle-class Singaporeans (around 25% of the population), nonindividuals (e.g. corporations and businesses), permanent residents (SPR), and foreigners not residing in Singapore. *The definition of MIDDLE-CLASS is generally based on the ability to assume higher financial risks resulting in higher leverage, and the ability to keep up with the recurring costs of private property ownership. As such, it invariably refers to individuals and households with sustainable high income.

2007 – WHERE FOREIGN BUYERS PROSPERED AND LUXURIATED IN SINGAPORE PROPERTY  MARKET  PRIMARY HOME SALE IN 2007   HOW DID ORDINARY SINGAPOREANS FARE   There were a total of 12,452 caveats lodged against property developers of new home units, out of which 11,615 (or 93.3%) were below $5 million in 2007 – with 2,887 (or 24.9%) of such caveats being attributed to HDB upgraders, and 8,728 (or 75.1%) of the vast majority of the caveats made by individuals who used private property addresses as their forwarding addresses, presumably living in them. (See Table [2.1-A] below)   By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

  o  HIGH‐END HOME SEGMENT DOMINATED BY FOREIGNERS 

In the high-end home segment, out of the 837 new home units sold above the $5 million price tag, 819 units (or 97.9%) of the caveats were lodged by private property owners (and foreigners) with only 18 units (or 2.2%) of the high-end home units purchased by HDB upgraders.   o  PRIVATE HOME OWNERS BOUGHT MORE NEW HOME UNITS IN 2007 

On the whole, 76.7% of all the new home units launched in 2007 were purchased by private property dwellers while the remaining 23.3% were taken up by HDB upgraders. TABLE [2.1-A] – SHOWING NUMBER OF CAVEATS LODGED AGAINST PROPERTY DEVELOPERS IN THE WHOLE OF 2007 AND THE RESIDENTIAL STATUS OF THE CAVEATORS

PURCHASERS’ ADDRESSES HDB PRIVATE 2,045 [41.0%] 2,941 [59.0%] 655 [17.8%] 3,030 [82.2%] 187 [6.4%] 2,757 [93.6%] 18 [2.2%] 819 [97.9%] 2,905 [23.3%] 9,547 [76.7%]

2007 NEW HOME PRICE ($) 200K – 1 mil > 1 mil – 2 mil > 2 mil – 5 mil 5 mil – 37.04 mil TOTAL

TOTAL 4,986 [40.0%] 3,685 [29.6%] 2,944 [23.6%] 837 [6.7%] 12,452

Statistics gleaned from URA Realis and compiled by Sam Gian

The relatively lower level of market participation by HDB upgraders in the private home market segment in 2007 is understandable as the housing market in general had just recovered from a 4-year slump and the HDB resale market did not pick up steam until after the second half of 2007.

HOW  SINGAPOREAN  HOME  BUYERS  FARE  VIS‐À‐VIS  FOREIGN  BUYERS  IN  2007  [PRIOR  TO  THE  FINANCIAL TSUNAMI IN US AND EUROPE]  Another approach is to look at Singaporean market share from two other different perspectives, i.e. market share by different residence status and market share by different nationalities. (See Table [2.1-B] and Table [2.1-C] below) TABLE [2.1-B] – MARKET SHARE BY PURCHASERS’ RESIDENCE STATUS IN DIFFERENT PRICE SEGMENTS IN 2007

2007

% OF SC % OF PERMANENT *SC % IN OVERALL OVERALL PRICE RESIDENT (SPR) TOTAL CATEGORY TOTAL

NON-SPR FOREIGNER

% OF OVERALL COMPANY TOTAL

% OF OVERALL TOTAL

> $5 mil

36.5%

1.6%

13.0%

0.6%

21.9%

1.0%

28.6%

1.3%

> $2 to $5 mil

52.8%

8.8%

14.3%

2.4%

21.3%

3.6%

11.5%

1.9%

> $1 to $2 mil

66.0%

21.1%

12.4%

4%

14.6%

4.7%

7.0%

2.3%

< $500k to $1 mil

75.9%

35.6%

13.9%

6.5%

8.0%

3.8%

2.2%

1.0%

OVERALL MARKET SHARE

67.1%

13.4%

13.0%

6.5%

Statistics gleaned from URA Realis and compiled by Sam Gian

*SC means Singaporean

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

> $5 mil > $2 mil to $5 mil > $1 mil to $2 mil < $500k to $1 mil OVERALL MARKET SHARE

4.6%

2.0%

3.0%

2.0%

15.2%

OTHERS

6.1%

[8TH]

67.1%

CHINA

41.0% 25.8% 17.0% 8.6%

[5TH]

1.6% 1.1% 1.7% 2.5%

INDIA

2.1% 3.3% 2.5% 3.4%

U.K.

2.7% 3.3% 2.5% 1.2%

[4TH]

3.3% 3.9% 4.1% 5.2%

[3RD]

12.9% 15.4% 6.1% 3.2%

MALAYSIA

36.4% 47.0% 66.0% 75.9%

[2ND]

INDONESIA

2007

SINGAPORE [1ST POSITION]

TABLE [2.1-C] – MARKET SHARE BY PURCHASERS’ NATIONALITIES IN DIFFERENT PRICE SEGMENTS IN 2007

Statistics gleaned from URA Realis and compiled by Sam Gian

As can be seen from the tabulation at Table [2.1-B], the high-end and luxury home market in 2007 was predominantly occupied by foreigners (defined as non-citizens who comprise the Permanent Residents (SPR) and non-SPR foreigners not residing in Singapore); and together they took up 34.9% of the whole year transactions; while companies bought another 28.6% of the high-end properties. Individual Singaporeans took 36.5% of the pie. And among the locals, less than 2% were HDB upgraders. This was the prevalent situation in an exuberant market characterised by the participation of foreigners, including now-defunct foreign investment banks (including Lehman Brothers, Morgan Standley, Wachovia etc), private fund managers, and high net worth individuals from the neighbouring countries. However, all this was to change in the following year where the subprime crisis in US and Europe caused their financial system to crash to the ground.

2011 – THE WATERSHED YEAR   SINGAPOREANS’ RUDE AWAKENING TO NEW REALITIES IN THEIR DAILY LIVES  Fast forward to 2011 where Singapore was forced by new circumstances to have to revisit some old fundamental issues that the post-independence generation of Singaporeans thought were ‘things of the past’, including soaring prices of daily essentials, frequent floods at popular areas and housing estates, widening social divides among people living here (which apparently translated into a significant vote swing against the ruling party in the May 2011 General Election), frequent breakdowns of the overcrowded Mass Rapid Transit (MRT) trains, sardine-packed public buses, daily traffic jams on the roads, widening income gap, mushrooming of pawnshops in the heartlands, increasing audacity of loan sharks who terrorise innocent neighbours at HDB heartlands etc. Have we taken two steps forward but one step backwards in socio-economic achievements?  DAILY QUEST FOR SOLUTIONS TO THE OVERCROWDING SITUATION  In fact, 2011 was a watershed year not just in the political culture of Singapore, but also in a more fundamental way as the people living here (especially those who are By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

born and bred here) seek solutions to the increasing inconveniences of their daily life which have resulted from both perceived and real losses of personal space in this increasingly crowded island-city. The significant adjustments that most of the ordinary Singaporeans have to make in their spatial relationship in their day-to-day activities have also contributed to the building up of a siege mentality in some individuals who resent being told to lower their expectation in life. 2011 was also a year where the Singapore government introduced the Seller’s Stamp Duty (SSD) on 14 January 2011 where any disposition of a private residential property within 4 years of its acquisition will attract additional tax; and from 8 December 2011, depending on the residence status as well as the number of residential property the buyers already owned at the point of a sale and purchase contract, they are subjected to Additional Buyer’s Stamp Duty (ABSD). Aimed to further frustrate speculators and to dike the flood of ‘hot money’, the cooling measures introduced in 2011 did bring some semblance of sanity to the market. But ultimately, one question still begs an answer: ‘How have Singaporeans benefitted from it?’ Let’s look at the statistics before we pass any judgement.

PRIMARY HOME SALE IN 2011   HOW DID ORDINARY SINGAPOREANS FARE?   o SINGAPOREAN BUYERS DID BETTER IN PRIMARY HOME MARKET IN 2011 THAN 2007 

The market share of HDB flat upgraders in the primary home sale market was 47.8% in 2011, compared with only 23.3% in 2007. However, in terms of growth in transaction volume, HDB flat upgraders appear to have improved their lots by leaps and bounds in between the 5-year period as they accounted for an additional 3,547 (or 122% higher) private transactions in the NEW home market with 6,452 transactions attributed to them in 2011, compared with 2,905 deals in 2007. (Reference: Table [2.1-A] and Table [2.2-A]) TABLE [2.2-A] – SHOWING NUMBER OF CAVEATS LODGED AGAINST PROPERTY DEVELOPERS IN THE WHOLE OF 2011 AND THE RESIDENTIAL STATUS OF THE CAVEATORS

2011 NEW HOME PRICE ($) 422K – 1 mil > 1 mil – 2 mil > 2 mil – 5 mil 5 mil – 37.04 mil TOTAL

PURCHASERS’ ADDRESSES HDB PRIVATE

4,279 [58%] 2,016 [42%] 149 [13%] 8 [5.0%] 6,452 [47.8%]

3,095 [42%] 2,825 [58%] 969 [87%] 154 [95%] 7,043 [52.2%]

TOTAL

7,374 [54.6%] 4,841 [35.9%] 1,118 [8.3%] 162 [1.2%] 13,495

Statistics gleaned from URA Realis and compiled by Sam Gian

o SINGAPOREAN SHARES OF >$5 MIL PRICE CATEGORY F FELL 42.4% IN 2011 (COMPARED WITH 2007) 

However, from the perspective of price range in the larger market (including resale and sub-sale) Singaporean’s market share did not seem to have improved at all. This is because even though the relative percentage of Singapore’s share of any market

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

segments (or price categories) vis-à-vis other nationalities has gone up, the absolute transaction volume has not. For example, in the >$5 million price category, when Singaporean’s market share is compared with other nationalities, their share went up from 36.5% in 2007 to 46.4% in 2011. But, when compared based on absolute transaction figures, Singaporean’s market share in that specific market segment actually dropped from 627 of total transaction in 2007 to 361 transactions and this works out to be 42.4% fall in transaction volume when compared between 2011 and 2007. In other words, Singaporeans hold a mere 1.0% share of the total transaction of luxury apartments in 2011 (See Table [2.2-B1] below) o SINGAPOREAN SHARES OF >$2 MIL‐TO‐ $5 MIL PRICE CATEGORY F FELL 19.6% IN 2011 (COMPARED WITH 2007) 

Likewise, despite an apparent 5.7% rise in 2011 in the >$2 million to $5 million price category over 2007, Singaporeans bought an overall of 2,747 private home units in 2011 which was 670 units fewer or 19.6% lower than the 3,417 private home units transacted in 2007 in this specific market segment. (See Table [2.2-B1] below) TABLE [2.2-B] – MARKET SHARE BY PURCHASERS’ RESIDENCE STATUS IN DIFFERENT PRICE RANGE IN 2011

2011

% OF *SC % IN SC % OF PERMANENT OVERALL OVERALL PRICE RESIDENT (SPR) TOTAL CATEGORY TOTAL

NON-SPR FOREIGNER

% OF OVERALL COMPANY TOTAL

% OF OVERALL TOTAL

> $5 mil

46.4%

1.0%

16.0%

0.4%

23.3%

0.5%

14.4%

0.3%

> $2 to $5 mil

58.5%

8.1%

12.3%

1.7%

24.1%

3.3%

5.0%

0.7%

> $1 to $2 mil

67.4%

26.0%

12.0%

4.7%

18.5%

7.2%

2.0%

0.8%

< $500k to $1 mil

73.7%

32.9%

14.1%

6.3%

11.5%

5.1%

0.65%

0.3%

OVERALL MARKET SHARE

68.6%

13.1%

Statistics gleaned from URA Realis and compiled by Sam Gian

16.2%

2.1%

[*SC means Singaporean]

o SINGAPOREANS BOUGHT FEWER UNITS IN THE LOW‐END & MASS MARKET SEGMENTS IN 2011  In the cheapest price category (i.e. $500k to $1 mil category), Singaporean buyers bought a total of 11,149 private home units in 2011 and this is 2,652 units fewer or 19.2% lower than the 13,801 private home units transacted in 2007 in this specific market segment.   o THE ONLY IMPROVEMENT IN 2011 WAS IN THE M MID‐MARKET SEGMENT ($1‐$2MIL CATEGORY)   The only market segment that Singaporean buyers showed an improved performance in 2011 is the mid-market segment or the “>$ 1 million to $2 million” price category where the locals bought a total of 8,826 private home units in 2011. This works out to be 648 units or 7.9% higher than the 8,178 units transacted in 2007 in this specific market segment. (See Table [2.2-B1] below)

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [2.2-B1] – COMPARING SINGAPOREAN’S MARKET SHARE BETWEEN 2007 AND 2011

2011

> $5 mil > $2 to $5 mil

NO OF TRANSACTION BY *SINGAPOREAN (SC)

*SC % IN PRICE CATEGORY

SC % OF OVERALL TOTAL

2007

*SC % IN PRICE CATEGORY

SC % OF OVERALL TOTAL

361

46.4%

1.0%

627

36.5%

1.6%

2,747

58.5%

8.1%

3,417

52.8%

8.8%

> $1 to $2 mil

8,826

67.4%

26.0%

8,178

66.0%

21.1%

< $500k to $1 mil

11,149

73.7%

32.9%

13,801

75.9%

35.6%

SINGAPOREAN’S TOTAL

23,083

--

68.6%

26,023

--

67.1%

OVERALL TOTAL

33,913

100%

38,774

--

100%

--

Statistics gleaned from URA Realis and compiled by Sam Gian

*SC means Singaporean TABLE [2.2-C] – MARKET SHARE OF PURCHASERS OF DIFFERENT NATIONALITIES IN DIFFERENT PRICE RANGE IN 2011

2011 > $5 mil > $2 mil to $5 mil > $1 mil to $2 mil < $500k to $1 mil OVERALL MARKET SHARE

SINGAPORE [1ST POSITION]

PRC

INDONESIA

MALAYSIA

U.K.

[2ND]

[3RD]

[4TH]

[5TH]

46.4% 58.5% 67.4% 73.8% 68.6%

10.4% 8.4% 7.7% 8.7% 8.3%

8.9% 10.2% 6.1% 2.4% 5.1%

3.4% 3.8% 5.3% 6.7% 5.7%

2.57% 1.85% 0.8% 0.3% 0.8%

[1ST POSITION]

[2ND]

[4TH]

[3RD]

[6TH]

OTHERS 28.1% 17.1% 12.6% 8.1% 11.5%

Statistics gleaned from URA Realis and compiled by Sam Gian

  o SINGAPOREAN’S MARKET SHARE WAS 11.3% LOWER IN 2011 COMPARED WITH 2007  Despite the increase of Singaporean’s market share over other nationalities in 2011 (see Table [2.2-C]), in terms of transaction volume, Singaporean’s overall market share was 2,940 units fewer (or 11.3% lower) than that of 2007.   o OVERALL PRIVATE HOME SALE VOLUME IN 2011 DECLINED 12.5% COMPARED WITH 2007   On the whole, when compared with 2007, there were a total of 4,861 fewer transactions (or 12.5% decline) in 2011 in overall market activities, including transactions by permanent residents and foreigners not residing in Singapore. And this was before the Additional Buyer’s Stamp Duty (ABSD) was imposed. What about after ABSD was imposed? Do Singaporeans fare better in the aftermath of ABSD, or are we worse off?

IMPACT OF ABSD ON SINGAPORE PROPERTY MARKET   To ascertain the impact of ABSD on Singaporean buyers (especially the heartlanders), we will likewise look at the same sets of statistics, including (i) private property transaction volume in the first quarter (Q1) of 2012 in terms of number of caveats lodged against property sellers, (ii) Singaporean’s market share vis-à-vis other nationalities; and, (iii) market share of different purchasers by price range. At By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

the end of the day, the data will help us ascertain whether ordinary Singaporeans are indeed becoming more affluent.   o OVERALL PRIVATE HOME SALE VOLUME IN Q1 2012 DECLINED 12.5% COMPARED WITH Q4 2011  In the aftermath of ABSD, there were a total of 9,019 fewer transactions (or 67.0% decline) in Q1 2012 in new home market activities. (see Table [2.3.A] & [2.3-A1]) However, as there is usually time lag in caveat lodgements, the decline should not be as severe as the current set of number suggested. It will be more meaningful to examine the Singaporean’s share of the buying activities instead. TABLE [2.3-A] – SHOWING OVERALL NUMBER OF CAVEATS LODGED AGAINST PROPERTY SELLERS (INCLUDING DEVELOPERS) IN Q1 2012 AND FORWARDING ADDRESSES OF CAVEATORS

SR

Q1 2012 NEW HOME PRICE ($)

1

398K – 1 mil

2

> 1 mil – 2 mil

3

> 2 mil – 5 mil

4

5 mil – 37.04 mil

5

TOTAL

[A]

[B]

PURCHASERS WITH HDB ADDR

PURCHASERS WITH PRIVATE ADDR

1,430 [65.7%] 714 [32.8%] 32 [1.47%] 0 [0%] 2,176 [49.0%]

915 [40.4%] 1,082 [47.8%] 228 [10.1%] 39 [1.7%] 2,264 [51.0%]

TOTAL

2,345 [52.8%] 1,796 [40.5%] 260 [5.9%] 39 [0.9%] 4,440

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [2.3-A1] – SHOWING OVERALL NUMBER OF CAVEATS LODGED AGAINST PROPERTY SELLERS (INCLUDING DEVELOPERS) IN Q4 2011 AND FORWARDING ADDRESSES OF CAVEATORS

1

Q4 2011 NEW HOME PRICE ($) 422K – 1 mil

2

> 1 mil – 2 mil

3

> 2 mil – 5 mil

4

5 mil – 28 mil

5

TOTAL

SR

[A] PURCHASERS WITH HDB ADDR

[B] PURCHASERS WITH PRIVATE ADDR

TOTAL

4,279 [58.0%] 2,016 [41.6%] 149 [13.3%] 8 [6.3%] 6,452 [47.9%]

3,095 [42.0%] 2,825 [58.4%] 969 [86.7%] 154 [122.2%] 7,043 [52.3%]

7,374 [54.8%] 4,841 [36.0%] 1,118 [8.3%] 126 [0.9%] 13,459

Statistics gleaned from URA Realis and compiled by Sam Gian

  o SINGAPOREAN’S MARKET SHARE IN RELATION TO SPR, FOREIGNERS & COMPANIES WENT UP   In the aftermath of ABSD, Singaporean’s overall market share went up by 7.6 percentage points to reach 75.8% in Q1 2012 compared with 68.2% before ABSD was imposed. Likewise, the overall market share of the permanent residents went up by 5 percentage points to reach 17% of the overall market share at the expense of foreigners and companies. (See Table [2.3-B] & [2.3-B1]) TABLE [2.3-B] – MARKET SHARE BY DIFFERENT RESIDENCE STATUS IN DIFFERENT PRICE RANGE IN Q1 2012

Q1 2012

*SC % IN SC % OF PERMANENT % OF % OF % OF NON-SPR PRICE OVERALL RESIDENT OVERALL OVERALL COMPANY OVERALL FOREIGNER CATEGORY TOTAL (SPR) TOTAL TOTAL TOTAL

> $5 mil

62.2%

0.97%

18.4%

0.3%

15.3%

0.2%

4.1%

0.06%

> $2 to $5 mil

74.4%

6.8%

12.0%

1.1%

11.0%

1.0%

2.6%

0.2%

> $1 to $2 mil

77.4%

28.3%

14.9%

5.5%

6.5%

2.4%

1.2%

0.4%

81%

42.7%

16.0%

8.4%

2.9%

1.5%

0.1%

0.06%

< $500k to $1 mil OVERALL MARKET SHARE

75.8%

17%

6.5%

0.7%

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

11

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [2.3-B1] – MARKET SHARE BY DIFFERENT RESIDENCE STATUS IN DIFFERENT PRICE RANGE IN Q4 2011

Q4 2011

*SC % IN SC % OF PERMANENT % OF % OF % OF NON-SPR PRICE OVERALL RESIDENT OVERALL OVERALL COMPANY OVERALL FOREIGNER CATEGORY TOTAL TOTAL TOTAL TOTAL (SPR)

> $5 mil

40.0%

0.7%

10.3%

0.2%

30.3%

0.6%

19.3%

0.40%

> $2 to $5 mil

60.4%

8.3%

11.0%

1.5%

24.0%

3.3%

4.5%

0.60%

> $1 to $2 mil

66.3%

24.8%

10.8%

4.0%

21.4%

8.0%

1.6%

0.60%

< $500k to $1 mil

73.2%

34.30

13.3%

6.3%

12.8%

6.0%

0.7%

0.30%

OVERALL MARKET SHARE

68.2%

12.0%

17.9%

1.9%

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [2.3-C] – MARKET SHARE BY PURCHASERS’ NATIONALITIES IN DIFFERENT PRICE CATEGORY IN Q1 2012

[A] SR

Q1 2012

[B]

< $500K-$1m UNIT

% of TOTAL

> $1 to $2 mil UNIT

% of TOTAL

[C]

[D]

> $2 to $5 mil

> $5 mil

UNIT

% of TOTAL

UNIT

% of TOTAL

[E] TOTAL

1

SINGAPORE

2,697

42.7%

1,784

28.3%

429

6.8%

61

0.97%

4,971

78.8%

2

MALAYSIA

243

3.9%

89

1.4%

14

0.2%

3

0.05%

349

5.5%

3

CHINA

145

2.3%

117

1.9%

28

0.4%

8

0.1%

298

4.7%

4

INDONESIA

71

1.1%

91

1.4%

50

0.8%

10

0.2%

222

3.5%

5

INDIA

89

1.4%

83

1.3%

11

0.2%

5

0.1%

188

3%

6

OTHERS

85

1.3%

141

2.2%

45

0.7%

11

0.2%

282

4.5%

7

TOTAL

3,330

52.8%

2,305

36.3%

577

9.1%

98

1.6%

6,310

Statistics gleaned from URA Realis and compiled by Sam Gian TABLE [2.3-C1] – MARKET SHARE BY PURCHASERS’ NATIONALITIES IN DIFFERENT PRICE CATEGORY IN Q4 2011

[A] SR

Q4 2011

[B]

< $500K-$1m UNIT

% of TOTAL

2,684

> $1 to $2 mil UNIT

% of TOTAL

34.4%

1,935

[C]

[D]

> $2 to $5 mil

> $5 mil

[E] TOTAL

UNIT

% of TOTAL

UNIT

% of TOTAL

24.8%

651

8.3%

58

0.7%

5,328

68.2%

1

SINGAPORE

2

CHINA

334

4.3%

253

3.2%

81

1.0%

18

0.2%

686

8.8%

3

INDONESIA

106

1.4%

228

2.9%

135

1.7%

18

0.2%

487

6.2%

4

MALAYSIA

227

2.9%

145

1.9%

40

0.5%

2

0.02%

414

5.3%

5

INDIA

141

1.8%

116

1.5%

22

0.3%

2

0.03%

281

3.6%

6

OTHERS

175

2.2

242

3.1%

148

1.9%

47

0.6%

612

7.8%

7

TOTAL

3,667

47.0%

2,919

37.4%

1,077

13.8%

145

1.9%

7,808

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

12

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

o NUMBERS OF TRANSACTIONS BY SINGAPOREANS SLIPPED 6.7% IN Q1 2012 COMPARED WITH 2007   The total number of 4,971 private home transactions by Singaporean buyers in Q1 2012 was actually 357 deals fewer (or 6.7% lower) than the 5,328 transactions in the same category in Q4 2011. (See Table [2.3-D]) In the ‘>$2 mil to $5 mil’ price category, there were 429 deals transacted by Singaporean buyers compared with 651 deals in the same category in the preceding quarter. It was 222 deals fewer or 34.1% down, quarter-to-quarter (Q-to-Q). (See Table [2.3-D]) The mid-market segment or the ‘>$1 mil to - $2 mil’ price category was 151 deals shy of the 1,935 transactions by Singaporean buyers in Q4 2011. The shortfall in Q1 2012 translates to 7.8% decline in percentage term. (See Table [2.3-D])   o TRANSACTIONS OF CHEAPEST AND DEAREST APARTMENTS BY SINGAPOREANS INCHED UP IN Q1 2012   Singaporeans bought 13 more units in the low-end and mass market segment and 3 more units in the high-end segment, achieving a 0.48% and 5.2% rise in transaction volume in the respective segments in Q1 2012. (See Table [2.3-D])   o OVERALL TRANSACTIONS IN Q1 2012 DECLINE 19.1% OVER PRECEDING QUARTER   On the whole, the overall private home sale transactions (including those transacted by permanent residents, foreigners and companies) in Q1 2012 declined by 1,498 deals (or 19.1%). (See Table [2.3-D]) TABLE [2.3-D] – COMPARING SINGAPOREAN’S MARKET SHARE BETWEEN Q1 2012 AND Q4 2011

NO OF TRANSACTION BY *SINGAPOREAN (SC)

*SC % IN PRICE CATEGORY

SC % OF OVERALL TOTAL

Q4 2011

*SC % IN PRICE CATEGORY

SC % OF OVERALL TOTAL

> $5 mil

61

62.2%

0.97%↑

58

40.0%

0.7%

> $2 to $5 mil

429

74.4%

6.8%

651

60.4%

8.3%

> $1 to $2 mil

1,784

77.4%

28.3%↑

1,935

66.3%

24.8%

< $500k to $1 mil

2,697

81%

42.7%↑

2,684

73.2%

34.3%

SINGAPOREAN’S TOTAL

4,971

--

78.8

5,328

--

68.2%

OVERALL TOTAL

6,310

--

100%

7,808

--

100%

Q1 2012

Statistics gleaned from URA Realis and compiled by Sam Gian

Some interesting facts were unveiled in this case study as follows:  

 SINGAPOREAN HOME BUYERS  Few Singaporeans actually had the means to buy into the high-end home segment regardless of whether it is before or after the implementation of Additional Purchaser’s Stamp Duty (ABSD). Singaporean buyers accounted for 429 units (or 6.8% of total transactions) in the ‘>$2 million to $5 million’ price category in Q1 2012 (GRID

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

13

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

[1C] of Table [2.3-C]); and 61 units (or 0.97%) of the overall transaction volume the

‘above $5 million’ price category respectively (GRID [1D]). Most local purchasers have spending powers within the ‘sub-$1 million’ price range (GRID [1A]) AND ‘above $1 million to $2 million’ (GRID [1B]) price range. (Reference: Table [2.3-C]) Among the 4,440 purchasers accounted for in Table [2.3-A] above, 2,176 (or 49%) of them are HDB flat upgraders (who could include Singaporeans as well as permanent residents); while 2,264 (or 51%) of them live in private residential properties.   o HDB HEARTLANDERS  – WALLET SIZE  Though by percentage term the heartlander’s share appears to have risen, the increase was contributed by 7.7% rise in the low-end private home segment (see GRID 1[A] of Table [2.3-A] and Table [2.3-A1] above). In fact, in the “>$1 mil to $2 mil” price category, there was a drop of 8.8% in HDB upgrader’s market share, compared with the preceding quarter, which is the difference between 41.6% share in Q4 2011 and 32.8% share in Q1 2012. (See GRID 2[A] Table [2.3-A] and Table [2.3-A1] above) In the “>$2 mil to $5 mil” category, there was an 11.8% fall in HDB upgrader’s market share, which is the difference between 13.3% share in Q4 2011 and 1.47% share in Q1 2012. (See GRID 3[A] Table [2.3-A] and Table [2.3-A1] above) As such, there is no evidence to say that the wallet size of HDB heartlanders has become bigger. Then what about apartment size? Is it also getting smaller?   o HDB HEARTLANDERS  – APARTMENT SIZE  The average apartment size in Singapore has shrunk 30.8% from an average of 1,394 sq ft in 2007 to 965 sq ft in 2011. (See Table [2.3-E]) The difference between new private home units purchased by HDB upgraders and private home owners is described below: New private home units purchased by HDB upgraders in 2011 shrank by 264 sq ft on average (or 23.1% smaller). In 2007, the average apartment size of private home units bought by HDB upgraders was in general 1,142 sq ft. (Table [2.3-E]) New private home units purchased by private home owners in 2011 were generally smaller by 425 sq ft or had a 28.9% reduction in size. In 2007, the average apartment size of private home units bought by private home owners was 1,469 sq ft, but in 2011, it was cut to 1,044 sq ft on average. (Table [2.3-E])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

14

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [2.3-E] – COMPARING HARD DATA OF PRIVATE HOME OWNERSHIP OF SINGAPOREANS TO ASCERTAIN GROWING AFFLUENCE BETWEEN 2007 AND 2011

PURCHASER’S ADDRESS INDICATOR

2011

2007 AVERAGE NO OF UNITS SOLD APT SIZE (FT2)

TOTAL FLOOR AREA (FT2)

AVERAGE APT SIZE (FT2)

2,718

3,103,627

1,142

1,044

9,200

13,512,189

1,469

965

11,918

16,615,816

1,394

NO OF UNITS SOLD

TOTAL FLOOR AREA (FT2)

HDB

6,457

5,671,627

878

PRIVATE

7,065

7,376,591

TOTAL

13,522

13,048,218

Statistics gleaned from URA Realis and compiled by Sam Gian

   

 MALAYSIAN BUYERS  The Malaysian buyers were the largest group of foreign purchasers (i.e. ranked top among all other foreign nationalities) who competed directly with the locals especially in the low-end and mass market segments in Q1 2012. They accounted for 349 private home transactions (or 5.5%) of the overall market share in Q1 2012, which was by percentage 0.2% better than the preceding quarter but by absolute quantum 65 private home units fewer than Q4 2011. As a group, the vast majority of 95.1% of Malaysian purchasers bought properties below the price of $2 million. (GRID [2A] and [2B] of Table [2.3-C]) Only 4% of them bought in the high-end segment in Q1 2012 (i.e. the “>$ 2mil to $5 mil” price range). (GRID [2C] of Table [2.3-C]) In the preceding quarter (Q4 2011), 89.9% of them were accounted for at the midmarket segment while 40 Malaysian purchasers (or 9.7%) bought home units in the high-end segment. In other words, the Malaysian buyers also felt the heat of the cooling measures and adjusted their strategy accordingly.    

 PRC CHINESE BUYERS  The PRC Chinese whose second ranking was usurped by the Malaysians in Q1 2012 has pared down their exposure significantly by *388 units (or 56.6%) in the first 3 months of the year from the final quarter of the preceding year – probably due to the tightening of credit back home. (*They bought 686 units in Q4 2011 but only 298 units in Q1 2012) In the preceding quarter (prior to ABSD), the PRC Chinese buyers snapped up a total of 686 private home units and accounted for an imposing 8.8% (GRID [2E] of Table [2.3C1]) of the total market share in Q4 2011. The majority of 85.6% of all their purchases were in the low-end and mass market segment while 81 of them (or 11.8%) were accounted at the high-end segment. The remaining 18 (or 2.6%) were accounted for at the top-end luxury segment which has a price tag of more than $5 million.  

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

15

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

o PRC CHINESE BUYERS MORE RESTRAINED AND CAUTIOUS IN Q1 2012  In Q1 2012, the PRC Chinese buyers were more restrained and showed their cautiousness with only 298 transactions, and more or less similar distribution pattern across the different market segments. They bought a total of 262 private home units, or 87.9% of all their purchases in the first three months of 2012, in the low-end and mass market segment. (GRID [3A] and [3B] of Table [2.3-C] above) They were less active this time round at the high-end segment with only 28 units to show for and the tepid figure translated to 9.4% of all the transactions by PRC Chinese. (GRID [3D] of Table [2.3-C]) Only 8 luxury home units with price tag of more than $5 million were attributed to PRC Chinese buyers.    

 INDONESIAN BUYERS  Though the Indonesian purchasers were ranked 4th in position in Q1 2012, they remain the real ‘big spender’ of all times. Different from the other top foreign purchasers, Indonesian purchasers are less active in the lower end market segment, buying only 71 units (or 1.1% of total transactions in Q1 2012) in the sub-$1 million price category. (GRID [4A] of Table [2.3-C]) However, in the higher end segment, for example, the “>$2 million to $5 million’ price category, the 50 high-end private home units bought by Indonesians put them in the second placing next to Singaporean buyers. In other words, the Indonesians are the biggest group of foreign buyers in the high-end home segment. Likewise, the Indonesian topped the luxury home segment with 10 purchases in Q1 2012.

FINDING:  In the final analysis, we have to answer the most important question of this case study, i.e. “How have ordinary Singaporeans benefited from the new scheme of things?” And I am afraid I do not have good news for most of you. Let’s show the last couple of tabulations on the percentage share of the market by Singaporeans as well as other residents here. TABLE [2.4-A] – ASCERTAINING HOW THE ABSD HAS BENEFITTED ANY GROUP OF BUYERS/PROPERTY INVESTORS

RESIDENCE STATUS

Q1 2012

Q4 2011

TOTAL TRANSACTIONS

% OF TOTAL

TOTAL TRANSACTIONS

% OF TOTAL

SINGAPOREAN

3,330

52.8%

5,328

68.2%

PERMANENT RESIDENT (SPR)

2,305

36.5%

936

12.0%

577

9.1%

1,398

17.9%

FOREIGNER (NON-SPR) COMPANY TOTAL

98

1.6%

146

1.9%

6,310

100%

7,808

100%

Statistics gleaned from URA Realis and compiled by Sam Gian

 

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

16

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

At the total of 6,310 private home transactions, the entire private home market in Q1 2012 lost 1,498 deals or 19.2% of the business volume.  

 BUYING ACTIVITIES OF SINGAPOREANS IN Q1 2012    o SINGAPOREANS  EXPERIENCED  STEEPEST  LOSS  OF  ALMOST  2,000  PRIVATE  HOME  TRANSACTIONS  (OR  37.5% DROP) IN Q1 2012  In the immediate 3 months following the imposition of ABSD, Singaporeans bought 3,330 private home units which were 1,998 units fewer than the 5,328 units transacted in Q4 2012. This translated to 37.5% drop in transactions made by Singaporeans in Q1 2012 compared with Q4 2012. (Table [2.4-A])   o SINGAPOREANS’ MARKET SHARE EXPERIENCED BIGGEST LOSS AMONG ALL OTHER NATIONALITIES In term of market share, Singaporeans saw their market share trimmed by 15.4 percentage points with their 68.2% share in Q4 2011 cut down to 52.8% in Q1 2012. This is the biggest loss in market share in relation to other residents in Singapore. (Table [2.4-A])    

 BUYING ACTIVITIES OF PERMANENT RESIDENTS (SPR) IN Q1 2012    o PERMANENT RESIDENTS (SPR) BUYING 1,369 PRIVATE HOME UNITS MORE THAN Q4 2011 Permanent residents (SPR) as a group is the biggest winner in the after-effect of ABSD as they purchased 2,305 private home units in Q1 2012 which were 1,369 private home units more than the 936 units they bought in Q4 2011, and this translated to a 146% gain over the previous quarter before ABSD was introduced. (Table [2.4-A])   o SPR’S MARKET SHARE ROSE 24.5 PERCENTAGE POINT FROM 12% IN Q4 2011 TO 36.5% Q1 2012 With 36.5% of the overall market share in Q1 2012, SPR has gained 24.5 percentage point over the 12% overall market share in Q4 2011. They are the only group of buyers who witnessed positive gains in their market activities after the introduction of ABSD last December. (Table [2.4-A])    

 BUYING ACTIVITIES OF NON‐SPR FOREIGNERS IN Q1 2012    o NON‐SPR FOREIGNERS LOST 58.7% IN TRANSACTION VOLUME – MAKING THEM THE BIGGEST LOSER The foreigners are the biggest loser in the aftermath of ABSD as they purchased 821 private home units fewer than in Q4 2011, and this translated to 58.7% loss in total transaction volume. In terms of market share, foreign buyers on the whole lost 8.8 percentage points in their market share in Q1 2012 from 17.9% they enjoyed in Q4 2011 to only 9.1% in Q1 2012. (Table [2.4-A])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

17

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

The sign of retreat by foreign buyers is most visible in the luxury home segment where foreign buyers only bought 15 luxury units in Q1 2012 compared with 44 units in the previous quarter. The shortfall of 29 units is equivalent to 65.9% decline. (Table [2.5-A]) Let’s now examine the performance at individual market segments.

 BUYING ACTIVITIES IN LUXURY HOME SEGMENT IN Q1 2012  o LUXURY HOME MARKET DROPPED 32.4% OF TRANSACTIONS IN Q1 2012 Both Singaporean and permanent residents bought 3 more luxury apartments in the first three months of this year. The decline in the market share of foreign buyers is more pronounced at minus 65.9% after they bought 29 units fewer in Q1 2012. Nonindividuals and companies bought the least in Q1 2012. (Table [2.5-A]) TABLE [2.5-A] – TRANSACTIONS AT LUXURY HOME MARKET TOOK A BREATHER IN Q1 2012 CAUSING IT TO SLIDE 32.4%

RESIDENCE STATUS

TRANSACTIONS > $5 mil

DIFFERENCE

% GAIN / LOSS

58

3

5.2%

18

15

3

20.0%

15

44

-29

-65.9%

Q1 2012

Q4 2011

SINGAPOREAN

61

SPR FOREIGNER (NON-SPR) COMPANY

4

28

-24

-85.7%

TOTAL

98

145

-47

-32.4%

Statistics gleaned from URA Realis and compiled by Sam Gian

o THE HIGH‐END HOME MARKET EXPERIENCED THE HEAVIEST BEATING IN Q1 2012 The high-end market saw the most decisive flinching action with total volume shrinking by almost 50% in Q1 2012. Likewise, the indifference of foreign buyers can be felt in this segment with only 64 high-end homes sold in the first 3 months of the year. When compared with the 259 deals in the preceding quarter, this particular buyer’s segment saw the heaviest tumble of 75.3% in business lost. (Table [2.5-B]) TABLE [2.5-B] – TRANSACTIONS AT HIGH-END HOME MARKET TOOK THE HEAVIEST BEATING IN Q1 2012 LOSING 46.4%

RESIDENCE STATUS

TRANSACTIONS > $2 mil to $5 mil

DIFFERENCE

% GAIN / LOSS

651

-222

-34.1%

69

119

-50

-42.0%

FOREIGNER (NON-SPR)

64

259

-195

-75.3%

COMPANY

15

48

-33

-68.8%

TOTAL

577

1,077

-500

-46.4%

Q1 2012

Q4 2011

SINGAPOREAN

429

SPR

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

18

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

o TRANSACTION  VOLUME  AT  MID‐MARKET  HOME  SEGMENT  EXPERIENCED  MODERATE  DECLINE  IN  Q1  2012

Both Singaporeans and foreigners bought fewer private home units in this segment compared with the last quarter. Singaporeans bought 1,784 private home units in Q1 2012 which were 151 units fewer than the 1,935 units transacted in Q4 2011. This worked out to be a 7.8% decline in transactions in this market segment. (Table [2.5-C]) Foreigner buyers showed their resignation with 149 units attributed to them compared with the 624 units in the previous quarter. The shortfall of 475 units translated to 76.1% loss in transaction volume. (Table [2.5-C]) TABLE [2.5-C] – THE MID-MARKET HOME SEGMENT SAW MODERATE LOSSES IN Q1 2012 AFTER BEING SETBACK BY 21%

RESIDENCE STATUS SINGAPOREAN

TRANSACTIONS > $1 mil to $2 mil Q1 2012

Q4 2011

1,784

1,935

DIFFERENCE

% GAIN / LOSS

-151

-7.8%

SPR

344

314

30

9.6%

FOREIGNER (NON-SPR)

149

624

-475

-76.1%

COMPANY

28

46

-18

-39.1%

2,305

2,919

-614

-21.0%

TOTAL

Statistics gleaned from URA Realis and compiled by Sam Gian

o SENTIMENT AND BUYING ACTIVITIES SUSTAINED IN MASS MARKET HOME SEGMENT Q1 2012 Singaporeans and permanent residents (SPR) seemed to be taking the ABSD in good stride and swarmed to every developer’s show flats and buying everything with impunity. In fact, the market share of Singaporean buyers in the mass market segment shot up to 81% vis-à-vis other nationalities within the same price category in Q1 2012 (see Table [2.3-D]). Foreigner buyers seemed to have forsaken this market segment in Q1 2012 by buying only 96 units compared with 471 units in Q4 2011. The shortfall of 375 units in Q1 2012 translated to the loss of 79.6% in transaction volume by this group of buyers in this segment. (Table [2.5-D]) TABLE [2.5-D] – IT WAS BUSINESS AS USUAL AT THE LOW-END AND MASS MARKET SEGMENTS IN Q1 2012

RESIDENCE STATUS

TRANSACTIONS < $500k to $1 mil

DIFFERENCE

% GAIN / LOSS

2,684

13

0.5%

533

488

45

9.2%

96

471

-375

-79.6%

Q1 2012

Q4 2011

2,697

SPR FOREIGNER (NON-SPR)

SINGAPOREAN

COMPANY TOTAL

4

24

-20

-83.3%

3,330

3,667

-337

-9.2%

Statistics gleaned from URA Realis and compiled by Sam Gian

CONCLUSION  The official statistics seem to suggest that the latest round of drastic cooling-off measure, i.e. the Additional Purchaser’s Stamp Duty (ABSD), has achieved its By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

intended effect of keeping the ‘hot money’ at bay, at least for now. Of course, Singaporean buyers also feel the brunt of the measure and have since chosen to stay on the sideline awaiting more certain signs. The high-end and luxury home segments have been kept extremely quiet for the first 3 months of the year but the property developers are not panicking yet due to the enthusiastic buying activities at the mass market segment, and the warming-up of the low-end shoebox apartment segment which shows no sign of abating for the time being. And one truth now stands out, that is, financially, Singaporeans on the whole are not on the same footing as the permanent residents (SPR) and the foreigners; and as such, the ‘home ground advantage’ that has been created by the specific circumstance actually counts for nothing.

TRAIL BLAZER OR MIDDLE‐CLASS FOLLY?  The Changing Risk Profile of Real Estate Investments

Perhaps, there is one more reason why 2007 was selected for all the case studies in this issue of the magazine, that is, the dramatic effects of the ‘boom and bust’ of the property market. It was a year where the high net worth individuals clamoured for uber luxury apartments in the heart of Orchard Road; and it was a year which held so many promises for so many people. But, what we saw with horror the following year was the financial tsunami that struck in October 2008 that brought a complete reversal of the revelries in 2007. Citibank, AIG, Bank of America – just to name a few – almost went belly up if not for the U.S. government to intervene with taxpayer’s money; but there were hundreds more banks and other types of financial institutions that collapsed like a house of cards. 

THE OLD MARKET ORDER IN 2007 

In 2007 where all things seemed well and good, a total of 606 caveats were lodged against property sellers of shoebox apartments which comprised 424 new home units in the primary market, and 181 units in the secondary market (Table [2.8] below) – in the backdrop of a year of ferocious bull-run. That was also a year of record high transaction volume for luxury apartments priced above $5 million, as can be seen in the statistics shown earlier at Table [2.1-A]. As the fashionable fad during the pre-financial tsunami era was about larger apartments in swanky neighbourhoods, it was not surprising at all that few developers would fancy building apartments below 50 m2 outside popular districts, e.g. Orchard Road areas.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

As such, 258 (or 60.8%) of the 424 new shoebox apartments sold in the primary market were located within prime and popular districts; while 166 (or 39.2%) of the other new units were outside popular districts. (See Table [2.9-A]) Likewise, in the secondary resale market, 88.1% of the 181 shoebox apartments were located within the prime and popular districts; while only 34% of these apartments were located at less popular areas. (Not tabulated) *Popular Districts refers to locations with the higher number of rental transactions and higher combined rents collected in a year. (Reference: Table [5.2-A] and Table [5.2-B]) 

DESPERATE MEASURE IN DESPERATE TIME – THE ORIGIN OF SHOEBOX APARTMENTS 

One of the signatures of the market reversal in the aftermath of the financial tsunami in 2008 was the birth of shoebox apartments when property developers abolished planning approvals they had already obtained for private housing projects with large apartment units inside and substituted them with fresh planning applications for more shoebox apartment units to be added. Shoebox apartments were indeed a desperate measure adopted during a desperate time. The reverse trend is easily noticeable in Table [2.8] below, where it shows the quintuple increase of shoebox apartment units from 424 new units sold in 2007 to 2,636 new units sold in 2011. TABLE [2.8] – NEW HOME TRANSACTION VOLUME FROM 2007 TO 2011 – TO ILLUSTRATE THE SHRINKING OF PRIVATE APARTMENT SIZES OVER THE PAST YEARS

YEAR

NEW HOME TRANSACTION VOLUME (UNITS) Up to 50 m2

51 – 100 m2

101 – 200 m2

201 – 300 m2

> 300 m2

TOTAL

2007

424

3.6%

3,171

27.2%

6,757

58.%

1,081

9.3%

209

1.8%

11,642

2008

365

9.7%

1,486

39.6%

1,704

45.4%

111

2.9%

86

2.3%

3,752

2009

961

7.6%

4,286

34.1%

6,806

54.2%

437

3.5%

75

0.6%

12,565

2010

1,991

14.3%

5,628

40.4%

5,643

40.5%

509

3.7%

152

1.1%

13,923

2011

2,636

19.4%

6,294

46.3%

4,323

31.9%

240

1.8%

78

0.6%

13,571

Statistics gleaned from URA Realis and compiled by Sam Gian



WHAT HAD CHANGED IN THE SINGAPORE REAL ESTATE MARKET IN 2011 

While shoebox apartments (defined as private apartment with the size of 50 m2 or smaller) were the best example to characterise the new market order in 2011 in the primary home market due to the small apartment’s suspect functionality, it was the 2-bedroom apartments (or 2-bedders) that really dominated the landscape, taking up 46.3% of the yearly total new home sale volume in the entire 2011 and 50.3% in Q1 2012; while shoebox apartments accounted for 19.4% in 2011 and 26.7% in Q1 2012. In terms of growth, the 2-bedders segment grew by 3,123 units (or 98.5%) when compared on a yearly basis with 2007. (See Tables [2.8] & [2.8-A])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

21

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [2.8-A] – NEW HOME TRANSACTION VOLUME IN Q1 2012 – TO ILLUSTRATE THE SHRINKING OF PRIVATE APARTMENT SIZE IN DESPERATE TIMES FOR PROPERTY DEVELOPERS

YEAR Q1 2012

NEW HOME TRANSACTION VOLUME (UNITS) Up to 50 m2 694

26.7%

51 – 100 m2 1,307

50.3%

101 – 200 m2 562

21.6%

201 – 300 m2 33

1.3%

> 300 m2 2

0.08%

TOTAL

2,598

Statistics gleaned from URA Realis and compiled by Sam Gian

Likewise, it is the shoebox apartments and the 2-bedder units that dominate the landscape of primary sale market in Q1 2012, accounting for a total of 77% of the total private new home transactions, with shoebox taking 26.7% slice from the big pie. (Table [2.8-A] above) Note: Though there were more than 6,000 new private home units sold in Q1 2012 – a new record for private home sale in Singapore’s history – at the time of writing, the official data only showed 2,598 caveats lodged against property developers.

RISK PROFILE OF SHOEBOX APARTMENTS SOLD IN 2007   As the general rule of real estate investment is “the bigger the better”, will the risks of a small apartment be greater? Let’s look at some numbers before we exercise our judgment on the issue. 

NEW SHOEBOX APARTMENT UNITS SOLD IN 2007 – 424 UNITS 

PRICE WATCH

In terms of absolute price quantum, 173 new shoebox units (or 40.8%) sold in the primary private home segment in 2007 were in the sub-$500,000 price category. The cheapest shoebox apartment sold in that year was a 39 m2 condo unit at Thomson V One at District 20 Sin Ming Road which was transacted for $310,000 (or $738 psf). The buyer is a HDB flat dweller. 194 new shoebox units (or 45.8%) sold in the primary private home segment in 2007

were in the “$500,000 to $1 million” price category. The median transaction in this category is a 44 m2 apartment unit at Suites @ Amber at District 15 Amber Road which was transacted for $670,000 (or $1,415 psf). The buyer is an owner of private residential property. 57 new shoebox units (or 13.4%) sold in the primary private home segment in 2007

were in the “above $1 million” price category. The highest price achieved in this category is a 49 m2 apartment unit on the 11th floor of Vida at District 9 Peck Hay Road. The apartment was transacted for $1,368,000 or $2,594 psf. The buyer is an owner of private residential property.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012



BALANCED RISK PROFILE OF SHOEBOX APARTMENT UNITS SOLD IN 2007   The tabulation below shows the distribution pattern of shoebox apartments in two broad categories of locations i.e. (a) 8 POPULAR DISTRICTS (e.g. D1, D2, D3, D5, D9, D10, D11 and D15) where there are higher number of rental transactions and higher combined rents collected in a year, (b) 19 LESS POPULAR DISTRICTS, as well as (c) the ratio of purchasers from public and private housing segments.

Among the 258 owners of new shoebox apartments sold in popular districts in 2007, 70.8% of them are private property owners; while among the 166 owners of new

shoebox apartments sold in less popular areas, 51% of them are private property owners. (Table [2.9-A]) In general, owners of shoebox apartments located at less popular districts tend to have to take on higher risks culminating from the following factors (i) longer tenancy void – as tenants are hard to come by; (ii) competitive rents as more mass market condominiums have been launched in outlaying areas; and (iii) higher unit psf cost for the small apartments. (Reference: Table [5.2-A] and Table [5.2-B]) 

CLOSER LOOK AT THE RISK PROFILE OF SHOEBOX APARTMENT IN DIFFERENT LOCATIONS  

The risks are higher in less popular districts as statistics show that over the past nine months from July 2011 to March 2012, the combined monthly rents collected in the 8 popular districts, including Districts 1, 2, 3, 5, 9 10, 11 and 15 were almost twice as high as the 19 less popular districts combined; likewise, there are 18.9% higher number of private tenancies signed in a month in the more popular districts, when compared with the less popular counterpart. (See Table [2.8-B] & Table [2.8-C] below) TABLE [2.8-B] – TOTAL RENTS COLLECTED IN A MONTH IN POPULAR DISTRICTS COMPARED WITH THOSE COLLECTED IN LESS POPULAR DISTRICTS OVER 8 MONTHS FROM JUL 2011 TO MAR 2012

TOTAL RENTS COLLECTED IN A MONTH ($) [A] 8 POPULAR DISTRICTS

[B] 19 LESS POPULAR DISTRICTS

[C] DIFFERENCE IN RENTAL INCOME [A] LESS [B]

MAR 2012

10,879,432

7,269,213

3,610,219

6,410,601

4,005,954

SR

MONTH

1 2

FEB 2012

10,416,555

3

JAN 2012

11,997,530

6,325,137

5,672,393

4

DEC 2011

8,143,025

5,135,103

3,007,922

5

NOV 2011

8,486,420

4,878,843

3,607,577

6

OCT 2011

8,970,102

4,836,751

4,133,351

7

SEPT 2011

10,857,636

4,689,192

6,168,444

8

AUG 2011

12,740,713

6,073,511

6,667,202

9

JUL 2011

12,915,641

6,633,637

6,282,004

95,407,054 [64.6%]

52,251,988 [35.4%]

43,155,066

TOTAL

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

In other words, the combined private rents collected on a monthly basis in the 8 popular districts are 45.2% higher than the total combined rents collected in the same time period in the 19 less popular districts. TABLE [2.8-C] – TOTAL TENANCY AGREEMENTS SIGNED IN A MONTH IN POPULAR DISTRICTS COMPARED WITH THOSE IN LESS POPULAR DISTRICTS OVER 8 MONTHS FROM JUL 2011 TO MAR 2012

TOTAL TENANCY AGREEMENTS SIGNED IN A MONTH ($) [A] 8 POPULAR DISTRICTS

[B] 19 LESS POPULAR DISTRICTS

[C] DIFFERENCE IN NUMBER OF T.A. SIGNED [A] LESS [B]

MAR 2012

1,976

1,871

105

FEB 2012

1,837

1,609

228

SR

MONTH

1 2 3

JAN 2012

2,048

1,598

450

4

DEC 2011

1,553

1,435

118

5

NOV 2011

1,674

1,377

297

6

OCT 2011

1,749

1,351

398

7

SEPT 2011

1,993

1,376

617

8

AUG 2011

2,276

1,680

596

9

JUL 2011

2,358

1,860

498

17,464 [55.2%]

14,157 [44.8%]

3,307

TOTAL

Statistics gleaned from URA Realis and compiled by Sam Gian

Likewise, the combined private tenancy agreements (T.A.) signed on a monthly basis in the 8 popular districts are 18.9% higher than the total combined private T.A. signed in the same time period in the 19 less popular districts. The above statistics did not feature any shoebox apartments in these less popular areas. Once the bulk of it is ready for occupancy in two to three years time, the resulting competition may further depress the rents. 

BALANCED  RISKS  FOR  SHOEBOX  APARTMENTS  BOUGHT  IN  2007  –  DUE  TO  SUPERIOR  LOCATIONS 

From this perspective, the owners of shoebox apartments bought in 2007 have a fairly balanced risk as the majority of the shoebox apartments sold in 2007 were in popular districts. (See Table [2.9-A] below) TABLE [2.9-A] – THE TOTAL NUMBER OF NEW SHOEBOX SOLD IN 2007 WAS 424 UNITS – WITH 60.8% OF THEM LOCATED IN POPULAR DISTRICTS; 39.2% IN LESS POPULAR DISTRICTS

PURCHASER’S ADDRESSES PTE

HDB

LESS POPULAR DISTRICTS

74

86.5%

13.5%

D8

D2

12

83.3%

16.7%

D12

D3

0

0

0

D14

D5

8

D9

77 11 35

5% 63.6% 81.8% 54.3%

50.% 36.4% 18.2% 45.7%

D20 TOTAL

POPULAR DISTRICTS

NEW SHOEBOX APT SOLD (UNITS)

D1

D10 D11

NEW SHOEBOX APT SOLD (UNITS)

49 47 13 57 166 [39.2%]

PURCHASER’S ADDRESSES PTE

HDB

44.9%

55.1%

48.9%

51.1%

69.2%

30.8%

54.4% 51%

45.6% 49%

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 D15 TOTAL

41 258 [60.8%]

63.4% 70.8%

36.6% 29.2%

Statistics gleaned from URA Realis and compiled by Sam Gian

RISK PROFILE OF SHOEBOX APARTMENTS IN THE POST‐FINANCIAL TSUNAMI ERA – 2011   Fast forward to 2011, the buying activities in the small apartment segment took on a radically different outlook. Here are some numbers to chew on. In 2011, a total of 3,159 caveats were lodged against property sellers of shoebox apartments which comprised 2,636 new home units in the primary sale market, and 511 units in the secondary market (including sub-sales). 

NEW SHOEBOX APARTMENT UNITS SOLD IN 2011 – 2,636 UNITS 

PRICE WATCH 196 shoebox apartments (or 7.4%) sold in the primary sale segment in 2011 were in the sub-$500,000 price category. The cheapest shoebox apartment sold in that year was a 42 m2 condo unit at Eight Courtyards at District 27 Canberra Drive (off Yishun) which was transacted for $422,450 (or $934 psf). The buyer is a HDB flat dweller. 2,286 new shoebox apartment units (or 86.7%) sold in 2011 are in the “$500,000 to $1 million” price category. The median transaction in this category is a 49 m2 condo unit at Archipelago at District 16 Bedok Reservoir Road which was transacted for $621,000 (or $1,177 psf). The buyer is a HDB flat dweller. 154 new units (or 5.8%) sold in 2011 are in the “above $1 million” price category. The highest price achieved in this category is a 46 m2 apartment unit on the 39th floor of Robinson Suites at District 1 Robinson Road. The apartment was transacted for $1,683,000 or $3,399 psf. The buyer is an owner of private residential property. 

TECTONIC SHIFT OF RISKS IN SHOEBOX APARTMENTS 

In 2011, the ratio between shoebox apartments located in popular districts and less popular districts is 35.7% to 64.3% in favour of less popular districts; while 5 years ago, it was 60.8% in favour of popular districts. In terms of growth in this particular housing segment, there was a more than quintuple growth (to be precise an increase of 521%) in the overall transaction of shoebox apartment units in 2011. In the primary home sale market, the rise in transaction volume of such small apartments in 2011 over 2007 was 621%; while rise in the resale market segment was 282%. (See Table [2.10] below)

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

25

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012 TABLE [2.10] – THE MUSHROOMING OF SHOEBOX APARTMENT IN 2011

YEAR

NO. OF SHOEBOX APARTMENT TRANSACTIONS PRIMARY

RESALE

TOTAL

2007

424

181

606

2011

2,636

511

3,159

DIFFERENCE

621%

282%

521%

Statistics gleaned from URA Realis and compiled by Sam Gian

The tabulation at Table [2.10-A] shows the ratio of purchasers according to their own housing status in both popular and less popular districts. In the popular districts, the majority of 80% of the 941 buyers of new shoebox apartments sold in 2011 are private property owners; while only 20% are HDB upgraders. *Popular Districts refers to locations with the higher number of rental transactions and higher combined rents collected in a year. (Reference: Table [5.2-A] and Table [5.2-B]) On the other hand, in the less popular districts, the majority of 60.4% of the 1,695 buyers of new shoebox units sold in 2011are HDB upgraders; while 39.6% of them are private property owners. TABLE [2.10-A] – 60.4% OF THE PURCHASERS OF NEW SHOEBOX APARTMENT IN LESS POPULAR DISTRICTS WERE HDB FLAT DWELLERS

POPULAR DISTRICTS

NEW SHOEBOX APT SOLD (UNITS)

D1

20 259 0 0 105 118 49 *390 941 [35.7%]

D2 D3 D5 D9 D10 D11 D15 TOTAL

PURCHASER’S ADDRESSES PTE

HDB

80.% 57.1% 0 0 67.6% 57.6% 69.4% 41.5% 80%

20.% 42.9% 0 0 32.4% 42.4% 30.6% 58.5% 20%

LESS POPULAR DISTRICTS D4 D8 D12 D13 D14 D16 D17 D18 D19 D20 D21 D22 D23 D27 D28 TOTAL

NEW SHOEBOX APT SOLD (UNITS)

78 84 248 60 678 47 53 36 275 0 49 11 21 42 13 1,695 [64.3%]

PURCHASER’S ADDRESSES PTE

HDB

34.6% 53.6% 41.1% 45.% 40.4% 38.3% 47.2% 30.6% 31.6% 0 51.% 27.3% 47.6% 33.3% 30.8% 39.6%

65.4% 46.4% 58.9% 55.% 59.6% 61.7% 52.8% 69.4% 68.4% 0 49.% 72.7% 52.4% 66.7% 69.2% 60.4%

Statistics gleaned from URA Realis and compiled by Sam Gian

*Note: Out of the 390 shoebox apartments sold in the popular District 15, some 139 (or 35.6%) of them are in the Telok Kurau estate, which is characterised by short alleys in between the ‘lorongs’.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Considering the traffic conditions in the short alleys at Telok Kurau areas, such shoebox apartments are not your typical District 15 seafront property. In terms of apartment size, only 1 unit was exactly 50 m2 and the other 132 units were smaller than 46 m2; and the remaining 6 units have the size of between 46 m2 to 48 m2. *Due to the mushrooming of shoebox apartments island-wide, URA has stipulated that all private apartments and flats to be built in areas with Gross Plot Ratio of 1.4 must have the minimum plot size of 1,000 m2 and the size of all dwelling units must be at least 70 m2. However, for Telok Kurau estate, due to the narrow local access roads (lorongs) that are prone to traffic jams, the dwelling units for flat and condominium developments must have a minimum of 100 m2 in addition to the minimum plot size requirement. 

HDB  UPGRADERS  ARE  EXPOSED  TO  GREATER  RISK  OF  SHOEBOX  APARTMENTS  IN  LESS  POPULAR DISTRICTS IN 2011  

Table [2.10-A] shows

the lop-sided distribution pattern of shoebox apartment units sold in 2011. Only 35.7% of new shoebox apartments sold in that year were in popular districts, and among them Districts 3 and 5 had no shoebox units at all. On the other hand, 64.3% of the new shoebox apartments sold in 2011 were in less popular districts. (See Table [2.9-A] above for comparison) In other words, the risk profile of shoebox apartments is significantly different today compared with five years ago. Here are other recent factors that may work against owners of newer shoebox units in general as the risk level goes up: 

NARROWING PRICE GAP BETWEEN SHOEBOX UNITS IN POPULAR & LESS POPULAR DISTRICTS 

When the prices of shoebox apartments at popular districts are compared with those of less popular districts (hereinafter “the two different market segments”) within the same year, the narrowing price gap becomes apparent. (See Table [2.11-A] above for comparison) o AVERAGE P PURCHASE PRICE OF SHOEBOX UNITS IN 2007 – 42% GAP 

In 2007, the gap between average purchase price of shoebox apartments in the two different market segments was $329,361(or 42%), i.e. average price of $778,407 in popular districts compared with average price of $449,046 in less popular districts. o AVERAGE P PURCHASE PRICE OF SHOEBOX UNITS IN 2011 – 24.9% GAP 

In 2011, the gap between the average purchase price of shoebox apartments in the two different market segments was $200,326 (or 24.9%), that is, average price of $803,422 in popular districts compared with $603,096 in less popular districts.

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

o AVERAGE U UNIT PSF PRICE OF SHOEBOX UNITS IN 2007 – 38.7% GAP 

In 2007, the gap between the average unit psf price of shoebox apartments in the two different market segments was $601 psf (or 38.7%), i.e. average psf price of $1,552 psf in popular districts compared with $951 psf in less popular districts. o AVERAGE U UNIT PSF PRICE OF SHOEBOX UNITS IN 2011 – 27.4% GAP 

In 2011, the gap between the average unit psf price of shoebox apartments in the two different market segments was $506 psf (or 27.4%), i.e. average psf price of $1,850 psf in popular districts compared with $1,344 psf in less popular districts. This shows that the price gap of shoebox apartments in the two different market segments has shrunk – and such small apartments in less popular areas can now be considered ‘over-priced’. The gap in average purchase price has narrowed by 17.1% in the 5-year period (i.e. from a price gap of 42% between popular and less popular districts in 2007 to 24.9% gap in 2011). In terms of unit psf price of shoebox apartments in the two different market segments, the gap had narrowed by 11.3% in the 5-year period (i.e. from a price gap of 38.7% between popular and less popular districts in 2007 to 27.4% gap in 2011). 

ABSOLUTELY HIGHER RISK TO OWN SHOEBOX UNITS IN LESS POPULAR DISTRICTS 

The net result of the narrowing price gap is the higher absolute financial risk to be shouldered by the buyers of shoebox apartment units. This may be compounded by the fact that private home rent did not enjoy the exponential increase brought on by the effect of inflation. TABLE [2.11-A] – COMPARING THE STATISTICS OF SHOEBOX APARTMENT WITHIN THE SAME YEAR, I.E. 2007 AND 2011

2007 SR

DISTRICTS

AVE. APT SIZE (m2)

2011

AVE. PURCHASE PRICE ($)

UNIT PRICE ($ psf)

AVE. APT SIZE (m2)

AVE. PURCHASE PRICE ($)

UNIT PRICE ($ psf)

1

POPULAR

46

778,407

1,552

40

803,422

1,850

2

LESS POPULAR

43.8

449,046

951

42

603,096

1,344

3

DIFFERENCE

3.8

329,361

601

[42%]

[38.7%]

-2.0

200,326

506

[24.9%]

[27.4%]

Statistics gleaned from URA Realis and compiled by Sam Gian



GREATER PRICE GROWTH FOR SHOEBOX APARTMENTS IN LESS POPULAR DISTRICTS 

In terms of price growth over the 5-year period, there was a 3.2% rise in the average purchase price in 2011 in popular districts; while the rise in the average purchase price in 2011 in less popular districts was much steeper at 34.3%. (Table [2.11-B])

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

In terms of unit psf price, there was a 19.2% jump in average psf price in popular districts in 2011 compared with 2007; while the increase in unit price in less popular areas was much higher at 41.3% compared with 2007. (Table [2.11-B]) In other words, in terms of both average prices in absolute quantum and in psf price, the price gain of shoebox apartments in less popular areas is more acute. This could be attributed to the higher demand for such apartment in the less popular districts. TABLE [2.11-B] – COMPARING THE STATISTICS OF SHOEBOX APARTMENT BETWEEN 2007 AND 2011

LESS POPULAR DISTRICTS

POPULAR DISTRICTS SR

YEAR

AVE. APT SIZE (m2)

AVE. PURCHASE PRICE ($)

UNIT PRICE ($ psf)

AVE. APT SIZE (m2)

AVE. PURCHASE PRICE ($)

UNIT PRICE ($ psf)

1

2011

40

803,422

1,850

42

603,096

1,344

2

2007

46

778,407

1,552

43.8

449,046

951

DIFFERENCE

–6

25,015 [3.2%]

298 [19.2%]

–1.8

154,050 [34.3%]

393 [41.3%]

Statistics gleaned from URA Realis and compiled by Sam Gian

  

SHRINKING OF SHOEBOX APARTMENTS 

On the average, a typical shoebox apartment sold in popular district in 2011 would be smaller by 6 m2 (or 13%) when compared with a typical unit sold in 2007 in the same popular district. Likewise, a typical shoebox apartment sold in less popular district in 2011 would be 1.8 m2 (or 4.1%) when compared with a typical unit sold in 2007 in the same district. 

PRICE INFLATION OF SHOEBOX APARTMENTS 

Due to the fact that 666 (or 96%) of the new shoebox apartment units were transacted at the less popular districts, the absolute sale prices tend to slight towards the more affordable “>$500,000 to $1 million” price range. TABLE [2.11-C] – PRICE RANGE IN PRIMARY NEW HOME MARKET – COMPARING 2007 AND 2011

PRICE RANGE IN PRIMARY NEW HOME MARKET YEAR

UNITS SOLD SUB-$500K

>$500k to $1 million

> $1 million

TOTAL UNITS SOLD IN YEAR

2007

173 [40.8%]

194 [45.8%]

57 [13.4%]

424

2011

196 [7.4%]

2,286 [86.7%]

154 [5.8%]

2,636

Q1 2012

262 [37.8%]

430 [61.9%]

2 [0.3%]

694

Statistics gleaned from URA Realis and compiled by Sam Gian

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

29

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

ON HINDSIGHT  Of particular concern to me while embarking on this case study was the question of whether the common folks were going to realise their financial dream via their investment in such apartments with suspected functionality inside the ‘living’ space and dubious ‘liveability’ factors outside the home unit, including either the lack of shared facilities e.g. gym, tennis courts, or too crowded or over usage of the facilities that lead to frequent breakdown. Imagine people may get stuck in a heavy traffic jam inside the car park of their own condominium! Actually, there is a worrying trend. Very few HDB upgraders have bought into popular districts where they stand a better chance of getting a decent rental income (and probably shorter rental voids as the demand is higher in inner city areas due to the proximity to the business district). Conversely, 62% of the shoebox apartments in less popular districts were bought by HDB upgraders. So, the statistics are lopsided with the investors having modest means carrying more risks.

ARE THE HEARTLANDERS TAKING MORE RISKS THAN NECESSARY IN THE PURSUIT OF THEIR  MIDDLE‐CLASS DREAM?  Let’s look at some more statistics that show the investment moves by purchasers of different ‘origin’ (as in their residence addresses and perhaps their income group) in two different time periods and ascertain whether the heartlanders are actually taking on more risks that may veer them towards the danger zone. TABLE [2.11-D] – DIFFERENT RISK PROFILE BETWEEN HDB UPGRADERS AND PRIVATE HOME OWNERS IN PRIMARY NEW HOME MARKET – COMPARING 2007 AND 2011

[A]

[B]

SR

PURCHASER ADDRESS

1

HDB UPGRADERS

6,457

6,200

2

PRIVATE HOME OWNERS

7,065

3

TOTAL

2011 [C]

[D]

[E]

[F]

[G]

2007 [H]

[I]

[J]

TOTAL AVE AVE PSF AVE APT TOTAL AVE AVE APT UNIT UNIT AVE PSF VALUE PURCHASE PRICE SIZE VALUE PURCHASE SIZE BOUGHT BOUGHT PRICE ($) ($ mil) PRICE ($) ($) (sq ft) ($ mil) PRICE ($) (sq ft)

960,248

1,093

878

2,718

2,716

10,227 1,447,559

1,386

1,044

9,200

13,522 16,427 1,214,859

1,259

965

11,918

999,579

875

1,142

20,013 2,175,342

1,481

1,469

22,730 1,907,199

1,368

1,394

Statistics gleaned from URA Realis and compiled by Sam Gian

o THE 1,604 FEWER NEW HOME BOUGHT IN 2011 REPRESENT 13.5% DROP IN QUANTITY BETWEEN 2007  AND 2011 

While the total quantity of private new home units increased by 13.5% over the 5-year period between 2007 (with 11,918 new home units transacted) and 2011 (with 13,522

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

new home units transacted), the HDB upgraders actually single-handedly contributed to the growth by snapping up 3,739 more new home units (or 137.6% increase in quantity) compared with the previous bull-run in 2007. Purchasers with private home addresses (who were earlier generalised as the ‘middle-class’ Singaporeans, foreigners and non-individual corporations etc) actually bought 2,135 fewer units (or 23.2% decline) in buying activities in between the two time period. o WHILE  THE  MIDDLE‐CLASS  SPENT  48.9%  LESSER  ON  TOTAL  PURCHASE  PRICE  HDB  UPGRADERS  SPENT  128% MORE ON NEW PRIVATE HOMES 

There was a 27.7% drop in the total transaction value in 2011 compared with 2007. It dropped from the $22.73 billion spent on new home units in 2007 to $16.4 billion in 2011. While purchasers with private home addresses had reduced their exposure by spending $9.786 billion less (or 48.9% lower) in 2011 compared with 2007, the HDB upgraders, on the other hand, plonked a combined $6.2 billion into the new home market in 2011. That works out to be a staggering $3.48 billion more (or 128.2% higher) than the $2.716 billion spent in 2007.   o ON THE WHOLE AVERAGE HOME PRICES FELL 36.3% IN THE 5‐YEAR PERIOD BUT THE FALL IS NEGLIGIBLE  FOR PURCHASERS WITH HDB ADDRESSES 

The average purchase price (in absolute quantum) fell from the average of $1,907,199 in 2007 to $1,214,859 in 2011. The shortfall was $692,340 (or 36.3%). However, the average purchase price paid by HDB upgraders at the developer’s show flats was $960, 248 on the average which was $39,331 (or 4%) lower than the $999,579 average purchase price paid by HDB upgraders in 2007. On the average, purchasers with private home addresses paid $727,783 lower (or 33.5% cheaper) than they did in 2007. They used to pay an average of $2,175,342 for a new private home unit in 2007; but now having to pay much less at $1,447,559 per unit. o WHILE  THE  MIDDLE‐CLASS  REDUCED  THEIR  AVERAGE  UNIT  COST  THE  HDB  UPGRADERS  INCREASED  THEIRS 

On the average, purchasers with private home addresses paid $95 psf less (or 6.4% lower) in their average unit purchase price (on per-sq-foot basis) in 2011 compared with 2007. The average psf price they paid was down from $1,481 psf in 2007 to $1,386 psf in 2011. However, purchasers with HDB upgraders in general paid $218 psf more (or 24.9% higher) in their average unit purchase price (on per-sq-foot basis) in 2011 compared with 2007. The average psf price they paid was up from $875 psf in 2007 to $1,093 psf in 2011. By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

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SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

o EQUAL  MISERY  FOR  ALL  IN  TERMS  OF  APARTMENT  SIZE  BUT  ‘MIDDLE‐CLASS’  STILL  OWN  LARGER  APARTMENTS 

In terms of apartment sizes, purchasers of all and sundry have to contend themselves with smaller apartment size. Purchasers with private home addresses on the average bought new private apartments with average size of 1,044 sq ft which is 425 sq ft (or 28.9%) smaller than the average size of 1,469 sq ft five years ago. HDB upgraders on the average bought new private apartments with average size of 878 sq ft which is 264 sq ft (or 23.1%) smaller than the average size of 1,142 sq ft five years ago.

HOW HAS THE SITUATION CHANGED AFTER ABSD?  TABLE [2.11-D1] – DIFFERENT RISK PROFILE BETWEEN HDB UPGRADERS AND PRIVATE HOME OWNERS IN PRIMARY NEW HOME MARKET IN Q1 2012

[A]

[B]

Q1 2012 [C]

UNIT BOUGHT

TOTAL VALUE ($ mil)

[D]

[E]

AVE PURCHASE PRICE ($)

AVE PSF PRICE ($)

AVE APT SIZE (sq ft)

SR

PURCHASER ADDRESS

1

HDB UPGRADERS

1,478

1,227

830,281 

1,107

72

2

PRIVATE HOME OWNERS

1,120

1,231

1,099,276 

1,252

81

3

TOTAL

2,598

2,458

946,245

1,170

76

Statistics gleaned from URA Realis and compiled by Sam Gian

On the surface, things seem to get better in Q1 2012 with prices declining. However, on closer look, it was due to the shrinking apartment size across the board. So, it prompts one to ask: “Are the heartlanders getting more affluent?” o ON THE WHOLE AVERAGE HOME PRICES FELL 28.4% IN Q1 2012 AFTER ABSD  

Average purchase price of new home units in Q1 2012 was $946,245 per unit and this is $268,614 (or 28.4%) lower than the $1,214,859 average in 2011. For purchasers with HDB addresses, the average purchase price for a private new home was $830,281 in Q1 2012, which is $129,967 (or 15.7%) lower than the $960,248 per unit in 2011.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

32

 

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

Purchasers with private home addresses paid $1,099,276 on the average per new home unit. This is $348,283 (or 31.7%) lower than the average of $1,447,559 per unit they paid in 2011. o OVERALL UNIT PSF PRICE FELL 7.6% IN Q1 2012 AFTER ABSD  

While the average psf price had fallen in Q1 2012 from the whole of 2011, HDB upgraders are still paying higher psf price for new home units in Q1 2012. On the average, HDB upgraders paid $1,107 psf per new home unit in Q1 2012 and this is $14 psf (or 1.3%) dearer than in 2011. On the other hand, purchasers with private home addresses paid $1,252 psf per unit in Q1 2012; and this is $134 psf (or 10.7% lower) than the $1,386 psf per unit on the average in 2011. o AVERAGE APARTMENT SIZE CONTINUES TO GET SMALLER IN Q1 2012  

Sadly, the ‘affluence indicator’ does not point to a healthy sign. This is because the private apartment size continues to get smaller. On the whole, the average size of new apartments in Q1 2012 was 818 sq ft; and this is 147 sq ft (or 18%) smaller than the 965 sq ft in 2011. In Q1 2012, most HDB upgraders bought into new apartments that are on average about 775 sq ft in size, which is 103 sq ft (or 13.3%) tighter than the 878 sq ft average apartment size in 2011. Purchasers with private home addresses bought into new apartments that are on average about 872 sq ft in size, which is 172 sq ft (or 19.7%) smaller than the 1,044 sq ft average apartment size in 2011. CONCLUSION It appears that the risk factors of real estate investment has increased for HDB upgraders or reduced for purchasers with private addresses, even though everybody seems to be buying into new apartments that are generally smaller in size compared to 5 years ago. This is because everything being equal the latter group of buyers have the advantages of being in a ‘popular districts’, with a slightly bigger apartment size (though it also gets smaller in Q1 2012), and comparatively cheaper prices for the new private home units they purchased.

By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg]

33