Singapore Property Market Direction - April 2012

Mr O (Optimist) said to his friends: ‘see, the statistics show the market potential to stage a rebound soon’; while Mr P (Pessimist) said: ‘the data is pointing towards a likely collapse’. Whereas, Mr R (Realist as in a pragmatic investor) said: ‘oh, it can go either way; let’s wait and see which way the market goes before we plan our next move.’ Whatever it is, all the players have a good one-third chance of correctly guessing how the metaphorical elephant looks like. And a one-third chance looks like a high probability. Or is it? I want to be as candid as it’s socially acceptable in offering my perspective in the forecast of the property market in the near term (of say 3 to 6 months) by looking at what had already happened in the past months and years through official statistics from URA. I’m operating on the premise that recent market occurences will provide clues to the emerging trend. As every real estate salesperson needs a Geographical Target Area (GTA) or GTAs to operate in, such foresight will enable them to stay ahead of the competitive curve. This has always been the true objective of this free magazine - to share insights into inherent RISKS in real estate investment. Those risks do not manifest themselves presently does not mean that they are not lurking around the corners or they don’t exist anymore like the Plague. Therein lies another level of danger because very few people are actually discussing, let alone debating, the different interpretations of the official statisitcs when they ought to be – hence the analogy of Mr O, P and R above. I have no issue with real estate salespersons giving lay opinions when plying their trade. It is easy and also socially acceptable for salesperson to give commence on market potential and then follow by some standard sales pitches. But other than such innocuous remarks, one has to come up with deeper technical analyses to back themselves up if what they are saying is going to lead to some innocent listeners bearing the full consequence of a long-term financial commitment. At the very least, these people should be told from the onset the meaning of caveat emptor, i.e. you buy at your own RISKS. – which means I only have a one-third chance of getting the predication right.

Editor Sam Gian

www.update.sg

FREE Quarterly Magazine by Akan Datang ! Q3 2012

Sam Gian’s FREE Seminar

‘WHERE IS THE MARKET HEADING’

Table of Contents

MMaarrkkeett UUppddaattee [1] HOME GROUND ADVANTAGE [Page 4 – 20 ] [2] TRAIL BLAZER OR MIDDLE-CLASS FOLLY? [page 20 – 33]

[3] A RUDE AWAKENING OF THE MIDDLE-CLASS DREAM? [page 34 – 50 ] [4] TUG-OF-WAR BETWEEN LANDLORD & TENANT? [Page 51 – 64 ]

continue… … … Mr O may find the statistics rather prickly; Mr P may be further depressed; while Mr R may decide to go on an extended holiday. But this is not my point, which is about adopting one’s own perspective towards the property market and in processing the official statisitcs. We must realise that the market is the metaphorical elephant and no matter how smart we are, the elephant is larger than us and we will always be blind-sided by it. But then again, there isn’t a ‘bad time’ to buy either. If one has already studied and understood the RISKS and decide that they have the appetite and the muscle to take that much of calculated RISKS, then go ahead and do it. But, if one had followed the crowd blissfully and eventually found out that they couldn’t exit the market so easily or rent out the property at their expected rate – a situation which we call the ‘liquidity RISK’ – it would be a real tragedy.

PRIME TIME SEMINAR ‘WHERE IS THE MARKET HEADING’

FREE Seminar by Sam Gian on 17 August 2011 – two back-to-back FULL HOUSE attendances – morning & afternoon – on the same day

SPECIAL PROPERTY MARKET REVIEW – APRIL 2012

AA bblliinndd mmaann ssaaiidd ttoo hhiiss ffrriieenndd:: ““II hhaavvee nnoott sseeeenn ccoolloouurrss bbeeffoorree;; ccaann yyoouu tteellll mmee hhooww BBLLUUEE llooookk lliikkee??””

HHiiss ffrriieenndd ccoouullddnn’’tt aannsswweerr tthhee qquueessttiioonn aass tthheerree wwaass nnoo bbaassiiss ttoo bbeeggiinn aannyy ddeessccrriippttiioonn..

WWhhaatt iiss tthhee MMOORRAALL ooff tthhee ssttoorryy??

““YYoouu ccaann’’tt ddeessccrriibbee CCOOLLOOUURR ttoo ssoommeeoonnee wwhhoo hhaass nnoott sseeeenn iitt bbeeffoorree,, aanndd vviiccee vveerrssaa..””

And now, I am about to describe to you the TRUE COLOUR of the real estate market.

OVERVIEW I have said on many occasions to a wide audience that we are witnessing the onset of a ‘downward trend’ in Singapore’s property market. In fact, at my last half-yearly ‘WHERE IS

THE MARKET HEADING’ seminar held on 17 August 2011 (the next one coming in 3rd quarter of 2012), I concluded that foreign buyers had contributed to the surge in private home sale volume and private home prices, despite the host of calibrated measures that were aimed at the generic direction of property speculators. And probably to address the inadequacy of the earlier measures, the Additional Buyer’s Stamp Duty (ABSD) was imposed and it was to take effect from 8 December 2011 onwards. And that seems to have stamped the tide of foreign buying, at least for now. In this issue of the Property Market Direction, while much expected emphasis will be placed on ascertaining the effects and effectiveness of ABSD, I will also show a series of sales figures gleaned from URA Realis system to support my earlier ‘downward trend’ statement which might have rattled some cages. But not to be rattled myself and to support my belief that the private home market may soon be reaching its ‘tipping point’ where some of the inherent RISKS will manifest themselves, I will offer the analysis on a number of leading indicators, including: By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg] 2


By Sam Gian – Certified Management Consultant / Trainer / Content Developer [www.update.sg] 3

AN OVERVIEW OF THE REAL ESTATE MARKET Comparative approach to ascertain if we are getting smarter in home choices

… … … continue from Page 2 (1) comparison of yearly private home sale figures (in

transaction volume, transaction value and total floor areas sold) between 2011 and 2007* which is arguably the ‘benchmark year’ for measurement of property market peak; (References: Tables [2.1-A] to [2.2-C])

(2) comparison of transaction volume and values of non-landed private property transactions in various market segments differentiated by price range, i.e. (i) LOW-END and MASS MARKET segment (characterised by home prices of “<$500,000 to $1 million”), (ii) MID-MARKET segment (characterised by home prices of “>$1 million to $2 million”, (iii) HIGH-END MARKET segment (characterised by home prices of “>$2 million to “$5 million”, and (iv) the LUXURY market Segment (characterised by home prices of “more than $5 million” by residential status (i.e. citizens, permanent residents, non-resident foreigners, and non-individuals) to ascertain the impact of the ABSD on foreigner’s market share; (References: Tables [2.3-A] to [2.5-D])

(3) comparison of foreigner’s market share for the 15-month period from January 2011 to March 2012; (References: Tables [2.3-A] to [2.5-D])

(4) comparison of transaction volume and value of landed homes to ascertain the strengths of unit land costs, and followed by an analysis of the affordability factor; (References: Tables [4.1-A] to [4.3-C]) and last but not least,

(5) comparison of private home rents from the 3rd quarter of 2011 (Q3 2011) to the 1st quarter of 2012 (Q1 2012). There will also be a short discussion on whether at today’s capital appreciation, investors will get the rude awakening when they realise that the current private home rents amount are still lagging behind those achieved in the last bull-run year of 2007.

*2007 was a dramatic year by any yardstick as construction of the two Integrated Resorts (IR) (with casino inside) went underway. More foreigners and along with their massive funds rushed into Singapore, spiking the number of applications under the Financial Investor Scheme (FIS) (which is to be scrapped soon by MAS) and fuelling the rapid growth of the private banking and private wealth management businesses in Singapore before the financial tsunami in the US the following year brought everything back to earth. Back then, foreign investment banks and property funds snapped up en bloc sale projects and large commercial buildings at the drop of the hat (e.g. Lehman Brothers bought Crosby House, Morgan Stanley and Wachovia Development; Goldman Sachs which bought DBS building, Hitachi Tower and Chevron House; and CLSA Capital Partners bought/sold SIA Building at Robinson Road – just to name a few high profile deals). On the residential front, fund managers searched frantically for luxury and high-end private residential properties – called the ‘uber’ apartments, both for rent and for purchase. And by the way, the record prices set in the luxury home segment in 2007 have yet to be breached until today, with all the cheap money flowing into Singapore following two rounds of Quantitative Easing (QE) measures in the US.



A RUDE AWAKENING OF THE MIDDLE CLASS DREAM A theoretical explanation may be inadequate for the super-sized bull-run in

conventional landed home segment

In theory, residential landed properties or landed homes are less susceptible to property speculation due to a number of distinct factors as follows: Firstly, a landed home is also known as

‘restricted property’ that is not meant for investment by foreign owners (including permanent residents), which is to say that if any foreigners were to have obtained the special approval to own one, they must live in it. The foreign person must also not own more than one such restricted property. Applying for the approval has become tougher after the recent amendments made to the Residential Property Act and the Minister for Law has made the promise to Singaporeans that ‘he would be very surprised if there are more than 50 restricted properties being sold to foreigners per year from now on’. In short, as a rule, foreign competition does not feature in this property segment.

Secondly, due to the huge price tag, only the top 10% income earners in

Singapore can afford this particular asset class. This is why there are much fewer instances of speculative buying in this property segment as compared with condominiums and private apartments, as few common folks can afford the huge initial outlay.

Thirdly, landed housing units are rare in land scarce Singapore. There are only

about 72,000 such properties in Singapore. So, the constraint in demand and supply is more acute in this market segment.

Related to the above point is the unique phenomenon of increasing premium

associated with larger land size, that is, there is often no ‘bulk discount’ for larger houses or larger land plots. The bigger the land, the larger is the premium that the buyer will have to pay. For example, between 2007 and 2011, bigger houses enjoyed bigger gains in prices compared to smaller properties, such as, detached houses in general enjoyed an average annual percentage gain of 14.7% per annum, or in absolute term, a consolidated 5-year gains of 73.6% in median sale price. (Refer to Table [4.1-D])

Likewise, prices for semi-detached houses during the same 5-year period enjoy an average annual percentage gain of 15% per annum, or in absolute term, a consolidated 5-year gains of 75.0% in median sale price. (Refer to Table [4.2-B]) However, for the smaller conventional landed housing type, i.e. terrace houses, the average annual percentage gain in prices was 7.33% per annum, or in absolute term, a consolidated 5-year gains of 36.7% in median sale price. (Refer to Table [4.3-B])



ECONOMIC UNDERPINNING OF LARGER LANDED PROPERTIES As such, property analysts tend to agree with the economic underpinning of the larger landed home units, e.g. detached houses where the market movements follow a certain economic fundamentals. For example, when prices of detached houses rose sharply in 2010 by 30.68% year-on-year in unit psf prices from an average of $741 psf in 2009 to $968.4 psf in 2010 (See Table [4.1-A] below), the demand for this particular property class went down 39.7%, from 459 transactions in 2010 to 277 transactions in 2011. (See Table [4.1-A] below) Having said that, however, the effect of QUANTITATIVE EASING (QE) measure by the US Federal Reserve (i.e. the central bank) would subvert everything we knew about demand and supply. Altogether, two rounds of QE from December 2008 to mid-2011 seems to have thrown all conventional economic theories out of the window; and things are a little unpredictable nowadays where the real estate market seems to mirror the volatility of the stock market. THE EFFECT OF QUANTITATIVE EASING (QE) MEASURE BY U.S. FEDERAL RESERVE To many others countries, especially in Asia, the QUANTITATIVE EASING (QE) measures have more dire consequences than what it originally intended, that is to help the ease cash-flow to sooth the unemployment problems at home. Both QE 1 and QE 2 created a combined US$2.3 trillion for the US Federal Reserve to buy back US government debts with the hope of injecting liquidity into the market. Besides that, interest rate is deliberately kept to near zero to prevent the US economy from going into depression. This is what we call the ‘hot money’ which is believed to be the main culprit of the on-going massive inflation. These measures caused investors to dump US dollars and switch to holding (and hoarding) tangible assets and commodities, and in so doing causing asset prices all over the Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate, as investors take up position to hedge against inflation. The first round of QE started in December 2008 and ended in August 2010. And it is believed that the effect filtered through to Singapore property market as can be seen from the sudden increase in property buying activities. And the second round of QE commenced from November 2010 to June 2011. THE DREAM TO BE A MIDDLE CLASS REMAINS ELUSIVE In light of the massive inflation resulting from the loose monetary measures in the developed economies, sellers in general would continue to ask for a higher premium in 2012, and as the same logic would dictate, this would continue to put a lid on the demand for larger houses among



Singaporean wage earners as the ‘affordability factor’ now weighs heavier on prospective buyers than ever before. And the ‘waiting game’ is on as the gap between asking prices and buyer’s real purchasing power widens. At the end of the day, provided there are no major mishaps from this point on, transactions for detached houses should stay subdued at well below 200 units for the whole of 2012. Let’s now look at the performance of the individual landed housing types within this market segment, in terms of comparison with the benchmark performance in 2007. MARKET PERFORMANCE IN THE DETACHED HOUSE SEGMENT BUNGALOWS IN SENTOSA COVE AND DETACHED HOUSES IN MAIN ISLAND The bungalow transactions on Sentosa Cove were not included in the comparative study of the recent market trend of larger houses because of the ‘volatility’ of this particular seafront luxury landed home segment. For illustration, in between two years of moderate performance with 37 and 35 transactions done in 2007 and 2009 respectively, there was only one bungalow sold on Sentosa Cove in 2008 – the other 5 landed house deals were terrace houses. A year later, the quiet island witnessed 54 bungalow deals. And again, there wasn’t a single transaction of any type of landed home units on Sentosa Cove in January 2012. (See Table [4.1-C])

VOLATILE TRANSACTIONS IN SENTOSA COVE BUNGALOWS The ‘volatility’ factor could be due to the fact that the houses in the resort island are touted as ‘celebrity plaything’ for the ‘rich and famous’ who are more vulnerable to global events such as the collapse of banks in the U.S. during the 2008 financial tsunami, the on-going tension between Iran and the developed economies, and the list goes on. Due to the disparity in prices between the detached houses on the main island and bungalows in Sentosa Cove, the inclusion of the extremely high prices of Sentosa bungalows in the analysis would distort the presentation of the big picture and mislead the readers.



COMPARISON OF AVERAGE UNIT LAND PRICE OF BUNGALOWS IN SENTOSA AND IN MAIN ISLAND

Look at all column [C] in Table [4.1-A], Table [4.1-B] and Table [4.1-C], one would see that there is a ‘more-than $1,000’ difference in average per-square-foot (psf) price of the two types of landed housing types. And the gap may get wider due to the fact that the ‘hot money’ is making its round in Asia in search of safe haven; and Sentosa Cove being nickname the ‘Monaco of the East’ may continue to attract high net worth individuals. TTAABBLLEE [[44..11--AA]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD IINN TTHHEE WWHHOOLLEE OOFF SSIINNGGAAPPOORREE IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE

YEAR

DETACHED HOUSE TRANSACTIONS

[A] TRANSACTION VOLUME

[B] TRANSACTION VALUE (BY $10 Million)

[C] AVERAGE UNIT LAND PRICE

($ PSF) MAIN

ISLAND SENTOSA

COVE TOTAL MAIN ISLAND

SENTOSA COVE TOTAL MAIN

ISLAND SENTOSA

COVE 2007 705 37 742 451.19 35.6 486.79 683.3 1,153.8 2008 222 1 223 148.56 1.228 149.79 722. 2 1,939 2009 432 35 467 309.82 47.19 357.01 741 1,519. 3 2010 459 54 513 443.16 92.1 535.26 968.4 1,927.3 2011 277 24 301 267.40 43.97 311.38 1,073 2,097.1

Q1 2012 35 2 37 31.71 5.66 37.37 1,103.4 2,134.5 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES As for detached houses in main island Singapore, the effect of QE1 and QE2 was evident in the transaction volume and the price rise. For example, before the QE measure was introduced in the US in December 2008, both transaction volume and prices for detached lost massive grounds in the entire 2008 and the sliding momentum lasted through to Q1 2009. But once the effect was felt in Singapore in Q2 2009, the average psf price for detached houses jumped 20.1% and transaction volume soared by 4.75 times. When QE1 officially ended in August 2010, detached house transactions slide from 127 deals in Q2 2010 to 112 in Q3 3010 and 97 in Q4 2010. Gains in unit land price for detached houses over this period was 1.1% in Q3 2010 over the preceding quarter and 5.3% in Q4 2010 over Q3 3010. QE2 started in November 2010, and by the end of December 2010, the average unit land price for detached houses was already up by a whopping 30.68%. By the time the effect of QE2 made its round in the high-end detached house segment, many Singaporean buyers would have been ‘priced out’ of the market; and this can be seen in the weaker increase in transaction volume from 97 bungalow deals in Q4 2010 to 90 deals in Q1 2011 and 80 deals in Q2 2011. Whereas, the gain in unit land price was 2.2% in Q1 2011 over the final quarter of 2010, and



4.3% in Q2 2011 over the first quarter of the year. But the gain was at the expense of falling transaction volume. So, the mini ‘bull run’ effect in 2010 was caused by investors’ reaction to the loose monetary policy of the U.S. rather by genuine and sustainable improvement in productivity or any tangible well being. But once the wealth effect started to wear out a little, the percentage rise in psf price in detached houses becomes more subdued and more in tandem with the economic reality. (See column [D] of Table [4.1-B] below) TTAABBLLEE [[44..11--BB]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD OONN MMAAIINN IISSLLAANNDD SSIINNGGAAPPOORREE ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

YEAR

DETACHED HOUSE TRANSACTIONS ON MAIN ISLAND SINGAPORE (EXCLUDING SENTOSA COVE)

[A] TOTAL

[A-1] TOTAL LAND AREA SOLD

(m2)

[B] TRANSACTION

VALUE (BY $10 MILLION)

[C] AVERAGE UNIT

LAND PRICE ($ PSF)

[D] % RISE IN AVE PSF OVER

PRECEDING YEAR

Q1 2007 170 142,092 92.865 616 - Q2 2007 278 247,667 183.060 654 6.2% Q3 2007 168 150,678 122.915 761 16.4% Q4 2007 89 63,769 52.348 754 -0.9% TOTAL 705 604,206 451.19 683.3 0

Q1 2008 73 59,219 46.254 713 -5.4% Q2 2008 64 60,186 50.981 758 6.3% Q3 2008 60 47,556 36.168 697 -8.0% Q4 2008 25 20,726 15.161 713 2.3% (QE 1 started in Nov) TOTAL 222 187,687 148.56 722. 2 5.69%

Q1 2009 28 17,377 10.867 598 -16.1% Q2 2009 133 112,383 86.515 718 20.1% Q3 2009 163 157,096 125.016 739 2.9% Q4 2009 108 96,351 87.423 807 9.2% TOTAL 432 383,207 309.82 741 +2.6%

Q1 2010 123 104,009 99.220 873 8.1% Q2 2010 127 134,529 144.080 981 12.3% (QE 1 ended in Aug) Q3 2010 112 84,325 92.153 992 1.1% Q4 2010 97 91,474 107.712 1,044 5.3% (QE 2 started in Nov) TOTAL 459 414,337 443.16 968.4 +30.7%

Q1 2011 90 69,465 82.542 1,067 2.2% Q2 2011 80 73,700 87.155 1,113 4.3% (QE 2 ended in June) Q3 2011 65 45,996 50.664 1,015 -8.8% Q4 2011 42 36,979 47.042 1,098 8.1% TOTAL 277 226,140 267.40 1,073 +10.8%

Q1 2012 35 27,417 31.71 1,103.4 0.5% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann Due to the volatility in the transactions of Sentosa Cove bungalows, the percentage rise and fall in psf price is more erratic in Sentosa Cove. (See column [D] of Table [4.1-C] below)



TTAABBLLEE [[44..11--CC]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD OONN SSEENNTTOOSSAA CCOOVVEE

YEAR

DETACHED HOUSE TRANSACTIONS ON SENTOSA COVE

[A] TOTAL

TRANSACTIONS


(m2)

[B] TRANSACTION VALUE

(BY $10 MILLION)

[C] AVERAGE UNIT

LAND PRICE ($ PSF)

[D] % RISE IN AVE

PSF OVER PRECEDING YEAR

2007 37 28,740 35.6 1153.8 0 2008 1 588 1.228 1,939 68.05% 2009 35 28,946 47.19 1,519. 3 -21.6% 2010 54 44,788 92.1 1,927.3 26.8% 2011 24 19,332 43.97 2,097.1 8.81%

Q1 2012 2 2,382 5.66 2,134.5 1.78% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann RUMOUR OF QE 3 CAUSED UPSWING IN MARCH 2012 In March 2012, there was another revival in the landed home market and this could be due to the rumors that the third round of QE might be implemented. The rumors were sufficient to send the total transaction volume flying past December 2011’s. (Table [4.1-D], [4.1-D1] & Graph [4.1-A] & [4.1-B]) Even when transaction volume and value are excluded in the data for analysis, the market performance is still considered impressive. (Table [4.1-E], [4.1-E1] & Graph [4.1-C]) However, the Federal Reserve had since early April 2012 denied it. (See conclusion story – “YOUR GUESS IS AS GOOD AS MINE”) TTAABBLLEE [[44..11--DD]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD TTOOTTAALL VVAALLUUEE IINN 22001111 ((IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

2011 DETACHED HOUSES (INCLUDING SENTOSA)

VOLUME VALUE ($) AVE PSF ($) JAN 31 299,135,000 1,153.4 FEB 29 265,153,847 1,113.8

MAR 36 388,425,000 1,116 APR 25 312,393,246 1,081 MAY 30 280,763,958 1,186.9 JUN 28 328,406,000 1,144.7 JUL 29 207,697,776 1,053

AUG 21 172,943,777 1,083 SEPT 19 193,564,888 1,119 OCT 20 204,266,888 1,309 NOV 26 371,297,376 1,277 DEC 7 89,800,000 1,267.6

TOTAL 301 3,113,847,756 1,158.7 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..11--DD11]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE && VVAALLUUEE IINN QQ11 22001122 ((IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

Q1 2012 DETACHED HOUSES (INCLUDING SENTOSA)

VOLUME VALUE ($) AVE PSF ($) JAN 12 4 23,770,000 1,109 FEB 12 8 120,684,175 1,258

MAR 12 25 229,327,000 1,135.50 TOTAL 37 373,781,175 1,168

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann



TTAABBLLEE [[44..11--EE]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD TTOOTTAALL VVAALLUUEE IINN 22001111 ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

2011 DETACHED HOUSES (EXCLUDING SENTOSA)


MAR 33 336,625,000 1,069.9 APR 25 312,393,246 1,081 MAY 28 247,253,958 1,134.9 JUN 27 311,906,000 1,119.8 JUL 28 193,897,776 1,023.8

AUG 20 156,863,777 1,041.9 SEPT 18 175,664,888 1,036 OCT 14 109,228,000 1,028 NOV 23 300,397,376 1,144 DEC 5 60,800,000 1,077.6

TOTAL 278 2,693,830,868 1,074.13 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..11--EE11]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE && TTOOTTAALL VVAALLUUEE IINN QQ11 22001122 ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

Q1 2012 DETACHED HOUSES (EXCLUDING SENTOSA)


MAR 12 24 211,647,000 1,107 TOTAL 35 317,101,175 1,101

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann GGRRAAPPHH [[44..11--AA]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVAALLUUEE (($$)) OOFF AALLLL LLAANNDDEEDD HHOOUUSSEE TTYYPPEESS IINN 22001111 –– QQ11 22001122


GGRRAAPPHH [[44..11--BB]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE ((UUNNIITTSS)) OOFF AALLLL LLAANNDDEEDD HHOOUUSSEE TTYYPPEESS IINN 22001111 –– QQ11 22001122




GGRRAAPPHH [[44..11--CC]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE ((UUNNIITTSS)) OOFF DDEETTAACCHHEEDD HHOOUUSSEESS IINN 22001111 –– QQ11 22001122 ((EEXXCCLLUUDDEE SSEENNTTOOSSAA CCOOVVEE))

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann COMPARISON OF DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 When the price for a certain product increases, the demand for that product will decrease. This is the most fundamental of all economic theories; and the economic principle can clearly be seen in the high-end landed home segment. For example, the demand for detached houses fell almost 60% from the benchmark 2007 to 2011 after both the psf land price and absolute sale price of the premier property soared by more than 70% over the 5-year period. (Reference: Table [4.1-F] below) TTAABBLLEE [[44..11--FF]] –– CCOOMMPPAARRIINNGG DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111

TRANSACTION VOLUME MEDIAN SALE PRICE

($ MILLION) MEDIAN PSF PRICE

($ PSF) 2007 2011 % DIFF 2007 2011 % DIFF 2007 2011 % DIFF

D4 40 24 -40% 8.97 17.8 98.4% 1,090 2,120 94.5%

D5 7 3 -57% 2.86 6.28 119% 471 958 103.4%

D10 186 49 -73.7% 8.3 14.2 71% 816 1,417 73.6%

D11 84 30 -64.3% 6.86 11.11 62% 887 1,361 53.4%

D13 41 15 -63.4% 4.6 7.4 61% 586 1,076 83.6%

D14 31 5 -83.9% 2.45 5.3 116% 460 1,132 146%

D15 109 51 -53.2% 4.65 7.3 57% 664 1,091 64.3%

D16 25 13 -48% 3.05 4.38 43.6% 570 793 39%

D17 19 11 -42% 2.65 4.7 77.4% 404 746 84.6%

D19 62 27 -56.5% 2.65 4.838 82.6% 445 855 92.1%

D20 31 3 -90.3% 3.16 8 153% 550 1,110 101.8%

D21 36 21 -41.7% 6 8.22 37% 738 1,158 56.9%

D23 17 15 -11.8% 3.65 4.6 26% 426 740 73.7%

D25 10 9 -10% 2.33 3.78 62% 412 549 33.2%

D27 9 4 -55.6% 2.51 3.65 45% 326 796.5 144%

D28 18 12 -33.3% 4 7.7 92.5% 495 834 68.5%

TOTAL 725 292 -59.7% 4.29 7.45 73.6% 584 1,046 79.1% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann The same economic fundamental can be seen in the semi-detached house segment.



SEMI-DETACHED HOUSES As mentioned earlier the economic underpinning of real estate is more luminously clearer in landed residential properties than, say, condominiums which are often subject to speculation. As such, the following quarter-by-quarter layout of the transaction figures of semi-detached houses over the 5-year period of between 2007 and 2011 clearly illustrate the ebb and flow of the property market in relation to the larger economy factors. UNIT LAND PRICE BREACHING $700 PSF AND $800 PSF IN A MATTER OF 6 MONTHS In the aftermath of the financial tsunami in 2008, average unit land price showed negative growth from Q3 2008 to Q1 2009, and transaction volume tumbled 44% from 135 deals in Q3 to 75 in Q4 2008. But miraculously, home prices started to pick up momentum from Q2 2009 onwards, barely 9 months after the infamous crash in Wall Street. Unit land prices started to cross the $700 psf barrier in Q3 3009; $800 psf in Q1 2010; $900 psf in Q2 2011; and $1,000 psf in Q4 2011. As they always say: “and the rest is history”. THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES Regardless of whether any part of the ‘hot money’ did filter through into the restricted property segment in Singapore, the sudden wealth effect (which was caused by ultra-low mortgage interest rate by local banks which took the cue from the US) helped to propel landed home prices to much greater height, in deviant of the lack of progress in the global economy in the aftermath of the financial tsunami. Once the effect of QE1 was felt in Singapore in Q2 2009, the average psf price for semi-detached houses jumped more than 11% and transaction volume soared by 3.13 times when compared with Q1 2009. However, unlike in the detached house segment, after QE1 officially ended in August 2010, unit price gain of semi-detached houses continued probably due to the quantum leap in prices of detached houses in the same time period, pushing prospective bungalow buyers out of the range to seek substitute housing. For the whole of 2010, unit price gain of semi-detached houses in Singapore was 22%. (See Column D of Table [4.2-A] below)



TTAABBLLEE [[44..22--AA]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD FFRROOMM 22000077 TTOO QQ11 22001122

YEAR

SEMI-DETACHED HOUSE TRANSACTIONS

[A] TOTAL


(m2)

[B] TRANSACTION


[C] AVERAGE UNIT LAND

PRICE ($ PSF)


PRECEDING YEAR

Q1 2007 322 112,841 62.480 533 0 Q2 2007 559 188,759 118.308 606 13.6% Q3 2007 304 102,150 72.780 680 12.3% Q4 2007 245 83,194 58.765 669 -1.7% TOTAL 1,430 486,944 312.334 616 -

Q1 2008 154 53,124 38.474 684 2.2% Q2 2008 172 55,691 40.246 685 0.10% Q3 2008 135 42,703 28.580 645 -5.8% Q4 2008 75 24,419 15.655 623 -3.4% (QE 1 started in Nov) TOTAL 536 175,937 122.956 666 8.1%

Q1 2009 103 32,717 20.795 620 -0.50% Q2 2009 293 93,914 62.377 637 2.7% Q3 2009 323 106,013 78.786 707 11% Q4 2009 253 86,287 66.756 742 5.0% TOTAL 972 318,931 228.715 677 1.65%

Q1 2010 268 86,911 72.290 806 8.6% Q2 2010 292 98,451 85.881 828 2.7% (QE 1 ended in Aug) Q3 2010 248 84,460 74.133 833 0.6% Q4 2010 221 70,398 65.376 890 6.8% (QE 2 started in Nov) TOTAL 1,029 340,220 297.68 837 22.0%

Q1 2011 185 60,284 64.017 1,009 13.4% Q2 2011 227 74,335 78.125 994 -1.5% (QE 2 ended in June) Q3 2011 147 47,931 51.009 999 0.5% Q4 2011 120 39,310 42.214 1,026 2.7% TOTAL 679 221,860 235.36 1,005 20.1%

Q1 2012 113 37,291 42.34 1,066.7 6.1% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann COMPARISON OF SEMI-DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 However, the capital gain achieved in the conventional landed home segment did not come about due to higher transaction volume; but quite the contrary, it was achieved at the back of decline in transaction volume most of the time when the volume of 2011 was compared to the same period of the benchmark year of 2007. In other words, the real economic performance does have an impact on market buoyancy. (Table [4.2-B])



TTAABBLLEE [[44..22--BB]] –– CCOOMMPPAARRIINNGG SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111 ((BBYY PPOOSSTTAALL DDIISSTTRRIICCTT))




D5 25 15 -40% 2.228 3.30 52.2% 655 997 48.1%

D10 173 70 -59.5% 3.30 5.20 62.1% 937 1,519 57.6%

D11 70 35 -50% 3.50 5.15 77.3% 902 1,599 47.1%

D13 55 24 -56.4% 1.70 3.23 67.2% 545 911 90%

D14 53 29 -45.3% 1.85 2.97 83.8% 462 849 60.5%

D15 191 60 -68.6% 2.50 3.78 54.9% 697 1,080 51.2%

D16 151 97 -35.8% 1.70 2.83 63.4% 497 812 66.5%

D17 26 10 -61.5% 1.52 2.3 63.6% 503 823 51.3%

D18 11 6 -45.5% 1.388 2.18 85.6% 424 787 57.1%

D19 213 110 -48.4% 1.70 3.13 95.4% 461 901 84.1%

D20 91 27 -70.3% 1.72 3.3 88.7% 495 934 91.9%

D21 71 32 -54.9% 2.2 3.65 68.7% 661 1,115 65.9%

D22 5 3 -40% 910K 1.5 71.5% 403 691 64.8%

D23 62 16 -74.2% 1.65 3.1 60.4% 548 879 87.9%

D25 10 10 0 1.20 2.1 106.3% 269 555 75%

D26 30 24 -20% 1.55 2.8 92.9% 425 820 80.6%

D27 47 23 -51.1% 1.25 2.28 114.0% 384 822 82.4%

D28 139 86 -38.1% 1.55 2.95 106.1% 407 839 90.3%

TOTAL 1,423 677 -52.4% 537.5 940.7 75.0% 33.41 55.7 66.8% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann In an alternative layout on transaction volume and value of semi-detached house transactions between January 2011 and March 2012, the same conclusion can be drawn as above, i.e. the extraordinary performance in March 2012 could be attributed to the QE measures. The sudden jolt of the March 2012 transactions of semi-detached houses actually propelled the sales performance past June 2011, the month QE2 officially ended. (Table [4.2-C] & [4.2-C1]) TTAABBLLEE [[44..22--CC]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN IINN 22001111

2011 SEMI-D HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 77 252,330,980 970.7 FEB 34 124,393,080 1,073

MAR 74 263,453,270 1,020 APR 86 291,234,295 981 MAY 81 275,698,890 991.7 JUN 60 214,323,276 1,017.9 JUL 59 216,811,776 982

AUG 45 150,609,888 1,007 SEPT 43 142,675,008 1,013.7 OCT 35 129,093,000 1,039.7 NOV 44 150,046,000 991.6 DEC 39 136,950,888 1,059

TOTAL 677 2,347,620,351 1,012 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann



TTAABBLLEE [[44..22--CC11]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN BBEETTWWEEEENN IINN QQ11 22001122

Q1 2012 SEMI-D HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 12 25 89,347,555 973.2 FEB 12 28 99,784,887 1,099.6

MAR 12 60 234,357,000 1,090.4 TOTAL 113 423,489,442 1054.4


TERRACE HOUSES Likewise, the performance of the terrace house segment was also influenced by the advent of liquidity where buyers took up position during the QE1 and QE2 periods which can be seen from Q2 2009 to second half of 2010. THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES Once the effect of QE1 was felt in the terrace house segment in Q3 2009, the average psf price for terrace houses jumped 22.2% and transaction volume soared by 4.5 times over the first quarter (Q1) of the year. When QE1 officially ended in August 2010, terrace house transactions slide from 644 deals in Q2 2010 to 531 in Q3 3010 and 498 in Q4 2010 or -22.6%. By then, rise in unit land price for terrace houses over this period was pared down to 3.7% in Q3 2010 over the preceding quarter. A month after QE2 started in November 2010, the average unit land price for terrace houses was already up by 23.9% for the whole year. After QE2 ended in June 2011, terrace house transactions began a gradual slide in the following quarters, i.e. from 523 deals in Q2 2012 to 366 deals (or 30.0%) in Q3 2012 and 327 deals in Q4 2011; while unit psf price likewise slipped from 5.1% in Q2 2011 to 4.4% in Q3 2011 and 3.2% in Q4 2011. TTAABBLLEE [[44..33--AA]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD TTHHRROOUUGGHHOOUUTT SSIINNGGAAPPOORREE

YEAR

TERRACE HOUSE TRANSACTIONS

[A] TOTAL


(m2)

[B] TRANSACTION


[C] AVERAGE UNIT

LAND PRICE ($ PSF)


PRECEDING YEAR

Q1 2007 527 108,127 61.052 549 - Q2 2007 984 203,635 130.664 615 12.0% Q3 2007 608 125,017 90.454 700 13.8% Q4 2007 460 93,279 70.740 739 5.6%



TOTAL 2,579 530,058 352.91 643.6 0 Q1 2008 338 65565 50.778 747 1.0% Q2 2008 326 63329 45.145 692 -7.3% Q3 2008 291 58894 40.276 661 -4.5% Q4 2008 148 28579 18.500 625 -5.6% (QE 1 started in Nov) TOTAL 1,103 216,367 154.7 691.8 7.5%

Q1 2009 164 33,096 20.249 603 -3.5% Q2 2009 477 94,571 61.291 635 5.2% Q3 2009 741 144,174 110.016 737 16.1% Q4 2009 529 103,849 83.934 788 7.0% TOTAL 1,911 375,690 275.49 714 3.2%

Q1 2010 542 109,792 92.544 825 4.7% Q2 2010 644 126,112 113.685 868 5.2% (QE 1 ended in Aug) Q3 2010 531 104,329 98.123 900 3.7% Q4 2010 498 97,900 97.268 953 5.9% (QE 2 started in Nov) TOTAL 2,215 438,133 401.62 884.5 23.9%

Q1 2011 421 81,146 84.678 1,009 5.9% Q2 2011 523 104,037 114.188 1,060 5.1% Q3 2011 366 68,842 79.176 1,107 4.4% (QE 2 ended in June) Q4 2011 327 63,099 74.550 1,142 3.2% TOTAL 1,637 317,124 352.59 1,074 21.4%

Q1 2012 237 46,583 55.91 1,152.7 7.3% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann MARKET PERFORMANCE IN THE TERRACE HOUSE SEGMENT TTAABBLLEE [[44..33--BB]] –– CCOOMMPPAARRIINNGG TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111 ((BBYY PPOOSSTTAALL DDIISSTTRRIICCTT))


($ Mil) MEDIAN PSF PRICE


D2 12 5 -58.3% 3.0 5.148 71.6% 1,793 2,752 53.5%

D4 18 0 0 4.8 0 0 1,661 0 0

D5 72 32 -55.6% 1.4 2.4 71.4% 679 1,055 55.4%

D8 16 9 -43.8% 1.39 2.2 58.3% 723 1,154 59.6%

D9 40 27 -32.5% 4.0 3.8 -5% 1,848 2,625 42.0%

D10 48 27 -43.8% 2.3 3.45 50% 966 1,493 54.6%

D11 40 27 -32.5% 2.218 3.5 57.8% 1,001 1,702 70.0%

D12 31 6 -80.7% 1.05 1.66 58.1% 952 1,042 9.5%

D13 121 69 -43.0% 1.0 1.82 82% 610 1,073 75.9%

D14 127 82 -35.4% 1.22 2.06 68.9% 522 942 80.5%

D15 395 233 -41.0% 1.29 2.15 66.7% 613 1,125 83.5%

D16 206 88 -57.3% 1.25 1.95 56% 570 1,012 77.5%

D17 65 67 3.1% 0.91 1.35 48.4% 469 767 63.5%

D18 31 24 -22.6% 0.96 1.547 61.1% 488 695 42.4%

D19 517 344 -33.5% 1.15 2.0 73.9% 501 940 87.6%



D20 240 130 -45.9% 1.01 1.93 91.1% 536 1,018 89.9%

D21 59 31 -47.5% 1.43 2.38 66.4% 662 1,094 65.3%

D22 48 53 10.4% 0.808 1.358 68.1% 416 772 85.6%

D23 135 118 -12.6% 1.11 2.148 93.5% 551 1,020 85.1%

D25 11 14 27.3% 1.08 1.53 41.7% 539 859 59.3%

D26 146 65 -55.5% 1.32 2.11 59.8% 705 997 41.4%

D27 23 50 117.3% 1.05 1.95 85.7% 435 1,113 155.9%

D28 178 136 -23.6% 1.225 2.08 69.8% 560 1,061 89.5%

TOTAL 2,579 1,637 -36.5% 36.971 50.521 36.7% 774 1,144 47.8% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..33--CC]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE IINN 22001111

2011 TERRACE HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 160 325,193,584 981 FEB 92 190,821,447 1,085.7

MAR 169 330,767,700 994 APR 195 402,665,148 1,034 MAY 161 340,365,968 1,021.9 JUN 167 398,856,018 1,127 JUL 135 295,459,855 1,083.9

AUG 125 262,871,764 1,117 SEPT 106 233,433,064 1,125.8 OCT 101 224,506,776 1,084.7 NOV 143 333,511,422 1,184 DEC 82 185,682,790 1,142. 7

TOTAL 1,636 3,524,135,536 1,076 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..33--CC11]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE IINN QQ11 22001122

Q1 2012 TERRACE HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 12 41 100,792,888 1,258 FEB 12 64 149,983,346 1,129.6

MAR 12 132 308,350,011 1,131 TOTAL 237 559,126,245 1,173

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann FINDING (1) SELLER’S MARKET IN THE LANDED HOUSE SEGMENT There can be two distinctly different interpretations to the above data: the first is the conventional interpretation of ‘demand outpacing supply’ and thereby causing prices to soar; while the second interpretation could be ‘high prices deterring demand’ which is taking ‘prices’ as causing the muted buying behaviour. However, both are true in this bizarre market as mere rumour of another round of QUANTITATIVE EASING (QE) was sufficient to cause the March 2012 figure to surge. Before that, a strong sense of cautiousness prevailed in this high-end market segment.



Whatever the interpretation, one factor stands out like the Statue of Liberty with the torch, that is, the impact of inflation on this rare asset class. Whether such a market can be considered as the ‘seller’s market’ will depend on very much on the prevailing risk appetite of the lender banks. Consider the implications of the following 2-part question: (a) ‘would the lenders find it riskier in today’s environment to lend $10 million to an individual to invest a detached house; or, (b) would it be safer for the lender bank to split up its $10 million into several smaller sub- $1 million loan packages and lend them to HDB flat dwellers who are upgrading to the mass-market private housing segment?’ If the answer to part (a) is affirmative, we have a ‘seller’s market’. But if the answer to part (b) is favourable, then the larger house types, i.e. detached house and semi-detached house segments may be stuck in a stalemate with the gap between seller’s and buyer’s price getting wider. The opportunity for upward mobility for some middle-class Singaporeans appears to have been curtailed. For some middle-class Singaporeans, the ‘upper class’ dream of owning a bungalow in land scarce Singapore is all but dashed. (2) THE AFFORDABILITY FACTOR Consequence to the inflation effect, all landed house prices in general have soared when compared with the last bull-run in 2007. The rate of acceleration is breath-taking and prices may have shot past the affordability level, which could be extrapolated from the over-50% plunge in transaction volume over the past 5 years. (See Tables [4.1-F], [4.2-B], & [4.3-B]) The current prices of detached houses may have already slipped out of reach of many of this country’s top 10% wage earners. Such high prices are unsustainable due to two critical factors: Firstly, the staggering rise in private home prices did not result from an

exponential rise in productivity growth or GDP growth in the economy; and,

Secondly, the great global uncertainties lying ahead; if the global situation does not improve quickly, activities in the landed home segment will slow down significantly for the remaining part of the year as Singaporeans’ wages will stall in the want for productivity.

(3) THE INFLATION EFFECT – THE RICH GETS RICHER Such a cruel reality is to be expected after one round of ferocious inflation where asset price skyrocketed beyond the affordability level of ordinary wage earners. Barring any severe recession, detached and semi-detached houses may now already be out of reach for many Singaporeans, not to mention the uncertain times ahead.



Perhaps, the only comfort remaining is that we know it is not due to foreigners snatching away our opportunities because of the ownership control imposed in this particular housing segment. (4) THE TWO QUANTITATIVE EASING (i.e. QE 1 & QE 2) MEASURES BY U.S. THE MAIN CULPRIT Perhaps, other than attributing to the two rounds of QUANTITATIVE EASING (QE) measures, there are no other plausible explanations to the two sudden jolts in the unit land price in the landed home segment in Q2 2009 and the whole year 30.7% jump in the unit land price in 2010. HOW THE TRILLIONS OF NEWLY PRINTED U.S. DOLLARS STACK UP Before the financial tsunami, the U.S. Federal Reserve held around US$700 billion to US$800 billion in Treasury Notes (or for ease of calculation, US$0.7-US$0.8 trillion). By the time QE 1 started in November 2008, the Fed aimed to buy back US$600 billion (or US$0.6 trillion) of debts including Treasury Notes, bank debts and Mortgage-backed securities (MBS) from private holders. But by the 4th month, i.e. March 2009, the Fed had purchased an additional US$450 billion in debts from the private holders; which means a total of US$1.05 trillion in debts were purchased by the Fed. By the time QE 1 officially ended in June 2010 (after 20 months), the Fed bought another US$350 billion of additional debts, making the grand total of US$1.4 trillion of debts being purchased from private investors by the Federal Reserve. At that point in time, the Fed had on its balance sheet US$2.1 trillion of debts. The second round of purchase of US government debts, dubbed QE 2, went on for only 7 months, from November 2010 to June 2011. The Federal Reserve purchased an additional US$600 billion worth of debts from private investors. THE IMPACT OF QE 1 WAS GREATER THAN QE 2 By the time QE 1 was halted in June 2010, the average unit land price of landed home units looked as follows:

o detached houses (excluding those on Sentosa Cove) rose by $383 psf (or 64.0%) to hit an average of $981 psf; (Table [4.1-B])

o semi-detached houses went up by $205 psf (or 32.9%) to reach an average of $828 psf; (Table [4.2-A])

o terrace houses climbed by $243 psf (or 38.9%) to reach an average of $868 psf by the end of Q1 2012. (Table [4.3-A])

When QE 2 started in November 2010, the average unit land price for landed home units in Singapore had already gone up to a level beyond income growth of even the top income earners; and as such, the increase in the unit land price was less intense. Between Q4 2010 and Q2 2011, the average unit land price of landed home units looked as follows:



o detached houses (excluding those on Sentosa Cove) rose by $69 psf (or 6.6%)

to reached an average of $1,113 psf; (Table [4.1-B])


o terrace houses climbed by $107 psf (or 11.2%) to reach an average of $1,060 psf by the end of Q2 2010. (Table [4.3-A])

MERE SPECULATION OF QE 3 SENT PRICES SOARING IN Q1 2012 The sudden and unexpected rise in March 2012 transaction of landed home units can also be attributed to the market rumour of another round of such measures. Between Q3 2011 and the end of March 2012, the average unit land price of landed home units looked as follows:

o detached houses (excluding those on Sentosa Cove) rose by $88 psf (or 8.7%) to reached an average of $1,103 psf; (Table [4.1-B])

o semi-detached houses went up by $67 psf (or 6.7%) to reach an average of $1,066 psf; (Table [4.2-A])


The average unit land price for detached houses transacted in Q1 2012 is comparatively lower than the historical height of $1,113 psf in Q2 2011. However, for semi-detached houses transacted in Q1 2012, the average unit land price of $1,066 psf is the new historical height. Likewise for terrace houses, $1,152 psf is also the new historical height in average unit land price.



A RUDE AWAKENING OF THE MIDDLE CLASS DREAM A theoretical explanation may be inadequate for the super-sized bull-run in

conventional landed home segment

In theory, residential landed properties or landed homes are less susceptible to property speculation due to a number of distinct factors as follows: Firstly, a landed home is also known as

‘restricted property’ that is not meant for investment by foreign owners (including permanent residents), which is to say that if any foreigners were to have obtained the special approval to own one, they must live in it. The foreign person must also not own more than one such restricted property. Applying for the approval has become tougher after the recent amendments made to the Residential Property Act and the Minister for Law has made the promise to Singaporeans that ‘he would be very surprised if there are more than 50 restricted properties being sold to foreigners per year from now on’. In short, as a rule, foreign competition does not feature in this property segment.

Secondly, due to the huge price tag, only the top 10% income earners in

Singapore can afford this particular asset class. This is why there are much fewer instances of speculative buying in this property segment as compared with condominiums and private apartments, as few common folks can afford the huge initial outlay.

Thirdly, landed housing units are rare in land scarce Singapore. There are only

about 72,000 such properties in Singapore. So, the constraint in demand and supply is more acute in this market segment.

Related to the above point is the unique phenomenon of increasing premium

associated with larger land size, that is, there is often no ‘bulk discount’ for larger houses or larger land plots. The bigger the land, the larger is the premium that the buyer will have to pay. For example, between 2007 and 2011, bigger houses enjoyed bigger gains in prices compared to smaller properties, such as, detached houses in general enjoyed an average annual percentage gain of 14.7% per annum, or in absolute term, a consolidated 5-year gains of 73.6% in median sale price. (Refer to Table [4.1-D])

Likewise, prices for semi-detached houses during the same 5-year period enjoy an average annual percentage gain of 15% per annum, or in absolute term, a consolidated 5-year gains of 75.0% in median sale price. (Refer to Table [4.2-B]) However, for the smaller conventional landed housing type, i.e. terrace houses, the average annual percentage gain in prices was 7.33% per annum, or in absolute term, a consolidated 5-year gains of 36.7% in median sale price. (Refer to Table [4.3-B])



ECONOMIC UNDERPINNING OF LARGER LANDED PROPERTIES As such, property analysts tend to agree with the economic underpinning of the larger landed home units, e.g. detached houses where the market movements follow a certain economic fundamentals. For example, when prices of detached houses rose sharply in 2010 by 30.68% year-on-year in unit psf prices from an average of $741 psf in 2009 to $968.4 psf in 2010 (See Table [4.1-A] below), the demand for this particular property class went down 39.7%, from 459 transactions in 2010 to 277 transactions in 2011. (See Table [4.1-A] below) Having said that, however, the effect of QUANTITATIVE EASING (QE) measure by the US Federal Reserve (i.e. the central bank) would subvert everything we knew about demand and supply. Altogether, two rounds of QE from December 2008 to mid-2011 seems to have thrown all conventional economic theories out of the window; and things are a little unpredictable nowadays where the real estate market seems to mirror the volatility of the stock market. THE EFFECT OF QUANTITATIVE EASING (QE) MEASURE BY U.S. FEDERAL RESERVE To many others countries, especially in Asia, the QUANTITATIVE EASING (QE) measures have more dire consequences than what it originally intended, that is to help the ease cash-flow to sooth the unemployment problems at home. Both QE 1 and QE 2 created a combined US$2.3 trillion for the US Federal Reserve to buy back US government debts with the hope of injecting liquidity into the market. Besides that, interest rate is deliberate kept to near zero to prevent the US economy from going into depression. This is what we call the ‘hot money’ which is believed to be the main culprit of the on-going massive inflation. These measures caused investors to dump US dollars and switch to holding (and hoarding) tangible assets and commodities, and in so doing causing asset prices all over the Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate, as investors take up position to hedge against inflation. The first round of QE started in December 2008 and ended in August 2010. And it is believed that the effect filtered through to Singapore property market as can be seen from the sudden increase in property buying activities. And the second round of QE commenced from November 2010 to June 2011. THE DREAM TO BE A MIDDLE CLASS REMAINS ELUSIVE In light of the massive inflation resulting from the loose monetary measures in the developed economies, sellers in general would continue to ask for a higher premium in 2012, and as the same logic would dictate, this would continue to put a lid on the demand for larger houses among



Singaporean wage earners as the ‘affordability factor’ now weighs heavier on prospective buyers than ever before. And the ‘waiting game’ is on as the gap between asking prices and buyer’s real purchasing power widens. At the end of the day, provided there are no major mishaps from this point on, transactions for detached houses should stay subdued at well below 200 units for the whole of 2012. Let’s now look at the performance of the individual landed housing types within this market segment, in terms of comparison with the benchmark performance in 2007. MARKET PERFORMANCE IN THE DETACHED HOUSE SEGMENT BUNGALOWS IN SENTOSA COVE AND DETACHED HOUSES IN MAIN ISLAND The bungalow transactions on Sentosa Cove were not included in the comparative study of the recent market trend of larger houses because of the ‘volatility’ of this particular seafront luxury landed home segment. For illustration, in between two years of moderate performance with 37 and 35 transactions done in 2007 and 2009 respectively, there was only one bungalow sold on Sentosa Cove in 2008 – the other 5 landed house deals were terrace houses. A year later, the quiet island witnessed 54 bungalow deals. And again, there wasn’t a single transaction of any type of landed home units on Sentosa Cove in January 2012. (See Table [4.1-C])

VOLATILE TRANSACTIONS IN SENTOSA COVE BUNGALOWS The ‘volatility’ factor could be due to the fact that the houses in the resort island are touted as ‘celebrity plaything’ for the ‘rich and famous’ who are more vulnerable to global events such as the collapse of banks in the U.S. during the 2008 financial tsunami, the on-going tension between Iran and the developed economies, and the list goes on. Due to the disparity in prices between the detached houses on the main island and bungalows in Sentosa Cove, the inclusion of the extremely high prices of Sentosa bungalows in the analysis would distort the presentation of the big picture and mislead the readers.



COMPARISON OF AVERAGE UNIT LAND PRICE OF BUNGALOWS IN SENTOSA AND IN MAIN ISLAND

Look at all column [C] in Table [4.1-A], Table [4.1-B] and Table [4.1-C], one would see that there is a ‘more-than $1,000’ difference in average per-square-foot (psf) price of the two types of landed housing types. And the gap may get wider due to the fact that the ‘hot money’ is making its round in Asia in search of safe haven; and Sentosa Cove being nickname the ‘Monaco of the East’ may continue to attract high net worth individuals. TTAABBLLEE [[44..11--AA]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD IINN TTHHEE WWHHOOLLEE OOFF SSIINNGGAAPPOORREE IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE

YEAR

DETACHED HOUSE TRANSACTIONS

[A] TRANSACTION VOLUME

[B] TRANSACTION VALUE (BY $10 Million)

[C] AVERAGE UNIT LAND PRICE

($ PSF) MAIN

ISLAND SENTOSA

COVE TOTAL MAIN ISLAND

SENTOSA COVE TOTAL MAIN

ISLAND SENTOSA

COVE 2007 705 37 742 451.19 35.6 486.79 683.3 1,153.8 2008 222 1 223 148.56 1.228 149.79 722. 2 1,939 2009 432 35 467 309.82 47.19 357.01 741 1,519. 3 2010 459 54 513 443.16 92.1 535.26 968.4 1,927.3 2011 277 24 301 267.40 43.97 311.38 1,073 2,097.1

Q1 2012 35 2 37 31.71 5.66 37.37 1,103.4 2,134.5 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES As for detached houses in main island Singapore, the effect of QE1 and QE2 was evident in the transaction volume and the price rise. For example, before the QE measure was introduced in the US in December 2008, both transaction volume and prices for detached lost massive grounds in the entire 2008 and the sliding momentum lasted through to Q1 2009. But once the effect was felt in Singapore in Q2 2009, the average psf price for detached houses jumped 20.1% and transaction volume soared by 4.75 times. When QE1 officially ended in August 2010, detached house transactions slide from 127 deals in Q2 2010 to 112 in Q3 3010 and 97 in Q4 2010. Gains in unit land price for detached houses over this period was 1.1% in Q3 2010 over the preceding quarter and 5.3% in Q4 2010 over Q3 3010. QE2 started in November 2010, and by the end of December 2010, the average unit land price for detached houses was already up by a whopping 30.68%. By the time the effect of QE2 made its round in the high-end detached house segment, many Singaporean buyers would have been ‘priced out’ of the market; and this can be seen in the weaker increase in transaction volume from 97 bungalow deals in Q4 2010 to 90 deals in Q1 2011 and 80 deals in Q2 2011. Whereas, the gain in unit land price was 2.2% in Q1 2011 over the final quarter of 2010, and



4.3% in Q2 2011 over the first quarter of the year. But the gain was at the expense of falling transaction volume. So, the mini ‘bull run’ effect in 2010 was caused by investors’ reaction to the loose monetary policy of the U.S. rather by genuine and sustainable improvement in productivity or any tangible well being. But once the wealth effect started to wear out a little, the percentage rise in psf price in detached houses becomes more subdued and more in tandem with the economic reality. (See column [D] of Table [4.1-B] below) TTAABBLLEE [[44..11--BB]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD OONN MMAAIINN IISSLLAANNDD SSIINNGGAAPPOORREE ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

YEAR

DETACHED HOUSE TRANSACTIONS ON MAIN ISLAND SINGAPORE (EXCLUDING SENTOSA COVE)

[A] TOTAL


(m2)

[B] TRANSACTION


[C] AVERAGE UNIT

LAND PRICE ($ PSF)


PRECEDING YEAR

Q1 2007 170 142,092 92.865 616 - Q2 2007 278 247,667 183.060 654 6.2% Q3 2007 168 150,678 122.915 761 16.4% Q4 2007 89 63,769 52.348 754 -0.9% TOTAL 705 604,206 451.19 683.3 0

Q1 2008 73 59,219 46.254 713 -5.4% Q2 2008 64 60,186 50.981 758 6.3% Q3 2008 60 47,556 36.168 697 -8.0% Q4 2008 25 20,726 15.161 713 2.3% (QE 1 started in Nov) TOTAL 222 187,687 148.56 722. 2 5.69%

Q1 2009 28 17,377 10.867 598 -16.1% Q2 2009 133 112,383 86.515 718 20.1% Q3 2009 163 157,096 125.016 739 2.9% Q4 2009 108 96,351 87.423 807 9.2% TOTAL 432 383,207 309.82 741 +2.6%

Q1 2010 123 104,009 99.220 873 8.1% Q2 2010 127 134,529 144.080 981 12.3% (QE 1 ended in Aug) Q3 2010 112 84,325 92.153 992 1.1% Q4 2010 97 91,474 107.712 1,044 5.3% (QE 2 started in Nov) TOTAL 459 414,337 443.16 968.4 +30.7%

Q1 2011 90 69,465 82.542 1,067 2.2% Q2 2011 80 73,700 87.155 1,113 4.3% (QE 2 ended in June) Q3 2011 65 45,996 50.664 1,015 -8.8% Q4 2011 42 36,979 47.042 1,098 8.1% TOTAL 277 226,140 267.40 1,073 +10.8%

Q1 2012 35 27,417 31.71 1,103.4 0.5% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann Due to the volatility in the transactions of Sentosa Cove bungalows, the percentage rise and fall in psf price is more erratic in Sentosa Cove. (See column [D] of Table [4.1-C] below)



TTAABBLLEE [[44..11--CC]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD OONN SSEENNTTOOSSAA CCOOVVEE

YEAR

DETACHED HOUSE TRANSACTIONS ON SENTOSA COVE

[A] TOTAL

TRANSACTIONS


(m2)

[B] TRANSACTION VALUE

(BY $10 MILLION)

[C] AVERAGE UNIT

LAND PRICE ($ PSF)

[D] % RISE IN AVE

PSF OVER PRECEDING YEAR

2007 37 28,740 35.6 1153.8 0 2008 1 588 1.228 1,939 68.05% 2009 35 28,946 47.19 1,519. 3 -21.6% 2010 54 44,788 92.1 1,927.3 26.8% 2011 24 19,332 43.97 2,097.1 8.81%

Q1 2012 2 2,382 5.66 2,134.5 1.78% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann RUMOUR OF QE 3 CAUSED UPSWING IN MARCH 2012 In March 2012, there was another revival in the landed home market and this could be due to the rumors that the third round of QE might be implemented. The rumors were sufficient to send the total transaction volume flying past December 2011’s. (Table [4.1-D], [4.1-D1] & Graph [4.1-A] & [4.1-B]) Even when transaction volume and value are excluded in the data for analysis, the market performance is still considered impressive. (Table [4.1-E], [4.1-E1] & Graph [4.1-C]) However, the Federal Reserve had since early April 2012 denied it. (See conclusion story – “YOUR GUESS IS AS GOOD AS MINE”) TTAABBLLEE [[44..11--DD]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD TTOOTTAALL VVAALLUUEE IINN 22001111 ((IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

2011 DETACHED HOUSES (INCLUDING SENTOSA)


MAR 36 388,425,000 1,116 APR 25 312,393,246 1,081 MAY 30 280,763,958 1,186.9 JUN 28 328,406,000 1,144.7 JUL 29 207,697,776 1,053

AUG 21 172,943,777 1,083 SEPT 19 193,564,888 1,119 OCT 20 204,266,888 1,309 NOV 26 371,297,376 1,277 DEC 7 89,800,000 1,267.6

TOTAL 301 3,113,847,756 1,158.7 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..11--DD11]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE && VVAALLUUEE IINN QQ11 22001122 ((IINNCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

Q1 2012 DETACHED HOUSES (INCLUDING SENTOSA)


MAR 12 25 229,327,000 1,135.50 TOTAL 37 373,781,175 1,168




TTAABBLLEE [[44..11--EE]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD TTOOTTAALL VVAALLUUEE IINN 22001111 ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

2011 DETACHED HOUSES (EXCLUDING SENTOSA)


MAR 33 336,625,000 1,069.9 APR 25 312,393,246 1,081 MAY 28 247,253,958 1,134.9 JUN 27 311,906,000 1,119.8 JUL 28 193,897,776 1,023.8

AUG 20 156,863,777 1,041.9 SEPT 18 175,664,888 1,036 OCT 14 109,228,000 1,028 NOV 23 300,397,376 1,144 DEC 5 60,800,000 1,077.6

TOTAL 278 2,693,830,868 1,074.13 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..11--EE11]] –– DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE && TTOOTTAALL VVAALLUUEE IINN QQ11 22001122 ((EEXXCCLLUUDDIINNGG SSEENNTTOOSSAA CCOOVVEE))

Q1 2012 DETACHED HOUSES (EXCLUDING SENTOSA)


MAR 12 24 211,647,000 1,107 TOTAL 35 317,101,175 1,101

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann GGRRAAPPHH [[44..11--AA]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVAALLUUEE (($$)) OOFF AALLLL LLAANNDDEEDD HHOOUUSSEE TTYYPPEESS IINN 22001111 –– QQ11 22001122


GGRRAAPPHH [[44..11--BB]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE ((UUNNIITTSS)) OOFF AALLLL LLAANNDDEEDD HHOOUUSSEE TTYYPPEESS IINN 22001111 –– QQ11 22001122




GGRRAAPPHH [[44..11--CC]] –– TTOOTTAALL TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE ((UUNNIITTSS)) OOFF DDEETTAACCHHEEDD HHOOUUSSEESS IINN 22001111 –– QQ11 22001122 ((EEXXCCLLUUDDEE SSEENNTTOOSSAA CCOOVVEE))

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann COMPARISON OF DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 When the price for a certain product increases, the demand for that product will decrease. This is the most fundamental of all economic theories; and the economic principle can clearly be seen in the high-end landed home segment. For example, the demand for detached houses fell almost 60% from the benchmark 2007 to 2011 after both the psf land price and absolute sale price of the premier property soared by more than 70% over the 5-year period. (Reference: Table [4.1-F] below) TTAABBLLEE [[44..11--FF]] –– CCOOMMPPAARRIINNGG DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111




D4 40 24 -40% 8.97 17.8 98.4% 1,090 2,120 94.5%

D5 7 3 -57% 2.86 6.28 119% 471 958 103.4%

D10 186 49 -73.7% 8.3 14.2 71% 816 1,417 73.6%

D11 84 30 -64.3% 6.86 11.11 62% 887 1,361 53.4%

D13 41 15 -63.4% 4.6 7.4 61% 586 1,076 83.6%

D14 31 5 -83.9% 2.45 5.3 116% 460 1,132 146%

D15 109 51 -53.2% 4.65 7.3 57% 664 1,091 64.3%

D16 25 13 -48% 3.05 4.38 43.6% 570 793 39%

D17 19 11 -42% 2.65 4.7 77.4% 404 746 84.6%

D19 62 27 -56.5% 2.65 4.838 82.6% 445 855 92.1%

D20 31 3 -90.3% 3.16 8 153% 550 1,110 101.8%

D21 36 21 -41.7% 6 8.22 37% 738 1,158 56.9%

D23 17 15 -11.8% 3.65 4.6 26% 426 740 73.7%

D25 10 9 -10% 2.33 3.78 62% 412 549 33.2%

D27 9 4 -55.6% 2.51 3.65 45% 326 796.5 144%

D28 18 12 -33.3% 4 7.7 92.5% 495 834 68.5%

TOTAL 725 292 -59.7% 4.29 7.45 73.6% 584 1,046 79.1% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann The same economic fundamental can be seen in the semi-detached house segment.



SEMI-DETACHED HOUSES As mentioned earlier the economic underpinning of real estate is more luminously clearer in landed residential properties than, say, condominiums which are often subject to speculation. As such, the following quarter-by-quarter layout of the transaction figures of semi-detached houses over the 5-year period of between 2007 and 2011 clearly illustrate the ebb and flow of the property market in relation to the larger economy factors. UNIT LAND PRICE BREACHING $700 PSF AND $800 PSF IN A MATTER OF 6 MONTHS In the aftermath of the financial tsunami in 2008, average unit land price showed negative growth from Q3 2008 to Q1 2009, and transaction volume tumbled 44% from 135 deals in Q3 to 75 in Q4 2008. But miraculously, home prices started to pick up momentum from Q2 2009 onwards, barely 9 months after the infamous crash in Wall Street. Unit land prices started to cross the $700 psf barrier in Q3 3009; $800 psf in Q1 2010; $900 psf in Q2 2011; and $1,000 psf in Q4 2011. As they always say: “and the rest is history”. THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES Regardless of whether any part of the ‘hot money’ did filter through into the restricted property segment in Singapore, the sudden wealth effect (which was caused by ultra-low mortgage interest rate by local banks which took the cue from the US) helped to propel landed home prices to much greater height, in deviant of the lack of progress in the global economy in the aftermath of the financial tsunami. Once the effect of QE1 was felt in Singapore in Q2 2009, the average psf price for semi-detached houses jumped more than 11% and transaction volume soared by 3.13 times when compared with Q1 2009. However, unlike in the detached house segment, after QE1 officially ended in August 2010, unit price gain of semi-detached houses continued probably due to the quantum leap in prices of detached houses in the same time period, pushing prospective bungalow buyers out of the range to seek substitute housing. For the whole of 2010, unit price gain of semi-detached houses in Singapore was 22%. (See Column D of Table [4.2-A] below)



TTAABBLLEE [[44..22--AA]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD FFRROOMM 22000077 TTOO QQ11 22001122

YEAR

SEMI-DETACHED HOUSE TRANSACTIONS

[A] TOTAL


(m2)

[B] TRANSACTION


[C] AVERAGE UNIT LAND

PRICE ($ PSF)


PRECEDING YEAR

Q1 2007 322 112,841 62.480 533 0 Q2 2007 559 188,759 118.308 606 13.6% Q3 2007 304 102,150 72.780 680 12.3% Q4 2007 245 83,194 58.765 669 -1.7% TOTAL 1,430 486,944 312.334 616 -

Q1 2008 154 53,124 38.474 684 2.2% Q2 2008 172 55,691 40.246 685 0.10% Q3 2008 135 42,703 28.580 645 -5.8% Q4 2008 75 24,419 15.655 623 -3.4% (QE 1 started in Nov) TOTAL 536 175,937 122.956 666 8.1%

Q1 2009 103 32,717 20.795 620 -0.50% Q2 2009 293 93,914 62.377 637 2.7% Q3 2009 323 106,013 78.786 707 11% Q4 2009 253 86,287 66.756 742 5.0% TOTAL 972 318,931 228.715 677 1.65%

Q1 2010 268 86,911 72.290 806 8.6% Q2 2010 292 98,451 85.881 828 2.7% (QE 1 ended in Aug) Q3 2010 248 84,460 74.133 833 0.6% Q4 2010 221 70,398 65.376 890 6.8% (QE 2 started in Nov) TOTAL 1,029 340,220 297.68 837 22.0%

Q1 2011 185 60,284 64.017 1,009 13.4% Q2 2011 227 74,335 78.125 994 -1.5% (QE 2 ended in June) Q3 2011 147 47,931 51.009 999 0.5% Q4 2011 120 39,310 42.214 1,026 2.7% TOTAL 679 221,860 235.36 1,005 20.1%

Q1 2012 113 37,291 42.34 1,066.7 6.1% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann COMPARISON OF SEMI-DETACHED HOUSE PERFORMANCE BETWEEN 2007 AND 2011 However, the capital gain achieved in the conventional landed home segment did not come about due to higher transaction volume; but quite the contrary, it was achieved at the back of decline in transaction volume most of the time when the volume of 2011 was compared to the same period of the benchmark year of 2007. In other words, the real economic performance does have an impact on market buoyancy. (Table [4.2-B])



TTAABBLLEE [[44..22--BB]] –– CCOOMMPPAARRIINNGG SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111 ((BBYY PPOOSSTTAALL DDIISSTTRRIICCTT))




D5 25 15 -40% 2.228 3.30 52.2% 655 997 48.1%

D10 173 70 -59.5% 3.30 5.20 62.1% 937 1,519 57.6%

D11 70 35 -50% 3.50 5.15 77.3% 902 1,599 47.1%

D13 55 24 -56.4% 1.70 3.23 67.2% 545 911 90%

D14 53 29 -45.3% 1.85 2.97 83.8% 462 849 60.5%

D15 191 60 -68.6% 2.50 3.78 54.9% 697 1,080 51.2%

D16 151 97 -35.8% 1.70 2.83 63.4% 497 812 66.5%

D17 26 10 -61.5% 1.52 2.3 63.6% 503 823 51.3%

D18 11 6 -45.5% 1.388 2.18 85.6% 424 787 57.1%

D19 213 110 -48.4% 1.70 3.13 95.4% 461 901 84.1%

D20 91 27 -70.3% 1.72 3.3 88.7% 495 934 91.9%

D21 71 32 -54.9% 2.2 3.65 68.7% 661 1,115 65.9%

D22 5 3 -40% 910K 1.5 71.5% 403 691 64.8%

D23 62 16 -74.2% 1.65 3.1 60.4% 548 879 87.9%

D25 10 10 0 1.20 2.1 106.3% 269 555 75%

D26 30 24 -20% 1.55 2.8 92.9% 425 820 80.6%

D27 47 23 -51.1% 1.25 2.28 114.0% 384 822 82.4%

D28 139 86 -38.1% 1.55 2.95 106.1% 407 839 90.3%

TOTAL 1,423 677 -52.4% 537.5 940.7 75.0% 33.41 55.7 66.8% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann In an alternative layout on transaction volume and value of semi-detached house transactions between January 2011 and March 2012, the same conclusion can be drawn as above, i.e. the extraordinary performance in March 2012 could be attributed to the QE measures. The sudden jolt of the March 2012 transactions of semi-detached houses actually propelled the sales performance past June 2011, the month QE2 officially ended. (Table [4.2-C] & [4.2-C1]) TTAABBLLEE [[44..22--CC]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN IINN 22001111

2011 SEMI-D HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 77 252,330,980 970.7 FEB 34 124,393,080 1,073

MAR 74 263,453,270 1,020 APR 86 291,234,295 981 MAY 81 275,698,890 991.7 JUN 60 214,323,276 1,017.9 JUL 59 216,811,776 982

AUG 45 150,609,888 1,007 SEPT 43 142,675,008 1,013.7 OCT 35 129,093,000 1,039.7 NOV 44 150,046,000 991.6 DEC 39 136,950,888 1,059

TOTAL 677 2,347,620,351 1,012 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann



TTAABBLLEE [[44..22--CC11]] –– SSEEMMII--DDEETTAACCHHEEDD HHOOUUSSEE TTRRAANNSSAACCTTIIOONN BBEETTWWEEEENN IINN QQ11 22001122

Q1 2012 SEMI-D HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 12 25 89,347,555 973.2 FEB 12 28 99,784,887 1,099.6

MAR 12 60 234,357,000 1,090.4 TOTAL 113 423,489,442 1054.4


TERRACE HOUSES Likewise, the performance of the terrace house segment was also influenced by the advent of liquidity where buyers took up position during the QE1 and QE2 periods which can be seen from Q2 2009 to second half of 2010. THE DIRE EFFECT OF QUANTITATIVE EASING (QE) MEASURES Once the effect of QE1 was felt in the terrace house segment in Q3 2009, the average psf price for terrace houses jumped 22.2% and transaction volume soared by 4.5 times over the first quarter (Q1) of the year. When QE1 officially ended in August 2010, terrace house transactions slide from 644 deals in Q2 2010 to 531 in Q3 3010 and 498 in Q4 2010 or -22.6%. By then, rise in unit land price for terrace houses over this period was pared down to 3.7% in Q3 2010 over the preceding quarter. A month after QE2 started in November 2010, the average unit land price for terrace houses was already up by 23.9% for the whole year. After QE2 ended in June 2011, terrace house transactions began a gradual slide in the following quarters, i.e. from 523 deals in Q2 2012 to 366 deals (or 30.0%) in Q3 2012 and 327 deals in Q4 2011; while unit psf price likewise slipped from 5.1% in Q2 2011 to 4.4% in Q3 2011 and 3.2% in Q4 2011. TTAABBLLEE [[44..33--AA]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN OOVVEERR TTHHEE PPAASSTT 55--YYEEAARR PPEERRIIOODD TTHHRROOUUGGHHOOUUTT SSIINNGGAAPPOORREE

YEAR

TERRACE HOUSE TRANSACTIONS

[A] TOTAL


(m2)

[B] TRANSACTION


[C] AVERAGE UNIT

LAND PRICE ($ PSF)


PRECEDING YEAR

Q1 2007 527 108,127 61.052 549 - Q2 2007 984 203,635 130.664 615 12.0% Q3 2007 608 125,017 90.454 700 13.8% Q4 2007 460 93,279 70.740 739 5.6%



TOTAL 2,579 530,058 352.91 643.6 0 Q1 2008 338 65565 50.778 747 1.0% Q2 2008 326 63329 45.145 692 -7.3% Q3 2008 291 58894 40.276 661 -4.5% Q4 2008 148 28579 18.500 625 -5.6% (QE 1 started in Nov) TOTAL 1,103 216,367 154.7 691.8 7.5%

Q1 2009 164 33,096 20.249 603 -3.5% Q2 2009 477 94,571 61.291 635 5.2% Q3 2009 741 144,174 110.016 737 16.1% Q4 2009 529 103,849 83.934 788 7.0% TOTAL 1,911 375,690 275.49 714 3.2%

Q1 2010 542 109,792 92.544 825 4.7% Q2 2010 644 126,112 113.685 868 5.2% (QE 1 ended in Aug) Q3 2010 531 104,329 98.123 900 3.7% Q4 2010 498 97,900 97.268 953 5.9% (QE 2 started in Nov) TOTAL 2,215 438,133 401.62 884.5 23.9%

Q1 2011 421 81,146 84.678 1,009 5.9% Q2 2011 523 104,037 114.188 1,060 5.1% Q3 2011 366 68,842 79.176 1,107 4.4% (QE 2 ended in June) Q4 2011 327 63,099 74.550 1,142 3.2% TOTAL 1,637 317,124 352.59 1,074 21.4%

Q1 2012 237 46,583 55.91 1,152.7 7.3% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann MARKET PERFORMANCE IN THE TERRACE HOUSE SEGMENT TTAABBLLEE [[44..33--BB]] –– CCOOMMPPAARRIINNGG TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE BBEETTWWEEEENN 22000077 AANNDD 22001111 ((BBYY PPOOSSTTAALL DDIISSTTRRIICCTT))


($ Mil) MEDIAN PSF PRICE


D2 12 5 -58.3% 3.0 5.148 71.6% 1,793 2,752 53.5%

D4 18 0 0 4.8 0 0 1,661 0 0

D5 72 32 -55.6% 1.4 2.4 71.4% 679 1,055 55.4%

D8 16 9 -43.8% 1.39 2.2 58.3% 723 1,154 59.6%

D9 40 27 -32.5% 4.0 3.8 -5% 1,848 2,625 42.0%

D10 48 27 -43.8% 2.3 3.45 50% 966 1,493 54.6%

D11 40 27 -32.5% 2.218 3.5 57.8% 1,001 1,702 70.0%

D12 31 6 -80.7% 1.05 1.66 58.1% 952 1,042 9.5%

D13 121 69 -43.0% 1.0 1.82 82% 610 1,073 75.9%

D14 127 82 -35.4% 1.22 2.06 68.9% 522 942 80.5%

D15 395 233 -41.0% 1.29 2.15 66.7% 613 1,125 83.5%

D16 206 88 -57.3% 1.25 1.95 56% 570 1,012 77.5%

D17 65 67 3.1% 0.91 1.35 48.4% 469 767 63.5%

D18 31 24 -22.6% 0.96 1.547 61.1% 488 695 42.4%

D19 517 344 -33.5% 1.15 2.0 73.9% 501 940 87.6%



D20 240 130 -45.9% 1.01 1.93 91.1% 536 1,018 89.9%

D21 59 31 -47.5% 1.43 2.38 66.4% 662 1,094 65.3%

D22 48 53 10.4% 0.808 1.358 68.1% 416 772 85.6%

D23 135 118 -12.6% 1.11 2.148 93.5% 551 1,020 85.1%

D25 11 14 27.3% 1.08 1.53 41.7% 539 859 59.3%

D26 146 65 -55.5% 1.32 2.11 59.8% 705 997 41.4%

D27 23 50 117.3% 1.05 1.95 85.7% 435 1,113 155.9%

D28 178 136 -23.6% 1.225 2.08 69.8% 560 1,061 89.5%

TOTAL 2,579 1,637 -36.5% 36.971 50.521 36.7% 774 1,144 47.8% SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..33--CC]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE IINN 22001111

2011 TERRACE HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 160 325,193,584 981 FEB 92 190,821,447 1,085.7

MAR 169 330,767,700 994 APR 195 402,665,148 1,034 MAY 161 340,365,968 1,021.9 JUN 167 398,856,018 1,127 JUL 135 295,459,855 1,083.9

AUG 125 262,871,764 1,117 SEPT 106 233,433,064 1,125.8 OCT 101 224,506,776 1,084.7 NOV 143 333,511,422 1,184 DEC 82 185,682,790 1,142. 7

TOTAL 1,636 3,524,135,536 1,076 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[44..33--CC11]] –– TTEERRRRAACCEE HHOOUUSSEE TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE AANNDD VVAALLUUEE IINN QQ11 22001122

Q1 2012 TERRACE HOUSES

VOLUME VALUE ($) AVE PSF ($) JAN 12 41 100,792,888 1,258 FEB 12 64 149,983,346 1,129.6

MAR 12 132 308,350,011 1,131 TOTAL 237 559,126,245 1,173

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann FINDING (1) SELLER’S MARKET IN THE LANDED HOUSE SEGMENT There can be two distinctly different interpretations to the above data: the first is the conventional interpretation of ‘demand outpacing supply’ and thereby causing prices to soar; while the second interpretation could be ‘high prices deterring demand’ which is taking ‘prices’ as causing the muted buying behaviour. However, both are true in this bizarre market as mere rumour of another round of QUANTITATIVE EASING (QE) was sufficient to cause the March 2012 figure to surge. Before that, a strong sense of cautiousness prevailed in this high-end market segment.



Whatever the interpretation, one factor stands out like the Statue of Liberty with the torch, that is, the impact of inflation on this rare asset class. Whether such a market can be considered as the ‘seller’s market’ will depend on very much on the prevailing risk appetite of the lender banks. Consider the implications of the following 2-part question: (a) ‘would the lenders find it riskier in today’s environment to lend $10 million to an individual to invest a detached house; or, (b) would it be safer for the lender bank to split up its $10 million into several smaller sub- $1 million loan packages and lend them to HDB flat dwellers who are upgrading to the mass-market private housing segment?’ If the answer to part (a) is affirmative, we have a ‘seller’s market’. But if the answer to part (b) is favourable, then the larger house types, i.e. detached house and semi-detached house segments may be stuck in a stalemate with the gap between seller’s and buyer’s price getting wider. The opportunity for upward mobility for some middle-class Singaporeans appears to have been curtailed. For some middle-class Singaporeans, the ‘upper class’ dream of owning a bungalow in land scarce Singapore is all but dashed. (2) THE AFFORDABILITY FACTOR Consequence to the inflation effect, all landed house prices in general have soared when compared with the last bull-run in 2007. The rate of acceleration is breath-taking and prices may have shot past the affordability level, which could be extrapolated from the over-50% plunge in transaction volume over the past 5 years. (See Tables [4.1-F], [4.2-B], & [4.3-B]) The current prices of detached houses may have already slipped out of reach of many of this country’s top 10% wage earners. Such high prices are unsustainable due to two critical factors: Firstly, the staggering rise in private home prices did not result from an

exponential rise in productivity growth or GDP growth in the economy; and,

Secondly, the great global uncertainties lying ahead; if the global situation does not improve quickly, activities in the landed home segment will slow down significantly for the remaining part of the year as Singaporeans’ wages will stall in the want for productivity.

(3) THE INFLATION EFFECT – THE RICH GETS RICHER Such a cruel reality is to be expected after one round of ferocious inflation where asset price skyrocketed beyond the affordability level of ordinary wage earners. Barring any severe recession, detached and semi-detached houses may now already be out of reach for many Singaporeans, not to mention the uncertain times ahead.



Perhaps, the only comfort remaining is that we know it is not due to foreigners snatching away our opportunities because of the ownership control imposed in this particular housing segment. (4) THE TWO QUANTITATIVE EASING (i.e. QE 1 & QE 2) MEASURES BY U.S. THE MAIN CULPRIT Perhaps, other than attributing to the two rounds of QUANTITATIVE EASING (QE) measures, there are no other plausible explanations to the two sudden jolts in the unit land price in the landed home segment in Q2 2009 and the whole year 30.7% jump in the unit land price in 2010. HOW THE TRILLIONS OF NEWLY PRINTED U.S. DOLLARS STACK UP Before the financial tsunami, the U.S. Federal Reserve held around US$700 billion to US$800 billion in Treasury Notes (or for ease of calculation, US$0.7-US$0.8 trillion). By the time QE 1 started in November 2008, the Fed aimed to buy back US$600 billion (or US$0.6 trillion) of debts including Treasury Notes, bank debts and Mortgage-backed securities (MBS) from private holders. But by the 4th month, i.e. March 2009, the Fed had purchased an additional US$450 billion in debts from the private holders; which means a total of US$1.05 trillion in debts were purchased by the Fed. By the time QE 1 officially ended in June 2010 (after 20 months), the Fed bought another US$350 billion of additional debts, making the grand total of US$1.4 trillion of debts being purchased from private investors by the Federal Reserve. At that point in time, the Fed had on its balance sheet US$2.1 trillion of debts. The second round of purchase of US government debts, dubbed QE 2, went on for only 7 months, from November 2010 to June 2011. The Federal Reserve purchased an additional US$600 billion worth of debts from private investors. THE IMPACT OF QE 1 WAS GREATER THAN QE 2 By the time QE 1 was halted in June 2010, the average unit land price of landed home units looked as follows:

o detached houses (excluding those on Sentosa Cove) rose by $383 psf (or 64.0%) to hit an average of $981 psf; (Table [4.1-B])


o terrace houses climbed by $243 psf (or 38.9%) to reach an average of $868 psf by the end of Q1 2012. (Table [4.3-A])

When QE 2 started in November 2010, the average unit land price for landed home units in Singapore had already gone up to a level beyond income growth of even the top income earners; and as such, the increase in the unit land price was less intense. Between Q4 2010 and Q2 2011, the average unit land price of landed home units looked as follows:



o detached houses (excluding those on Sentosa Cove) rose by $69 psf (or 6.6%)

to reached an average of $1,113 psf; (Table [4.1-B])



MERE SPECULATION OF QE 3 SENT PRICES SOARING IN Q1 2012 The sudden and unexpected rise in March 2012 transaction of landed home units can also be attributed to the market rumour of another round of such measures. Between Q3 2011 and the end of March 2012, the average unit land price of landed home units looked as follows:

o detached houses (excluding those on Sentosa Cove) rose by $88 psf (or 8.7%) to reached an average of $1,103 psf; (Table [4.1-B])

o semi-detached houses went up by $67 psf (or 6.7%) to reach an average of $1,066 psf; (Table [4.2-A])


The average unit land price for detached houses transacted in Q1 2012 is comparatively lower than the historical height of $1,113 psf in Q2 2011. However, for semi-detached houses transacted in Q1 2012, the average unit land price of $1,066 psf is the new historical height. Likewise for terrace houses, $1,152 psf is also the new historical height in average unit land price.



‘TUG-OF-WAR’ BETWEEN LANDLORDS & TENANTS Q1 2012 Private Home Rents rebounded but future is uncertain

The once vigorous take-up rate in the middle of 2011 was slowed to a stroll in the final 3 months (Q4) of the year, with prospective tenants having no real urgency to ink the tenancy agreements (TAs). Such wry patience could have resulted in the 19.4% drop in the official Q4 2011 rental data compiled by the Urban Redevelopment Authority (URA) on the number of residential projects with at least 10 tenancy agreements (TAs) signed in one quarter. (See Tables [5.1-C] & [5.4-D] which is captioned ‘PROJECTS WITH FEWER THAN 10 RENTAL CONTRACTS IN Q4 2011’) Apparently, this means a widening gap between landlords’ asking rents and tenant’s willingness which is invariably tied to perceived value. If the psychological status quo remains and the supply of new home units remain on track (which means more choices for prospective tenants), the competitive landscape of the private rental market will trend towards a more ‘demanding’ phase for the landlords in the next 6 months to a year. SPIKE IN RENTAL DEMAND IN JANUARY 2012 – BUT UPSWING RECEDED IN MARCH 2012 But out of the blue, after 5 consecutive months’ of decline in the private rental market there was a moderate upswing in rental transactions in January 2012. The reversal is significant on two fronts, i.e. it ended the protracted downward trend in rental demand, and, it defies the shorter month due to the disruption caused by the Chinese New Year break. But then again, besides bringing back some measures of delight to some landlords for the time being, the market revival in the first quarter (i.e. Q1 2012) may not be sustainable as it had not resulted from any changes in the economic fundamentals either globally or domestically. From a statistical perspective, January’s figures are always preceded by lower December numbers. (See Table [5.2-C]) Domestically, economic achievements aside, the ongoing piling up of newly completed condo units will certainly offer prospective tenants wider choices but it does nothing to alleviate landlord’s current woes (despite the January’s reprieve); and such steady supply across all market segments over the next 2 to 3 years will make competitions among landlords keener. (Tables [5.1-A], [5.1-B]) Similarly, the ‘landlord versus tenant’ tug of war is expected to go on for some months.



TTAABBLLEE [[55..11--AA]] –– AA TTOOTTAALL OOFF 3377,,111177 PPRRIIVVAATTEE HHOOMMEE UUNNIITTSS TTHHAATT HHAAVVEE BBEEEENN SSOOLLDD BBUUTT HHAAVVEE YYEETT TTOO BBEE CCOOMMPPLLEETTEEDD

TOTAL NEW HOME UNITS LAUNCHED AS OF Q4 2011

UNITS IN PROJECT TOP UNIT COMPLETED & SOLD COMPLETED & UNSOLD 42,530

37,117 SOLD 5,413 UNSOLD

11,300 10,153 1,147

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[55..11--BB]] –– 2200 SSEELLEECCTTEEDD NNEEWWLLYY CCOOMMPPLLEETTEEDD RREESSIIDDEENNTTIIAALL PPRROOJJEECCTTSS WWIITTHH AATT LLEEAASSTT 1100 UUNNSSOOLLDD UUNNIITTSS IINN QQ44 22001111

SR PROJECT NAME STATISTICS AS OF END OF Q4 2011

TOTAL UNITS IN PROJECT TOP UNITS COMPLETED &

SOLD COMPLETED &

UNSOLD 1 REFLECTIONS AT KEPPEL BAY 1,129 1,129 836 293 2 HILLTOPS 241 241 33 208 3 SCOTTS SQUARE 338 338 263 75 4 THE CLIFF 312 312 249 63 5 THE RITZ-CARLTON RESIDENCES 58 58 19 39 6 NEWTON IMPERIAL 36 36 0 36 7 The MARQ ON PATERSON HILL 66 66 31 35 8 THE LUMOS 53 53 19 34 9 111 EMERALD HILL 40 40 6 34 10 RESIDENCES AT EMERALD HILL 33 33 0 33 11 THE LINCOLN RESIDENCES 99 99 70 29 12 FARRER PARK SUITES 29 29 0 29 13 MARTIN No 38 88 88 65 23 14 The VERV @ RV 26 26 3 23 15 CLIVEDEN AT GRANGE 110 110 88 22 16 ONE SHENTON 341 341 320 21 17 THE CASCADIA 536 536 516 20 18 8 NAPIER 46 46 28 18 19 THE ORCHARD RESIDENCES 175 175 160 15 20 RIVERSIDE 48 70 70 59 11 SUB-TOTAL 3,826 3,826 2,765 1,061

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[55..11--CC]] –– CCOOMMPPAARRIISSOONN OOFF NNUUMMBBEERRSS OOFF PPRROOJJEECCTTSS WWIITTHH MMIINN.. 1100 TTAAss SSIIGGNNEEDD IINN OONNEE QQUUAARRTTEERR

2011 PROJECTS WITH MIN. 10 TENANCY AGREEMENTS (TA) SIGNED IN ONE QUARTER

Q1 224 Q2 267 Q3 283 Q4 228 (-19.4%)

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[55..11--DD]] –– TTHHEE PPRRIIVVAATTEE HHOOMMEE RREENNTT MMAARRKKEETT PPEEAAKKEEDD IINN JJUULLYY 22001111 AANNDD TTHHEENN WWEENNTT AALLLL TTHHEE WWAAYY DDOOWWNNWWAARRDD TTOO DDEECCEEMMBBEERR 22001111

QUARTER MONTHS NO OF RENTAL TRANSACTIONS

TOTAL TRANSACTION VALUE ($)

Q1 2011 JAN 2011 3,333 14,197,052 FEB 2011 2,493 10,908,346

MAR 2011 3,263 14,399,175

Q2 2011 APR 2011 3,712 16,016,489 MAY 2011 3,226 14,155,099 JUN 2011 3,513 15,560,291



Q3 2011 JUL 2011 4,218 19,549,278

AUG 2011 3,956 18,814,224 SEPT 2011 3,369 15,804,278

Q4 2011 OCT 2011 3,100 13,806,853 NOV 2011 3,051 13,365,263 DEC 2011 2,988 13,278,128

Q1 2012 JAN 2012 3,646 18,322,667 FEB 2012 3,446 16,827,156

MAR 2012 3,847 18,148,645 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann MONTHLY RENTS COLLECTED AT RESPECTIVE RESIDENTIAL DISTRICTS (Q3 2011 – Q1 2012) From the Q4 2011 and Q1 2012 rental data, it is now beyond any reasonable doubts that Districts 10 and 9 host the most opulent addresses with the most number of affluent tenants, with District 4 gradually catching up in the coveted status. TTAABBLLEE [[55..22--AA]] –– CCOOMMPPAARRIISSOONN OOFF MMOONNTTHHLLYY TTOOTTAALL IINN RREENNTTAALL VVAALLUUEE FFRROOMM JJUULLYY 22001111 TTOO MMAARRCCHH 22001122

DIST

MONTHLY RENTAL VALUE ($) IN *2H 2011 & Q1 -FEB 2012 Q1 2012 Q4 2011 Q3 2011

MAR 12 FEB 12 JAN 12 DEC NOV OCT SEPT AUG JULY D1 508,538 494,900 501,000 449,822 514,638 630,230 633,590 504,890 524,650

D2 218,867 241,580 214,750 234,356 264,480 267,050 209,250 189,960 318,876

D3 525,024 525,077 533,641 553,460 511,614 586,450 547,133 834,989 667,869

D4 1,039,417 597,488 592,325 596,900 474,800 542,651 548,000 667,800 655,480

D5 758,375 753,793 1,001,406 655,269 775,229 726,378 770,212 899,303 940,458

D6 0 7,000 0 3,700 3,300 6,271 0 5,950 8,100

D7 146,850 146,900 143,670 151,070 169,763 150,400 133,700 145,340 186,420

D8 413,685 318,170 338,700 297,655 290,615 302,450 305,600 459,630 527,513

D9 2,503,584 2,303,361 2,642,695 1,963,061 1,881,144 1,897,936 2,769,345 3,322,038 3,289,153

D10 3,035,457 3,084,626 3,839,010 2,427,525 2,443,433 2,449,906 3,253,322 4,010,682 3,952,259

D11 1,526,827 1,470,639 1,391,691 711,745 829,856 878,050 921,986 1,059,685 1,080,779

D12 569,060 543,300 431,177 292,105 309,630 315,600 2,57,450 285,350 383,218

D13 198,400 211,150 187,500 91,600 30,200 53,900 88617 93,200 88,900

D14 598,096 451,930 547,328 499,850 524,970 509,230 613,890 635,365 654,200

D15 1,802,760 1,542,579 1,873,337 1,147,787 1,266,026 1,534,102 1,752,798 1,919,166 2,141,597

D16 719,960 727,230 638,834 567,580 589,267 619,085 632,340 696,767 746,348

D17 216,880 153,950 169950 165,450 162,900 122,024 175,750 158,050 214,080

D18 312,960 264,050 190,843 233,503 192,500 152,325 175,450 191,365 212,975

D19 669,535 499,800 702,073 376,200 424,700 347,900 320,380 463,670 496,680

D20 352,000 374,898 389,030 274,750 196,920 180,100 186,450 165,469 235,148

D21 741,181 824,630 746,950 698,780 519,455 609,925 670,510 955,185 899,165

D22 338,150 251,800 348,278 286,230 331,730 303,480 266,000 377330 393,530



D23 499,985 576,956 502,690 412,130 463,695 398,550 378,140 535,090 609,080

D25 81,650 146,550 102,300 22,300 47,400 54,975 38,700 61,600 76,000

D26 117,953 76,538 110,034 67,550 68,438 50,760 55,550 72,400 96,750

D27 117,130 83,600 97,980 68,950 54,160 77,875 73,365 68,300 90,100

D28 136,321 154,661 85,475 28,800 24,400 39,250 26,750 35,650 59,950

TOTAL 18,148,645 16,827,156 18,322,667 13,278,128 13,365,263 13,806,853 15,804,278 18,814,224 19,549,278 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [*2H stands for Second half] Note: After 5 consecutive months of decline in rental value, the rental market staged a decisive rebound in January 2012 to end the month with $18,322,667 total monthly rent collection. This is $5,044,539 (or 38%) higher than the December 2011 figure. Following that, the total rental value dipped in February 2012 but clawed back some ground in March 2012, bringing the total rental value for Q1 2012 to $53,298,468, which is $12,848,224 (or 31.7%) higher than the $40,450,244 dismal performance of Q4 2011, but 1.6% shy of the Q3 total rent of $54,167,780. (See Table [5.2-A] & Graph 5.2-A) GGRRAAPPHH 55..22--AA –– MMOONNTTHHLLYY TTOOTTAALL IINN RREENNTTAALL VVAALLUUEE FFRROOMM JJUULLYY 22001111 TTOO MMAARRCCHH 22001122

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann ABSOLUTE NUMBER OF PRIVATE APARTMENTS BEING RENTED MONTHLY As always, districts 9, 10 and 15 occupy the top 3 spots in terms of absolute number of rental transactions from Q3 through to the first month of the new year. It seems that in terms of ranking of popularity and tenant’s preference, little has changed except the market has been a little quieter than the landlords would have wanted it to be. The same residential districts still exude the same attractiveness and dominate the market positions. (See Table [5.2-B])



TTAABBLLEE [[55..22--BB]] –– CCOOMMPPAARRIISSOONN OOFF RREENNTTAALL TTRRAANNSSAACCTTIIOONN VVOOLLUUMMEE ((BBYY MMOONNTTHH)) FFRROOMM JJUULLYY 22001111 TTOO MMAARRCCHH 22001122

DIST

MONTHLY RENTAL TRANSACTION VOLUME IN *2H 2011 & Q1 2012 Q1 2012 Q4 2011 Q3 2011

MAR 12 FEB 12 JAN 12 DEC NOV OCT SEPT AUG JULY D1 98 92 96 89 104 123 129 100 97

D2 47 54 50 54 59 62 47 47 81

D3 113 115 124 122 113 129 127 176 151

D4 154 89 82 80 66 71 78 96 85

D5 184 178 236 162 191 184 182 229 255

D6 0 2 0 1 1 1 0 1 2

D7 41 41 35 40 44 38 33 39 49

D8 113 86 93 85 73 86 84 118 149

D9 425 386 419 321 330 339 440 521 504

D10 428 434 483 382 394 370 467 544 525

D11 256 225 226 151 165 175 186 222 226

D12 155 146 124 87 94 96 75 89 115

D13 54 40 40 29 10 17 28 28 30

D14 192 135 163 153 164 158 190 196 197

D15 425 353 414 272 318 367 415 437 519

D16 191 189 163 161 166 174 173 195 203

D17 70 52 56 58 56 40 60 54 73

D18 92 76 54 70 57 46 55 57 64

D19 176 126 164 112 126 102 100 139 146

D20 83 83 97 73 50 55 53 47 68

D21 191 197 176 205 152 169 185 264 260

D22 93 70 93 80 100 85 72 101 113

D23 148 172 155 137 154 135 125 180 202

D25 17 23 15 8 15 19 12 18 23

D26 32 24 34 22 23 18 19 24 31

D27 36 29 33 25 18 29 25 23 31

D28 33 29 21 9 8 12 9 11 19

TOTAL 3,847 3,446 3,646 2,988 3,051 3,100 3,369 3,956 4,218

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [*2H stands for Second half] Note: By examining Graph 5.2-B, no one will bet against rental volume rising in April 2012 as the historical trend has clearly pointed to that. [See the similarity in the rental market in the previous three years in Table [5.2-C] below. However, whether such a pattern will repeat itself in 2012 remain to be seen.



GGRRAAPPHH [[55..22--BB]] –– 33 YYEEAARRSS’’ RREENNTTAALL TTRREENNDD WWHHEERREE TTHHEE HHIIGGHHEESSTT NNUUMMBBEERR OOFF TTEENNAANNCCYY AAGGRREEEEMMEENNTTSS SSIIGGNNEEDD WWAASS IINN JJUULLYY

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann TTAABBLLEE [[55..22--CC]] –– TTHHRREEEE YYEEAARRSS OOFF MMOONNTTHHLLYY ’’HHIIGGHH’’ AANNDD ‘‘LLOOWW’’ FFOORR CCOOMMPPAARRIISSOONN –– JJAANNUUAARRYY’’SS RREENNTTAALL VVOOLLUUMMEE IISS AALLWWAAYYSS PPRREECCEEDDEEDD BBYY AA MMUUCCHH LLOOWWEERR DDEECCEEMMBBEERR’’SS RREETTUURRNNSS

RANK 2011 2010 2009

MONTH TENANCIES SIGNED MONTH TENANCIES SIGNED MONTH TENANCIES SIGNED 1 JUL 4,218 JUL 3,638 JUL 3,737 2 AUG 3,956 JUN 3,510 AUG 3,455 3 APR 3,712 APR 3,437 APR 3,214 4 JUN 3,513 SEP 3,423 MAR 3,073 5 SEPT 3,369 MAY 3,380 JUN 3,045 6 JAN 3,333 OCT 3,240 MAY 2,896 7 MAR 3,263 MAR 3,034 SEPT 2,824 8 MAY 3,226 NOV 2,895 JAN 2,791 9 OCT 3,100 DEC 2,864 DEC 2,644 10 NOV 3,051 JAN 2,810 FEB 2,578 11 DEC 2,988 FEB 2,377 NOV 2,490 12 FEB 2,493 AUG 2,295 OCT 2,315


18 RESIDENTIAL DISTRICTS SAW FALLING MEDIAN PSF MONTHLY RENT IN MARCH 2012 In the final month of 2011, out of the 28 residential districts in Singapore, 11 residential districts (or 39.3%) saw slight dip in median psf monthly rent of between one per cent and 15.6% (in D22), 13 of them (or 46.4%) experienced marginally better median psf monthly rent of between half a per cent to around 5%, 1 districts (or 3.57%) had no rental transactions at all; while 3 residential district (or 10.7%) stagnated with the same median psf monthly rent. (See Table [5.3-A])



However, the rental market staged a comprehensive rebound in Q1 2012 with 1,800 more tenancies signed or 19.7% increase in transaction volume. The total rental dollars collected rose by $12,848,224 (or 31.7%) higher than Q4 2011. However, by March 2012 the much improved median psf monthly rents in 19 out of the 28 residential districts (or 67.9%) in Singapore achieved in January 2012 were reversed in March 2012 with the majority of 18 residential districts (or 64.3%) experiencing dip in median psf monthly rent. ONLY 7 RESIDENTIAL DISTRICTS ENJOYED BETTER MEDIAN PSF MONTHLY RENT IN MARCH 2012 Only 7 out of the 28 residential districts, or 25% of the 28 residential districts in Singapore enjoyed higher median psf monthly rent in March 2012. Districts 6 and 24 had no rental transactions at all; and only 1 district (or 3.57%) stagnated with the same median psf monthly rent as the final month of last year. (See Table [5.3-A]) TTAABBLLEE [[55..33--AA]] –– AASSCCEERRTTAAIINN TTHHEE MMOOVVEEMMEENNTTSS OOFF MMEEDDIIAANN PPSSFF MMOONNTTHHLLYY RREENNTTAALL OOVVEERR TTHHEE PPAASSTT 88 MMOONNTTHHSS ((FFRROOMM JJUULLYY 22001111 TTOO FFEEBB 22001122))

DIST Median PSF MONTHLY RENT IN 2H* of 2011 & Q1 2012

MAR 12 FEB 12 JAN 12 DEC NOV OCT SEPT AUG JULY D1 ▲5.85 5.66 5.93▲ 5.79 5.81 5.66 5.52 5.62 5.39 D2 5.43 5.82 6.53▲ 5.97 5.73 6.14 6.01 6.12 5.82 D3 3.99 4.11▲ 3.84 4.05 4.08 4.01 3.91 4.08 4.03 D4 4.63 5.16▲ 4.96▲ 4.64 4.61 4.61 4.78 4.61 4.95 D5 3.31 3.43 3.52▲ 3.51 3.49 3.5 3.49 3.39 3.31 D6 - 5.41 - 5.46 5.9 12.14 0 10.43 7.24 D7 4.08 4.42▲ 4.35▲ 4.34 4.54 4.62 4.31 4.2 4.33 D8 4.12 4.28 4.31▲ 3.78 3.85 4.46 4.36 3.97 3.85 D9 ▲5.11 4.93 5.06▲ 4.78 4.54 4.89 4.73 4.82 4.78 D10 3.86 3.98 4.18▲ 3.95 3.95 4.07 4.06 4.15 4.07 D11 4.08 4.13▲ 3.64 3.9 3.84 4.28 4.25 3.93 3.89 D12 3.54 3.54 3.54▲ 3.06 2.98 3.04 3.22 3.15 3.01 D13 2.52 2.98 3.03▲ 2.91 2.81 3.35 3.21 3.26 2.84 D14 ▲2.93 2.86 3.01▲ 2.95 2.95 2.96 2.98 2.92 2.96 D15 3.18 3.3▲ 3.22▲ 3.19 3.32 3.3 3.26 3.27 3.17 D16 3.05 3.17 3.25▲ 3.23 3.19 3.15 3.22 3.13 3.14 D17 2.47 2.61 2.82 2.84 2.71 2.59 2.6 2.62 2.57 D18 ▲2.98 2.91▲ 2.88 3.02 2.99 2.87 2.94 2.93 2.91 D19 2.84 2.89 3.07▲ 3.06 3.02 2.98 2.78 2.93 2.97 D20 ▲3.06 2.89 3.14 3.26 3.18 2.87 3.06 2.84 3.07 D21 2.63 2.74▲ 2.67 2.7 2.71 2.76 2.71 2.71 2.65 D22 2.97 3 3.15▲ 3.01 3.57 3.35 3.09 3.16 3.19 D23 ▲2.69 2.64▲ 2.58 2.58 2.62 2.61 2.54 2.59 2.49 D24 - - - - - - - - - D25 ▲3.01 2.89▲ 2.81▲ 2.72 2.77 2.87 2.76 2.73 2.73 D26 2.53 2.68 2.91▲ 2.82 2.8 2.84 2.79 2.86 2.66 D27 2.31 2.4 2.56▲ 2.32 2.42 2.38 2.4 2.34 2.44 D28 2.07 2.32 2.64▲ 2.3 2.3 2.41 2.54 2.45 2.13

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [*2H stands for Second half]



DID THE NEWLY COMPLETED RESIDENTIAL PROJECT FARE ANY BETTER IN INVESTMENT INCOME? TTAABBLLEE [[55..33--DD]] –– AASSCCEERRTTAAIINNIINNGG TTHHEE RREENNTTAALL IINNCCOOMMEE IINN NNEEWW TT..OO..PP.. PPRROOJJEECCTTSS –– CCOOMMPPAARRIISSOONN FFRROOMM QQ11 TTOO QQ44 22001111

SR PROJECTS RECEIVING TOP RECENTLY MEDIAN PSF MONTHLY RENT ($)

Q4 2011 Q3 2011 Q2 2011 Q1 2011 1 MARINA BAY RESIDENCES 5.92 5.84 5.35 5.54 2 THE OCEANFRONT @ SENTOSA COVE 4.46 4.36 4.09 4.30 3 ONE-NORTH RESIDENCES 4.51 4.44 4.59 5.02 4 CITY SQUARE RESIDENCES 4.62 4.17 4.17 4.53 5 ONE AMBER 4.09 3.83 3.80 3.27 6 THE SAIL @ MARINA BAY 5.99 6.06 5.99 5.66 7 THE METROPOLITAN CONDO 4.11 4.24 4.26 3.90 8 ONE SHENTON 5.01 5.25 - - 9 THE PARC 3.29 3.80 3.27 3.10 10 THE COSMOPOLITAN 5.18 5.30 5.24 5.06 11 DAKOTA RESIDENCES 3.72 3.83 3.68 3.64 12 CASA MERAH 3.42 3.46 3.26 3.30 13 THE AZURE <10 4.32 4.09 4.54 14 TRIBECA <10 <10 <10 <10 15 THE TRILLIUM <10 5.15 4.84 4.93 16 ARDMORE II <10 4.84 4.45 4.78 17 ST REGIS RESIDENCES SINGAPORE <10 5.10 5.13 5.84 18 SKY@ELEVEN <10 <10 <10 <10 19 THE ARTE <10 3.16 3.27 3.06 20 AALTO <10 4.58 3.93 3.83 21 THE ESTA <10 3.57 3.42 3.40 22 THE SEAFRONT ON MEYER <10 3.99 3.74 3.60

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann *<10 denotes less than 10 rental transactions in the quarter

FINDING – Out of the 22 newly T.O.P projects selected for this case study (as well as in the case study done in Nov 2011), 5 projects (or 23.8%) enjoyed higher median psf monthly rents [it dropped from 14 projects (or 66.67%) in the last case study]; while 7 projects (31.8%) (or two more projects than in the Nov 2011 case study) saw their median psf monthly rent falling, albeit marginally. 10 projects (45.5%) attracted less than 10 rental deals in the final quarter of 2011. In the last case study in Nov 2011, only 2 projects were unable to attract less than 10 tenancies. COMPARISON OF Q1 TO Q4 2011 MEDIAN PSF MONTHLY RENT AT POPULAR CONDO PROJECTS A total of 187 condo projects are selected for this case study to ascertain if median psf monthly rents in the different residential districts in Singapore have gone up, down or sideway.



CONDO PROJECTS WITH HIGHER MEDIAN PSF MONTHLY RENTS IN Q4 2011 The first set of 121 projects (or 64.7%) shown in Table [5.4-A] has experienced higher median psf monthly rents in the final quarter of 2011 when compared with the preceding Q3 2011. TTAABBLLEE [[55..44--AA]] –– CCOOMMPPAARRIISSOONN OOFF QQUUAARRTTEERRLLYY MMEEDDIIAANN RREENNTTSS ((BBYY PPRROOJJEECCTTSS)) IINN 22001111 –– PPRROOJJEECCTTSS WWIITTHH HHIIGGHHEERR MMEEDDIIAANN RREENNTTSS IINN QQ44 22001111

SR DIS PROJECT NAME MEDIAN RENT

Q4 11 Q3 11 Q2 11 Q1 11 1 D1 EMERALD GARDEN 4.26 4.1 3.95 3.96

2 D1 MARINA BAY RESIDENCES 5.92 5.84 5.35 5.54

3 D1 PEOPLE'S PARK COMPLEX 4.27 3.43 3.96 2.94

4 D2 ICON. 6.65 6.48 6.56 6.74

5 D2 INTERNATIONAL PLAZA 3.76 3.71 3.12 3.53

6 D3 QUEENS 4.30 4.21 3.53 3.75

7 D4 THE BERTH BY THE COVE 4.85 4.79 4.75 4.54

8 D4 THE OCEANFRONT @ SENTOSA COVE 4.46 4.36 4.09 4.3

9 D5 ONE-NORTH RESIDENCES 4.51 4.44 4.59 5.02

10 D5 PARC IMPERIAL 6.64 6.24 6.28 5.8

11 D5 REGENT PARK 3.51 3.27 3.36 3.22

12 D5 WESTCOVE 2.92 2.86 2.91 2.89

13 D7 BURLINGTON SQUARE 4.62 4.51 4.36 4.19

14 D7 THE PLAZA 4.65 4.05 4.04 4.4

15 D8 CITY SQUARE RES. 4.62 4.17 4.17 4.53

16 D8 KERRISDALE 3.78 3.75 3.67 3.55

17 D9 BELLE VUE RESIDENCES 5.90 5.16 4.72 5.02

18 D9 MIRAGE TOWER 4.44 4.18 4.21 4.01

19 D9 RIVERGATE 5.71 5.16 5.18 5.26

20 D9 ROBERTSON 100 5.87 5.7 5.87 5.49

21 D9 THE PIER AT ROBERTSON 7.13 6.87 6.76 6.9

22 D9 TIARA 4.19 3.97 3.98 4.24

23 D9 UE SQUARE 3.97 3.87 3.72 3.75

24 D9 VISIONCREST 6.86 6.36 6.47 6.7

25 D9 YONG AN PARK 4.16 3.97 4.15 4.19

26 D10 ARDMORE PARK 6.15 5.78 5.78 6.16

27 D10 ASTRID MEADOWS 4.16 4.11 4.37 4.4

28 D10 DUCHESS CREST 4.05 4.01 3.75 3.99

29 D10 FOUR SEASONS PARK 4.97 4.87 4.84 4.87

30 D10 TANGLIN REGENCY 4.26 4.06 4 4.35

31 D10 THE MERASAGA 4.54 4.07 3.88 4.3

32 D10 THE TESSARINA 3.92 3.63 3.78 3.71

33 D10 VALLEY PARK 3.74 3.69 3.7 3.6

34 D11 RESIDENCES @ EVELYN 5.08 5.05 5.18 5.37

35 D12 TRELLIS TOWERS 4.47 3.51 3.35 3.39



36 D14 ASTORIA PARK 3.50 3.22 3.15 3.18

37 D14 CENTRAL GROVE 3.16 3.1 3.1 2.93

38 D14 SIMSVILLE 2.97 2.93 2.86 2.99

39 D14 THE SUNNY SPRING 3.01 3 2.88 2.71

40 D14 THE WATERINA 3.36 3.23 3.15 3.07

41 D15 COSTA RHU 3.36 3.16 3.39 3.13

42 D15 EASTERN LAGOON 3.49 3.31 3.22 2.9

43 D15 MANDARIN GARDEN 3.26 3.22 3.27 2.87

44 D15 ONE AMBER 4.09 3.83 3.8 3.27

45 D15 PEBBLE BAY 3.75 3.57 3.56 3.54

46 D15 THE MAKENA 3.10 3.01 2.94 2.82

47 D15 THE SEA VIEW 4.30 4.23 3.76 4.01

48 D15 THE WATERSIDE 3.09 3.06 3.09 3.01

49 D15 WATER PLACE 3.97 3.75 3.6 3.52

50 D16 BAYSHORE PARK 3.50 3.28 3.26 3.2

51 D16 CHANGI GREEN 2.70 2.68 2.6 2.58

52 D16 COSTA DEL SOL 3.70 3.69 3.7 3.69

53 D16 THE BAYSHORE 3.21 3.14 3.06 3.01

54 D17 BALLOTA PARK 2.22 2.21 2.11 2.08

55 D17 CARISSA PARK 2.77 2.58 2.71 2.49

56 D17 EDELWEISS PARK 3.03 2.92 2.71 2.9

57 D18 CHANGI RISE 2.83 2.8 2.85 2.8

58 D18 MELVILLE PARK 2.78 2.76 2.65 2.51

59 D18 SAVANNAH CONDOPARK 3.37 3.13 3.14 3.04

60 D19 CHUAN PARK 2.45 2.36 2.44 2.38

61 D19 COMPASS HEIGHTS 3.21 3.15 3.05 3.08

62 D19 KOVAN MELODY 3.72 3.65 3.54 3.53

63 D19 REGENTVILLE 2.79 2.75 2.6 2.55

64 D20 GRANDEUR 8 3.27 3.22 3.1 3.18

65 D20 THE GARDENS AT BISHAN 3.53 3.36 3.42 3.1

66 D21 GARDENVISTA 3.72 3.68 3.54 3.77

67 D21 HUME PARK 2 2.36 2.34 2.21 2.13

68 D21 MAPLEWOODS 3.15 3.14 3.09 3.02

69 D21 SPRINGDALE 2.80 2.71 2.6 2.61

70 D21 SUMMERHILL 2.72 2.64 2.66 2.68

71 D21 THE HILLSIDE 2.76 2.56 2.68 2.63

72 D22 PARC OASIS 2.95 2.88 2.79 2.75

73 D22 THE CENTRIS 3.81 3.66 3.79 3.5

74 D23 GLENDALE PARK 2.46 2.45 2.41 2.25

75 D23 GUILIN VIEW 3.08 2.79 2.76 2.7

76 D23 HAZEL PARK 2.48 2.26 2.23 2.1

77 D23 HILLVIEW REGENCY 3.33 2.99 3.1 2.88

78 D23 PALM GARDENS 2.51 2.41 2.39 2.22



79 D23 PARKVIEW APARTMENTS 2.62 2.45 2.58 2.51

80 D23 REGENT GROVE 2.63 2.58 2.49 2.55

81 D23 THE DAIRY FARM 2.35 2.32 2.18 2.16

82 D23 THE WARREN 3.07 2.95 2.89 2.9

83 D25 CASABLANCA 3.07 2.96 2.84 2.87

84 D25 ROSEWOOD 2.81 2.64 2.75 2.71

85 D26 CASTLE GREEN 2.92 2.8 2.83 2.82

86 D27 ORCHID PARK 2.54 2.51 2.55 2.48 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [[NNoottee:: mmeeaannss hhiigghheerr mmeeddiiaann rreenntt]]

Note: In the previous quarter, out of the same 187 residential projects selected for the case study, 121 (64.7%) of them enjoyed higher median psf monthly rent. In Q4, with the same basket of private housing projects, only 86 (46%) of them had higher median psf monthly rents. CONDO PROJECTS WITH LOWER MEDIAN PSF MONTHLY RENTS IN Q4 2011 61 out of the 187 selected condo projects (32.6%) experienced lower median psf monthly rents in Q4 2011. In the previous quarter, this figure was lower at 28.9%. TTAABBLLEE [[55..44--BB]] –– CCOOMMPPAARRIISSOONN OOFF QQUUAARRTTEERRLLYY MMEEDDIIAANN RREENNTTSS ((BBYY PPRROOJJEECCTTSS)) IINN 22001111 –– PPRROOJJEECCTTSS WWIITTHH LLOOWWEERR MMEEDDIIAANN RREENNTTSS IINN QQ44 22001111


Q4 11 Q3 11 Q2 11 Q1 11 1 D1 THE SAIL @ MARINA BAY 5.99 6.06 5.99 5.66

2 D3 CENTRAL GREEN 3.64 3.68 3.72 3.48

3 D3 EMERALD PARK 3.85 4.03 3.53 3.75

4 D3 MERAPRIME 5.07 5.15 3.72 3.48

5 D3 TANGLIN VIEW 4.37 4.42 4.95 4.82

6 D3 THE METROPOLITAN 4.11 4.24 4.37 4.31

7 D4 CARIBBEAN AT KEPPEL BAY 5.60 5.88 5.61 5.4

8 D4 THE COAST AT SENTOSA COVE 3.87 3.95 4.2 4.21

9 D5 BLUE HORIZON 3.81 3.84 3.75 3.74

10 D5 BOTANNIA 3.36 3.49 3.37 2.95

11 D5 THE PARC 3.29 3.8 3.27 3.1

12 D5 VISTA PARK 3.27 3.35 2.92 3.09

13 D5 WEST BAY 2.99 3.05 2.97 3.23

14 D7 THE BENCOOLEN 4.70 4.73 4.82 4.76

15 D8 CITYLIGHTS 5.37 5.38 5.37 5.55

16 D9 ASPEN HEIGHTS 3.93 4.03 4 3.9

17 D9 CAIRNHILL CREST 4.92 4.9 4.88 4.49

18 D9 KIM SIA COURT 3.11 3.18 3.07 3.22

19 D9 PACIFIC MANSION 2.71 2.74 2.64 2.54

20 D9 PARC EMILY 5.05 5.13 5.31 4.77

21 D9 THE COSMOPOLITAN 5.18 5.3 5.24 5.06



22 D9 THE IMPERIAL 5.70 5.84 5.4 5.67

23 D9 WATERMARK ROBERTSON Q. 5.43 5.57 4.76 4.93

24 D10 BELMOND GREEN 4.10 4.5 4.28 4.21

25 D10 CUSCADEN RESIDENCES 5.00 5.39 5.06 4.97

26 D10 ONE JERVOIS 4.59 4.83 4.85 4.71

27 D10 REGENCY PARK 3.87 4.43 3.86 3.95

28 D10 RIDGEWOOD 2.78 2.85 2.82 2.88

29 D10 SPRING GROVE 3.95 4.19 4.27 4.22

30 D10 TANGLIN PARK 4.47 4.72 4.57 4.68

31 D11 AMARYLLIS VILLE 4.89 5.02 5.19 4.92

32 D11 PARK INFINIA @ WEE NAM 5.25 5.14 5.04 5.16

33 D11 THOMSON 800 3.04 3.07 3.02 3.08

34 D12 OLEANDER TOWERS 3.25 3.47 3.28 3.39

35 D14 DAKOTA RESIDENCES 3.72 3.83 3.68 3.64

36 D14 WING FONG MANS. 2.48 2.57 2.39 2.28

37 D15 COTE D'AZUR 3.89 3.97 3.83 3.82

38 D15 FERNWOOD TERRACE 2.35 2.42 2.52 2.25

39 D15 NEPTUNE COURT 2.33 2.42 2.34 2.25

40 D15 SANCTUARY GREEN 3.84 4 3.69 3.91

41 D15 VILLA MARINA 3.12 3.17 3.15 2.91

42 D16 AQUARIUS BY THE PARK 3.15 3.26 3.1 2.99

43 D16 CASA MERAH 3.42 3.46 3.26 3.3

44 D16 EAST MEADOWS 3.22 3.29 3.15 3.02

45 D16 SUNHAVEN 2.76 2.83 2.67 2.63

46 D17 FERRARIA PARK 3.15 3.2 2.9 2.85

47 D18 EASTPOINT GREEN 3.07 3.03 2.98 2.92

48 D19 CHILTERN PARK 2.73 2.78 2.6 2.56

49 D21 HILLVIEW GREEN 2.28 2.44 2.34 2.16

50 D21 HUME PARK I 2.15 2.23 2.25 2.35

51 D21 PANDAN VALLEY 2.39 2.46 2.4 2.44

52 D21 PINE GROVE 2.34 2.73 2.41 2.26

53 D21 SIGNATURE PARK 2.37 2.43 2.3 2.29

54 D21 SOUTHAVEN II 2.38 2.46 2.34 2.48

55 D21 SYMPHONY HEIGHTS 2.57 2.58 2.45 2.48

56 D22 PARC VISTA 2.85 2.88 2.8 2.73

57 D22 THE MAYFAIR 3.10 3.13 2.94 3.24

58 D23 HILLINGTON GREEN 2.60 2.63 2.48 2.53

59 D23 MAYSPRINGS 2.61 2.85 2.63 2.69

60 D23 NORTHVALE 2.55 2.68 2.4 2.42

61 D26 BULLION PARK 2.91 3.18 2.75 2.85 SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [[NNoottee:: mmeeaannss lloowweerr mmeeddiiaann rreenntt]]

Note: In the previous quarter, out of the same 187 residential projects selected for the case study, 54 (28.9%) of them had lower median psf monthly rent. In Q4, with



the same basket of private housing projects, 61 (32.6%) of them were deficient in median psf monthly rents compared with the previous quarter. CONDO PROJECTS WHERE MEDIAN PSF MONTHLY RENTS WENT SIDEWAY IN Q4 2011 7 out of the 187 selected condo projects (3.74%) experienced stagnant median psf monthly rents in Q4 2011. TTAABBLLEE [[55..44--CC]] –– CCOOMMPPAARRIISSOONN OOFF QQUUAARRTTEERRLLYY MMEEDDIIAANN RREENNTTSS ((BBYY PPRROOJJEECCTTSS)) IINN 22001111 –– PPRROOJJEECCTTSS WWIITTHH SSTTAAGGNNAANNTT MMEEDDIIAANN RREENNTTSS IINN QQ44 22001111


Q4 11 Q3 11 Q2 11 Q1 11 1 D3 THE ANCHORAGE 3.20 3.2 4.21 4.12 2 D9 8 @ MOUNT SOPHIA 5.80 5.80 5.62 5.66 3 D10 SOMMERVILLE PARK 3.65 3.65 3.49 3.54 4 D16 CHANGI COURT 2.89 2.89 2.79 2.73 5 D21 CLEMENTI PARK 2.65 2.65 2.43 2.63 6 D22 THE LAKESHORE 3.87 3.87 3.75 3.57 7 D23 REGENT HEIGHTS 2.73 2.73 2.57 2.54

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann [[NNoottee:: mmeeaannss uunncchhaannggeedd mmeeddiiaann rreenntt]]

CONDO PROJECTS WITH FEWER THAN 10 RENTAL DEALS IN Q4 2011 A total of 28 out of the 187 selected condo projects (or 15%) had fewer than 10 transactions in Q4 2011. The figure was much higher than the 6.42% in the preceding quarter in 2011. TTAABBLLEE [[55..44--DD]] –– CCOOMMPPAARRIISSOONN OOFF QQUUAARRTTEERRLLYY MMEEDDIIAANN RREENNTTSS ((BBYY PPRROOJJEECCTTSS)) IINN 22001111 –– PPRROOJJEECCTTSS WWIITTHH FFEEWWEERR TTHHAANN 1100 RREENNTTAALL CCOONNTTRRAACCTTSS IINN QQ44 22001111 SR DIS PROJECT NAME

MEDIAN RENT Q4 11 Q3 11 Q2 11 Q1 11

1 D1 RIVERWALK APARTMENT <10 3.69 3.52 4.02 2 D2 THE BEACON <10 <10 4.44 4.06 3 D4 HARBOURLIGHTS <10 4.00 3.66 3.95 4 D4 THE AZURE <10 4.32 4.09 4.54 5 D4 THE PEARL @ MOUNT FABER <10 <10 4.53 4.05 6 D5 THE INFINITI <10 2.74 2.8 2.66 7 D5 VARSITY PARK <10 3.68 3.58 3.5 8 D7 SUNSHINE PLAZA <10 4.62 4.94 4.58 9 D9 LEONIE CONDOTEL <10 4.19 4.26 4.39 10 D9 THE TRILLIUM <10 5.15 4.84 4.93 11 D10 ARDMORE II <10 4.84 4.45 4.78 12 D10 MELROSE PARK <10 <10 4.46 4.52 13 D10 ST REGIS RESIDENCES <10 5.10 5.13 5.84 14 D11 THOMSON EURO-ASIA <10 4.37 4.61 4.4 15 D11 ZEDGE <10 <10 5.22 5.17 16 D12 THE ARTE <10 3.16 3.27 3.06 17 D14 ATRIUM RESIDENCES <10 <10 2.77 2.76



18 D15 AALTO <10 4.58 3.93 3.83 19 D15 TANJONG RIA <10 3.12 2.86 3.01 20 D15 THE ESTA <10 3.57 3.42 3.4 21 D15 THE SEAFRONT ON MEYER <10 3.99 3.74 3.6 22 D17 AVILA GARDENS <10 2.57 2.21 2.25 23 D17 AZALEA PARK <10 2.29 2.14 2.13 24 D20 FAR HORIZON GDNS <10 <10 2.69 2.42 25 D21 THE BLOSSOMVALE <10 2.88 2.73 2.87 26 D23 CASHEW HEIGHTS <10 1.98 2.08 1.97 27 D23 THE JADE <10 <10 3.83 3.51 28 D26 SEASONS PARK <10 2.55 2.54 2.55

SSttaattiissttiiccss gglleeaanneedd ffrroomm UURRAA RReeaalliiss aanndd ccoommppiilleedd bbyy SSaamm GGiiaann This simply means that more landlords are frustrated by the prospect of not being able to land themselves the desired affluent tenants as easily as before. ON HINDSIGHT – JUST IN CASE At the end of the day, the common objective of these exercises is to drive home the importance of doing one’s homework before putting the deposit for a host of new calculated financial RISKS lying ahead. It cannot be emphasised enough that when investing in real estate, one must be able and willing to undertake those RISKS for at least 3 to 5 years, if not longer – just in case the market stumbles upon a downward cycle when one least expects it. This could mean that if an investor is unable to dispose of his property due to the effect of the host of the recent cooling-off measures, there is a high chance that he might not be able to enjoy the level of cash flow that he was led to believe that he could. And if the status quo remains, without the impetus from both foreign buyers and foreigner tenants to reinvigorate the market, the property market is likely to go into an induced slumber. Nobody will know ‘how long’ we will have to wait to see another bull-run.



YOUR GUESS IS AS GOOD AS MINE When the market is fearless, don’t try to talk sense into it

The latest cooling measure, i.e. the Additional Buyer’s Stamp Duty (ABSD) which took effect from 8 December 2011 aims to keep out the influx of ‘hot money’ created by the loose monetary policy in the United States and Europe and to check the prevalent ‘herd mentality’ especially in the primary home market. Yet, by March 2012, there was market murmur that there might soon be another round of cooling-off measures to stamp the tide of relentless buying of ‘very small apartments’ with suspected functionality. If this comes to fruition, the resulting implosion will suck the air out of the property market and leave many ‘high and dry’. This would count as one of the ‘bad case scenarios’ that could probably occur from the present market anomalies, which include the spirited buying of mass market homes in the primary sale market amidst great global uncertainties. However, the limited success of the ABSD measure has been in keeping the top-end of the luxury home markets, in both new home and resale segments, quiet. EXTERNAL ENVIRONMENT Externally, the same factors that weighed down rental growth for individual landlords in recent months are still lurking with intent. Just to recapitulate, these include the ever increasing probabilities of financial bailouts for some member states of the European Union (EU); the urgency by foreign banks to repatriate funds back home to comply with the minimum capital ratio (known as Basel III); the anaemic economic recovery in the United States (US); widespread corporate cost-cutting; and, the pervasive sense of cautiousness, e.g. the low daily trading volume of between $1 billion-$1.2 billion in the Singapore stock market [Source: The Business Times 16 April 2012 – LOW MARKET VOLUME HAS TO BE A WORRY]. But amidst a picture of general gloom, the real estate market is an exception where buyers of all creeds and persuasions are still paying between $1,000 and $1,700 per-square-foot (psf) for mass market condo units outside prime areas. Whether this is wise or unwise, only time will tell; but being a small and open economy, Singapore’s property market remains vulnerable to external variables which have refused to go away since last August. Let’s now look at how the global situation has evolved. EUROPE – DOUBLE DIP RECESSION Though having recently averted a Lehman Brother’s-lookalike meltdown, Europe is presently being hit with a double whammy



of an austerity drive in the middle of a widespread recession (except Germany). EU member states including Greece, Spain, Portugal as well as Ireland are in a much deeper recession than they care to admit. Outside the Euro zone, the United Kingdom (UK) economy suffers a ‘double dip’ recession for the first time since the 1970s. Its GDP in Q1 2012 fell 0.2% from the final quarter (Q4) of 2011 where it declined 0.3%. [Source: Bloomberg news 25 April 2012 – U.K. SUCCUMBS TO FIRST DOUBLE-DIP RECESSION SINCE 1970s: ECONOMY] First of all, what is the meaning of ‘austerity’? It means ‘belt tightening’, lower spending, cost cutting etc. While such stringent measures may help to stop further budgetary deficit, they do not create more jobs which are what the European economy badly needs at the moment. This means that the vast majority of the western banks will have to deleverage, reduce head counts (globally), increase deposit (e.g. time deposit), hold ‘easy-to-sell’ liquid assets (real estate is out of the question), and hold more low-risk securities such as government bonds which are deemed risk-free in theory. However, as of March 2012, these banks have a combined deficiency of Є485.6 billion and these cash is urgently needed to meet the target as the two deadlines (in 2015 and another in 2019) loom in the background. IMPLICATIONS TO PROPERTY MARKET IN SINGAPORE This means that the kind of market exuberance we saw in 2007 (described at Page 2 – OVERVIEW) where the ‘trigger happy’ investment banks from the US and Europe snapped up SIA Building, DBS Building and Farrer Court ‘while eating breakfast’ is now history. THE UNITED STATES (U.S.) – CHALLENGES AHEAD The only shimmer of hope actually comes from the encouraging statistics from the United States (US) in the March-April 2012 period. Ironically, the US was where the entire problems started with the collapse of the housing market (i.e. sub-prime crisis in 2008) which later led to the financial crisis where hundreds of banks in the US and Europe were decimated through winding-up or mergers & acquisitions. Those banks which are ‘too big to fail’ and were propped up by taxpayer’s monies are not considered insolvent and some of them include those that were active in snapping up commercial buildings and en bloc sale projects in Singapore in 2007. QUANTITATIVE EASING (QE) MEASURES & THEIR IMPLICATIONS Statistically, the U.S. is in recovery mode. Whether the policy tools the US government had used are effective or not is another issue but one particular monetary measure that it employed appeared to have prevented it from going into deeper recession



but it had a dire consequence to others more than it helped its own people. It was the QUANTITATIVE EASING (QE) measure that created a total of US$2.3 trillion for the US Federal Reserve to purchase U.S. government bonds, mortgage-backed securities, and bank debts directly from private investors (mostly banks) and in so doing, increased money supply and injected the newly created liquidity into the market to avoid deflation and to boost economic activities through spending. On top of that, interest rate has been deliberately kept to near zero to keep the money tap flowing in the banking system to prevent the US economy from going into contraction. The low interest policy will only be reviewed upward in 2014. QE 1 AND QE 2 The first round of bond buying actions by the Federal Reserve from private bond holders – dubbed QE 1 – lasted 20 months from December 2008 to August 2010. The second round of purchase of US government debts, dubbed QE 2, which went on for only 7 months, started in November 2010 and ended in June 2011. These measures practically mean that the U.S. government printed the money and put it in the hand of the banks so that the money could be circulated in the market and in so doing sustain consumer spending and prevent the economy from going into depression. But such a move caused investors all over the world to dump US dollars frantically and switch to holding (and hoarding) tangible assets and commodities, and in doing so causing asset prices all over Asian markets to soar as material costs skyrocketed. This can be seen in the price appreciation in Singapore real estate discussed earlier in related story: “A RUDE AWAKENING OF THE MIDDLE-CLASS DREAM”. IMPLICATIONS OF QE MEASURES But the recovery process is still considered fragile because, from a neutral perspective, the recent talk of a third round of QUANTITATIVE EASING (QE) is indeed worrying as it suggested that more is needed to be done to sustain the momentum of the recovery process. But, the bad news was treated as a buying signal by speculators and sent the stock markets across the globe into frenzy. Fortunately or otherwise, at the time this magazine went for printing, the Fed had come out in the open to quash any lingering hope for the need of another QE exercise. According to an online Reuters report, only two of the Federal Open Market Committee’s 10 voting members agreed with the additional monetary stimulus. U.S. HOUSING MARKET IS STILL FAR FROM RECOVERY Though home sale in the U.S. has generally improved in February 2012 due to low inventory, building permits and a better demand (which rose 4.8% in February 2012, the highest since 2008), sales of repossessed properties by lenders may rise 25% in 2012 compared with the 1,000,000 last year. A surge in supply in foreclosed property will dampen prices, and real estate experts in the U.S. have estimated that home prices would drop by 10% this year. [Source: Business Times 4 April 2012]



In a nutshell, the Federal Reserve maintained its cautious assessment of the economy for 2012 due to the high jobless rate and the nagging pains in Europe. PEOPLE’S REPUBLIC OF CHINA (PRC) Economic ‘soft-landing’ is highly probable in the world’s second largest economy, which already announced the official forecast of only 7.5% in this year’s GDP growth – the lowest in 10 years.

In fact, in the first three months (Q1) of 2012, China’s economy grew only 8.1% year-on-year (y-o-y) and this is the slowest growth in almost 3 years. The latest official data stated that China’s March home prices fell in 37 of 70 cities surveyed, consistent with private sector data which said home prices fell for the seventh month in March 2012 from a month ago. In the capital city Beijing, existing home prices fell 3.4% y-o-y in March 2012, and in the meantime, in China’s financial centre, Shanghai, there was a 1% drop in home prices y-o-y. THE FACTORY OF THE WORLD At the political front, the undisputed largest factory in the world treads cautiously into uncharted waters as it braces itself for the highly politicised change of guard in the top echelon of the Chinese Politburo. With the exception of 2002, such a top level change-over is often preceded with violence and bloodshed. Already the Chinese as well as Hong Kong stock markets had experienced wild swings resulting from news relating to the intrigues of power struggles within the ranked politicians. With fingers crossed, one can only pray that none of the troubles would end up undoing the new found prosperity and the increasing spending powers of the Chinese middle-class. PROBABLE OIL SHOCK IN 2012 – LEADING INDUSTRY INDICATORS IN SINGAPORE The escalating tension between Iran and the developed world could result in a probable oil shock that would bring everybody back to square one. Related developments have already sent shivers to many businesses that heavily rely on this particular energy source, for example,

NEPTUNE ORIENTAL LINE (NOL) on 22 February 2012 announced that it had suffered a net loss of US$320.43 million, due to high costs. The national shipping symbol of Singapore experienced a wild swing in fortune posting a net loss of US$478.18 million for the full fiscal year ended on 31 December 2011 after



gaining a full year profit of US$460.94 million in 2010. [Source: Straits Times 22 February 2012]

SINGAPORE AIRLINES LTD (SIA) on 9 March 2012 announced that due to weak

demand from business-class and corporate travellers and the soaring energy prices it had allowed its pilots to go on no-pay leave for up to two years. In the statement which was published in The Business Times, SIA attributed the cause of its business slowdown to the cost-cutting measures adopted by financial firms.

In the same report, the International Air Transport Association painted the worst case scenario of the airline industry losing US$8.3-billion in 2012 if Europe's debt problems trigger another banking crisis. [Source: The Business Times 9 March 2012] IMPLICATIONS OF HIGHER OIL PRICES TO REAL ESTATE Ironically, such grim messages coming out from Singapore’s leading industry icons might have contributed to the surprising surge in the private home market in March 2012 where resale volume jolted past the last 3 months’ tepid figures to register 925 resale deals which are only 93 deals shy of the monthly figure of 1,018 resale transactions in November 2011 before the knee-jerk effect after the latest cooling measure (i.e. ABSD) was announced in early December 2011. This could be due to the opportunistic interpretation of the conflict between Iran and the western world where the threat of imminent military confrontation in the Middle East would lead to shortage of oil supply which will in turn cause massive inflation globally. And in today’s context, any telltale sign of impending inflation will lead to speculative buying of properties and commodities. A BLADE THAT CUTS BOTH WAYS The goals of any investment are to raise personal wealth and to enhance personal spending power. The first objective can be achieved either through accumulation of surplus over a period of time or through capital gain from disposal of the property, or through both. But, like all other investments, real estate investments have a blade that cuts both ways. It could help the aspiring individuals to deepen the pocket and also to hurt their bottom line. And the only way to make sure that the former and not the latter scenario will prevail at the end of the day, one ought to have planned the investment with care, due diligence, detailed calculations and the know-how in interpreting the occurrences in the property market which is genetically tied to the larger economy. FIRST LINE OF DEFENCE – AFFORDABILITY Sometimes, things which belie and defy economic fundamentals happen in the property market, but they tend to be short-lived, such as the present fad of shoebox



apartments. This is because such small apartments are attractive to HDB upgraders due to the lower price quantum and perceived ‘affordability’. However, ‘affordability’ is not just about being able to put down the initial deposit and qualify for a mortgage loan. The investment holding must be able to produce sufficient cash-flow from regular income to enhance the owner’s spending power or at least to mitigate opportunity costs over a long period of time. This is because regardless of the physical size of real estate, they are illiquid and tough to dispose of, especially during bad times. Except during good times, the illiquidity attribute of real estate does not appear to be as menacing as a ‘fresh eating’ monster – which it actually is. LAST LINE OF DEFENCE – RENTAL INCOME If rental income is not the immediate goal of the investor’s, it must be their last line of defence, because besides the property’s LOCATION which is the number one yardstick of market value, another huge part of the property’s value is derived from its functionality or ‘liveability’ factor within, including fixtures and the number of rooms etc. And of course, a property’s location is often regarded as the yardstick of the owner’s affluence. The functionality of a home unit is inseparable from space sufficiency which is in turn expressed in physical size. In this regard, the concept of ‘functionality of space’ is fundamental. If the property is meant for receiving rental income, ‘small space’ equates ‘limited functionalities’ and thus lower desire by the end-users (i.e. tenants) until the incentives becomes apparent (e.g. lower rents, or the apartment is in a *popular district, etc) [*Popular Districts refers to locations with higher number of rental transactions and higher rents collected in a year.] (See Table [5.2-A] and Table [5.2-B]) In this regard, whether prospective tenants will be excited about shoebox apartments remains to be seen. PRIDE OF OWNERSHIP Pride of ownership is considered as one of the benefits of real estate investment. And the size of the property determines the size of ownership pride. By the same measure, reduction in every square metre of space in a property will correspondingly reduce the level of pride of the home owners and the occupiers. Why does the Housing & Development Board (HDB) classify public flats into 1-room flat, 2-room flat, 3-room flat and so on; and social subsidies are always tied to room types of a public flat? Moreover, related to the pride factor is a host of other possible setbacks over the long term, including the lure of ‘wrong tenants’, high repair costs, or functional obsolescence in older private housing projects. In sum, costs of property ownership tend to be enlarged over time, and they are not limited to financial costs but also opportunity costs and other legal implications.



THE BIGGER THE BETTER – START-GAME, MID-GAME & END-GAME

Do not forget an ageless maxim in real estate investment, i.e. “the bigger the better”. In the start-game, if an investor has sufficient funds for a large apartment (of say, 2,000 sq ft), do not split the funds to buy two smaller apartments (of say, 800 sq ft). This is because in the mid-game where the investor collects rents, larger apartment tend to be in better demand from a more affluent clientele due to the privacy provided by the living space, and as such, the upside is always better over a long period of time. In the end-game, the residual value (i.e. en bloc sale value) of a residential project comes from the larger units and not the smaller units. And the law stipulates that the calculation of majority consent must comprise share value and total floor area of all the residential lots in the residential project. This will give the owners of larger apartment units a better bargaining power over others in the en bloc sale project. ‘TO BUY’ AND ‘NOT TO BUY’ CARRY EQUAL RISK In conclusion, let’s revisit the story of Mr O (Optimist), Mr P (Pessimist) and Mr R (Realist). The three of them represent three different market perspectives and three courses of actions, i.e. buy, sell and hold (or wait). And each of the actions carries with it a certain amount of risks. For example, if Mr O buys now he will face the ‘liquidity risk’ if the market goes the other way; while if Mr P sells now he may face the ‘inflation risk’ or the ‘purchasing power risk’ if prices continue to go up. Mr R faces a 50/50 chance of either of the risks if the property market declines or rises. But what if the property market goes flat for a couple of years? Then the odds will stack against Mr O if he chooses to buy now, because he will be holding a high price property at a flat rent. In the final analysis, as long as the global economy does not truly recover and there exists a likelihood of another round of QUANTITATIVE EASING (QE) by the U.S. Federal Reserve, the property market will remain speculative, and even volatile, as more buyers use properties as the hedge against the resulting inflation. But being a realistic person, I will go with Mr R’s lower risk option and just ‘wait and see’ which way the market will go.


CONCLUSION Last but not least … … …

Since I have started this magazine with the story of a blind man asking his friend to describe colours to him, let me end with another story. The F1 formula grand prix has a few similarities with the present market condition, and of course, with life. Firstly, whether in business or in life, we are always running in circles, chasing our dream. Secondly, it is always the same few fellows who keep going after the same thing as us. And the best part of the F1 race is the ‘crash’ which often produces the surprised winner. And the moral of the story is:

“In F1 as in life, if those in front don’t ‘crash’, those behind will not be able to catch up.”

Let me now summarise the contents of this magazine in Chinese:

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Documents

Singapore Property Market Direction - April 2012