With the series of cooling measures introduced lately by Government, we expect to see more caution from developers in their land bidding. However freehold prime sites with sizeable areas are difficult to come by nowadays, therefore the recent enbloc at Pastoral View is going stir interest in some mature and sophiscated buyers if the selling prices of the residential units are priced right.

Pastoral view site is a prime site with its freehold title, with its proximity to Novena shopping malls and MRT station. In addition the 2 freehold sites have a combined land area of 51,395 sq ft which offers greater variety and economies of scale in the development. Therefore the unit land price of $847 psf ppr is relatively attractive. If the developers are able to work out less than $500 psf for the construction cost inclusive of professional fees and miscellaneous, Far East & OPH can easily fetch the project at expected $1800 psf with a fat attractive 33.3 % profit margin.

Far East, Orchard Parade buy Bassein Road residential plots

FAR East Organization and its listed unit Orchard Parade Holdings have clinched their second residential development site this week. The duo will buy Pastoral View (through a collective sale) and the next door plot being sold by OCBC for a total of $122 million.

This works out to a unit land price of about $847 per square foot per plot ratio (psf ppr) inclusive of a marginal development charge (DC) payable for OCBC’s plot at 11 Bassein Road. No DC is payable for Pastoral View, at 7 Bassein Road. The two freehold sites have a combined land area of 51,395 sq ft and can be redeveloped into a new condo with about 140 units averaging 1,000 sq ft. The District 11 properties near Novena MRT Station are zoned for residential use with a 2.8 plot ratio and 36-storey allowable height under Master Plan 2008.

Market watchers estimate the breakeven cost for a new condo on the site could be around $1,300 psf. In July, City Developments released its 368 Thomson freehold condo at an average price of about $1,350 psf.

‘The raft of cooling measures introduced by the government has resulted in some developers turning cautious but many are still keen on prime freehold land parcels with good attributes that are difficult to come by,’ said Tan Hong Boon, deputy managing director of Credo Real Estate. The company handled the sale of the two properties through a tender which closed last month, attracting a handful of submissions.

Credo did not give a split of the $122 million between Pastoral View and the plot sold by OCBC. However, Mr Tan said Pastoral View’s reserve price has been met. Pastoral View’s sale is subject to approval of the Strata Titles Board as owners’ unanimous consent has not been secured. Owners of Pastoral View’s 50 units stand to receive gross sale proceeds ranging from slightly over $1 million for studio apartments to $4.37 million for the penthouse. These sums are 80-90 per cent more than what the units would have sold for individually, according to Mr Tan.

Earlier this week, Far East and OPH clinched a 99-year leasehold plot at Jalan Eunos at a state tender on which they plan to develop a five-storey condo project that will incorporate some townhouses. Their winning bid of $414.57 psf ppr was 26.5 per cent above the next highest offer.

OPH said yesterday it will be taking stakes of 20 per cent in the Jalan Eunos site and 30 per cent in the Bassein Road properties.

Source : Business Times – 10 Sep 2010

Melrose Court sold for S$44m in en bloc sale

Melrose Court in Balestier has been sold for S$44 million in a collective sale.

The 32-unit residential development at No.10, Lorong Limau was sold to local boutique developer Melrose Land.

The property’s broker, Colliers International, says that Melrose Court is not linked to Melrose Land and notes that the sale is subject to the approval of the Strata Titles Board.

The freehold residential site has an area of 23,789 square feet.

Under the 2008 Master Plan, it has a gross plot ratio of 2.8.

Including the development charge of about S$277,235, the sale price translates to a land price of about S$665 per sq ft per plot ratio.

Colliers International says that upon approval, each owner is expected to receive gross proceeds of some S$1.129 million to S$2.261 million from the sale, depending on the size of their unit.

It also says that the site could accommodate a residential development of up to 36 storeys, comprising some 88 units of 830 sq ft each.

Source : Channel NewsAsia – 1 Sep 2010

I am not sure how many of us ever pay any attention to the URA Concept Plan which is being reviewed every 10 years. The Concept Plan is a strategic land use plan that will guide Singaproe’s development over the next 40 to 50 years in all land use such as housing, businesses, transport, infrastructure, recreation, and community needs. In real estate business, it is important to identify the gist of the Concept Plan which will mould and shape the Master Plan of Singapore in many ways.

Just in case that you are not aware, you are able to contribute to part of the Singapore future, by providing your views and feedbacks to the following website: http://spring.ura.gov.sg/conceptplan2011/

A chance for real, lasting change

Today – 27 May 2010

Concept Plan 2011 may sound like yet another bureaucratic exercise that will produce another paper to be filed away – and many people have simply ignored it. Past history shows that Concept Plans can actually be a big deal, though.

Just look back a few decades. Minister for National Development Mah Bow Tan said recently: “In the first Concept Plan in 1971, we drew up plans for major infrastructure projects such as Changi Airport and our first MRT lines.”

Two decades later, “in the 1991 Concept Plan, we systematically planned for the decentralisation of commercial space from the CBD”, he added.

Recommendations in those two Concept Plans have radically transformed Singapore.

A further two decades on, it may now be the right time for another radical change. This time, though, the initial recommendations announced early this month make it seem like Concept Plan 2011 could focus as much on the softer side of Singapore’s soul as on infrastructure.

It has the potential to catalyse far-reaching changes that could create a more vibrant place to live. To make a real difference, though, three unpolished gems amid the concepts floated so far may need a lot more polishing to make a real difference.

One of those gems is – as the focus group said – that the city needs buzz. With only 43 per cent of respondents in the Urban Redevelopment Authority’s 2009 Lifestyle Survey saying they are satisfied with night-time activities and events here, many Singaporeans seem to agree. The recent CB Richard Ellis study showing that Singapore had dropped to 11th place for cities where top world retailers are located reaffirms the need for vibrancy.

Yet much more than closing downtown streets on weekends and putting art on the streets is needed. Renowned researcher Richard Florida says that knowledge workers prefer things like a “vibrant music scene, outdoor restaurants, organic supermarkets, juice bars”, rather than “passive cultural amenities” and “big-ticket items”.

Innovative ideas for more far-reaching concepts – from edgier entertainment to entirely new models for restaurants and retailers – may need to become key parts of the mix.

A second gem involved concepts for buildings that included recommendations for changes such as organic growth in “distinctive neighbourhoods” like Bugis or Little India, and space for inter-generational bonding.

All are good concepts. Again, more transformational changes than tweaks to HDB flats may be needed to bridge the generational and diversity divides.

In one of his books Harvard professor Robert Putnam cites a dozen success stories – such as the Chicago public library branches that have become vital locations for building social connections – as examples of how to build social capital. Multi-cultural multi-ethnic Singapore may have even more opportunities than the United States, and out-of-the-box thinking could create new concepts that better connect this diversity of people.

The concept of diversity, too, could be expanded to refer to anything from art havens to lifestyle choices.

And third, the focus group recommended environmentally-friendly projects ranging from bike lanes and better public transport to creating a Heritage Charter to preserve historic buildings. But rather than just pulling down old buildings or clearing away parks to make way for the new, co-chairman Lee Tzu Yang said it is important to “try and build a consensus among all the stakeholders in a particular district as to how to cherish, safeguard the things we love”.

These ideas are good too, yet, as reporter Ong Dai Lin noted in Today’s coverage of the Concept Plan 2011, “their suggestions echoed popular calls that have been rejected time and again”. More transformative projects, perhaps something like solar panels on the roof of every public building to make Singapore a world model for alternative energy, could offer changes that remake Singapore.

This once-in-two-decades chance to transform Singapore through the Concept Plan seems too important to ignore. What may be needed to propel Singapore forward is more input from more people and truly innovative ideas for creating vibrancy or improving fundamental policies.

While small focus groups and lightly-publicised requests for feedback that drew a few thousand responses are a start, only around 0.1 per cent of the population has provided input on what could truly be a plan to reinvent Singapore yet again. Now is the time to put the power of many more people to work.

If you are looking for a newly launched project in these locations yet at a good for value prices, I would recommend St Michael Regency which is located in the St Michael areas. Located next to the Whampoa Canal, the launched prices are less than $900 psf for the lower level units. It is an apartment of 49 units, with 2 bed and 3 bed room units and penthouse unit types.

With a freehold tenure title and equipped with condominium facilities such as swimming pools, gym and Jacuzzi, I would say there is much room for price appreciation for the house buyers. Just take a look at the adjacent projects such as One St Michael and City Regency, the units have crossed $1000 psf after the project obtained TOP.

The layout of 3+1 bedroom unit of 1238 sf is rather spacious and efficient. The plus one is a study room, which you may opt to extend it as an extended living room. The kitchen also comes with a yard to facilitate washing and drying of clothes. This particular unit at low level directly from developer is asking for $886 psf.

http://www.keithyip.myweb.sg/93

If you are interested, give me a call at 96817684 and I will arrange for the actual unit viewing.

I have to admit it is always tough to have an impartial and unbiased stand in your profession when it comes close to conflict with your business. It is similar to asking a barber do you need a haircut.

I had once literally turned away a deal because I advised my clients to choose a new HDB flat rather than buying a new condominium unit. It was after long discussion with them on their financial planning and practicality of their lifestyle that we realized buying a private residential unit may not be the best option to them.

Try checking out the article by Dennis Chan which has highlighted certain obvious facts that many people are not aware or choose to ignore. One more obvious benefit of owning a HDB flat that was not mentioned: Do you know that this is the other asset that you will not be stripped off in the event you declare bankrupt? So at least you are safeguarded in a sense of not losing a shelter at the lowest point of your life. (pls do not under-estimate this fact, since no one is able to guarantee what will happen in our life:)

What to invest in? Try new HDB flats

By Dennis Chan

Tue, Apr 27, 2010
The Straits Times

As I am a financial journalist, one question that is regularly asked of me at gatherings among relatives and friends is: What to invest in?

An equally popular follow-up is: Where are prices headed?

Heck, even my hairdresser asks me that whenever I pop by the salon, about once a month, for a haircut. ‘Hard to tell,’ is my usual response, accompanied by a sagely nod.

When it comes to stocks and shares, can anyone tell the future accurately and consistently?

That is not to say I do not have some bright ideas about investing. Getting a new HDB flat is a perennial favourite of mine when asked for advice by people who do not already own one.

‘Is that it? Aren’t you preaching to the converted?’ some of you may rightly ask, given that more than 80 per cent of Singaporeans live in HDB flats.

To a certain extent, I am stating the obvious. But this ‘wisdom’ may not be apparent to all, especially to those who have certain notions about public housing.

And even among those who do not mind public housing, there are some who simply cannot countenance living in the outlying areas like Sengkang and Punggol where most of the new flats are being built.

For them, nothing less than a flat in a mature town will do. I do not doubt many of them have legitimate reasons for sticking to their stand.

As the mainstay of the HDB building programme is in the suburbs, those who insist on a home in a mature estate must realistically turn to the resale flat market.

But from an investment point of view, getting resale flats during a property boom often translates to paying frothy prices. It is not a smart thing to do, especially when one is starting out on a marriage.

Consider the expenses a courting couple usually face once they decide to get married.

Walking down the aisle is just a first step, not the fairy-tale ending that romance novelists like to write about.

A successful wedding proposal is like a city winning the rights to host the Olympics.

First, there is the euphoria: The man may dance a little jig of delight while his bride-to-be swoons over her quail egg-sized diamond ring. But then comes the hard planning and budgeting.

Get it right and the couple may bask in everlasting warmth and glory like the 1984 Los Angeles Olympics, often cited as the most financially successful Games.

Mess it up and they can expect to carry a lasting millstone like Montreal 1976 (It took the Canadian city 30 years to pay off its Olympic Games debts).

Similarly, money woes can make or break a marriage.

A couple tying the knot will typically need to set aside money for four major cash-flow draining events: the wedding, honeymoon, home purchase and renovation.

This is not an issue if they have wealthy parents who are willing to underwrite all or part of the expenses. But for those who have to finance their own way, prioritising and allocating resources judiciously are critical. Invariably, cash will be tight.

Under such circumstances, the right thing to do is to choose an affordable flat and to pay as little cash as possible.

The idea is to save as much of your salary as possible. The accumulated savings can then be channeled to other investments.

In other words, you do not want to be putting all your eggs into one investment – a house that also doubles as your home. You should also avoid getting mired in debt by buying an expensive home, as this could put stress on the marriage.

One way to acquire an inexpensive home is to choose a resale flat that is unpopular. A flat on a low floor or in an unpopular estate is more likely to be sold at a price that is close to its valuation. As HDB loans are pegged to valuation, a flat that is sold at close to its valuation price or lower may allow the buyer to borrow up to 90 per cent from the HDB.

A big advantage of buying from the resale market is the immediate occupation it affords: The buyer can choose to move into the flat the moment the sale is completed.

But if one can wait, a better alternative is to buy a flat directly from the HDB. Unlike resale flats, there is no haggling over price with the seller. This can be a source of comfort to a buyer who is unfamiliar with the property market and who is not confident he can negotiate a good deal in the open market.

The chances of getting a new flat are pretty good as the HDB has continually ramped up its building programme as well as reserving the bulk of its flats for first-time buyers.

So what if the new flats are mostly found in Sengkang and Punggol? They are fast growing into thriving townships, much like what Tampines, Jurong West and Woodlands have become.

New flats are affordable and priced significantly below the market. Take, for example, the price of a four-room flat at Punggol Emerald and Punggol Waves, which the HDB launched for sale last week.

They are being sold at between $243,000 and $323,000. In comparison, prices of resale flats nearby ranged from $355,000 to $385,000.

To help reduce out-of-pocket expenses on renovations, the HDB is also giving the buyer the option of having the flooring of his flat done up at an additional selling price. For a four-room flat, that amounts to $3,250.

As added icing on the cake, a new HDB flat generally comes with a 99-year lease at the time the HDB hands over the keys to the buyer.

In comparison, the clock on a leasehold property sold by the Government to a private developer starts running down from the date of full payment of land price by the successful tenderer, which is typically within 90 days from the date of award of tender of the land parcel.

Factoring in the time for construction and other delays, the buyer of a 99-year leasehold condominium is usually left with 94 to 95 years by the time he gets the keys to his flat.

It is worse for land that was sold at peak prices in 2007.

Take, for example, the South Beach mixed development at Beach Road. The 99-year leasehold site was won by a City Developments-led consortium in a government tender in 2007, but construction has been delayed as a result of the financial crisis. There are plans to start construction by next year.

Any further delays could shave the initial lease by up to a decade by the time the development is ready for occupation. The consortium has up to 2016 to complete the project.

Some people see such delays as insignificant as there are many other factors that determine the value of a property. But at the end of the day, tenure does matter as it is what differentiates a leasehold property from a freehold one.

To recap, some of the benefits of buying a new HDB flat are that it:

• Is more affordable;
• Requires less cash upfront;
• Is sold at a fixed price. No bargaining is needed;
• Affords buyers a fresh 99-year lease;
• Cannot be seized by creditors to pay off debts in the event of bankruptcy provided the purchase was not financed by a bank loan. This protection also applies to resale flats; and
• Is much cheaper than comparative homes in the market. This means there is a built-in protection against falling prices in a market downturn.

In conclusion, I would advise those who are eligible for public housing to buy a new HDB flat as a first step to investing in their future, even if they aspire to live in private homes eventually.

This is because the HDB home ownership programme provides tangible benefits that are available only to Singaporeans. Citizenship has its privilege.

I promised to share with you more on Uncle A’s investment.   Uncle illustrated 2 shophouses he invested recently.

Shophouse 1 in Iskandar

The first one is a 3 storey shophouse in the new Iskandar site in Johor Bahru. He bought it at RM $650k. The shophouse unit obtained TOP at end 2008, but he delayed the take-over till middle last year. The reason being that the shophouse is located in the new township, and he would want the developer to take maintenance of the unit till the last minute if possible. It is very true in Malaysia context. While the site is very big and town occupancy is not very high, there is high chance of break-in and damages. Since Uncle A is not staying at the area, the developer was still able to take care of it during the period the unit not leased out.

In the middle of 2009, Uncle A took over the unit. Towards the end of the year, Uncle A managed to lease out the 3 storey unit to 2 different tenants: shop front at level 1 to a car repair at $1950, 2^nd & 3^rd storey to a tuition centre at $1250.

 Gross rental yield

= Annual Gross rental / Price

= 12 months x ($1950+$1250) / $650,000

=   $38,400 / $650,000

= 5.9%

Uncle A is not so excited with the return, though the gross yield at 5.9% may sound very high to most of us. However be mindful this property is in Malaysia, where the financing cost and political risks are high. You would have to command higher yield return to justify the high risks.

In Singapore the average gross yield is 2.5% to 3.5%, which is considered relatively low in comparison to Australia & Malaysia. It could be explained by the political stability and economic weather in Singapore. Also the financing cost is relatively low, with Sibor rate hovering at the lowest point well below 1%.

Back to Uncle A’s property shophouse in Iskandar. He paid up fully on the project, and he is not concerned with the financing cost. He thinks the rental yield is ‘so so’ (as he could get a better return from stocks and his business). However he sees the future of the development, which has great potential to have great buzz and activity. In long run the shophouse should have a healthy growth in price appreciation.

Shophouse 2

Uncle A stays in a small town in Johor. This town has not much developed in the recent years, since many people have left for big cities in KL, JB or even Singapore. It is pretty laid back. Almost every one knows every one in this town.

There is this main road running across the town. The shophouses along the main road are pretty run down and poorly maintained. In the beginning of the year, Uncle A bought one corner 3 storey shophouse at a prominent junction. Though the location is good, the shop was pretty dilapidated and it comes with no carparks space. And it had been vacant for quite sometime. Maybe due to the reasons, the price Uncle A got was pretty attractive at $350k.

Since the shop was really old and run down, Uncle A sunk in RM$80k in renovating it. In addition, he divided the shopfront at ground floor into 4 units. Similarly to our HDB central small shoplots selling handphone set, he leased out the units easily with good rental, even though there are no carpark spaces! The ground floor units are leased out for selling ing budget products, handphone trades and magazine stalls.

Forgot to ask him on the 2^nd level rental, since I was so caught up when he told me that he intend to use the 3^rd floor for swiftlet farming for bird nest! Ha ha, if you are not familiar with this new trade, this is the up and coming sunrise industry involves the conversion of people-centric buildings into buildings used to house and produce bird nest. This is quite an interesting phenomenon, and I will cover it in details if given the chance.

Even before he has fully leased out all the shopunits, he is already commanding $4000 monthly. Let’s work out the gross rental yield.

 Gross rental yield

= Annual Gross rental / (buying price + renovation cost)

= 12 months x ($4000) / ($350k + $80k)

=   $48,000/ $430k

= 11.1%

Imagine a shophouse of less than 100% occupancy getting 11.1% return. The return is simply phenomenal!

Uncle A commented the return is much higher due to the trouble involving in getting the renovations done and authority clearance check. Doing investment and business in Malaysia is not as fortunate as in Singapore that every rule laid down clearly for us to check. However the return definitely worth the trouble caused.

If you find the Uncle A story interesting, drop me your comments so I could share with you more:)

I have a relative from Malaysia. I shall name him as Uncle A. Uncle A is an old bird in investment, both in stocks and property. He is not highly educated, however he believes in self-upgrade that he applies what he learns from newspaper and books on his investment. And he is an extremely smart guy with a calculus in his mind, who believes  in cash flow more than capital appreciation.

I was told he only get his first one million at the age of 40, through prudent saving and conservative investment. And he had multiplied several times of it by now (he is close to 65 if I guess it correctly). He owns dozens of properties in the main cities in Malaysia and Singapore. In addition, he has lots of blue chips in hand. Every month, he receives more than $100,000 in free cash flow from his investment.

Uncle A  does not believe in financial leverage, and he purchased most properties with 100% cash. He always warns me against the interest rate risk and advice to go for the minimum loan. 50% loan is what he recommending. Any amount more than that is risky, taking into interest rate risk as well as the future unforeseen factors like loss of jobs. Any amount less than that is not economical since there will be legal and loan fee involved as an overhead cost. And he is super conservative in investment, only willing to commit money on the safest investment that would not take his sleep away.

Uncle A’s parameter for investment is equally stringent as Warren Buffet, and he does not believe in financial leverage in multiplying the profit. To him financial leverage is a double-edged sword. He only buys things that he could comfortably afford.

He has lots of negative comments when he reviews my portfolio. He thought that it has been over-geared in many aspects, while my portfolio is actually considered on the very conservative side in comparison to many other Singaporeans.

In the current world that many people hinge on financial leverage to work towards their wealth, I wonder people like Uncle A will have done equally well if I put him on today’s context? And there are not many people are equally patient and disciplined in his conservative approach, though Uncle A has worked out well and achieved a super-normal return on his investment.

I will share with you more of Uncle A’s investment stories in future.