Sunday, June 29, 2014

And speaking of Luxury-home deals...

 Here are highlights of an article in this week's THEEDGE SINGAPORE:

  • Overall in Singapore, non-landed secondary transactions fell 51% to 1,678 units in the first five months of 2014. Relatively similar trend was seen for the high-end segment. The prime residential segment (sample size covers Districts 9, 10 and 11 as well as Sentosa) accounted for 20% of all transactions in the city-state. Secondary median prices for non-landed homes (in Districts 9, 10 and 11) softened only 6% to 9% from their peak, however, to between $1,500 and $1,900psf in 2014
  • Secondary median prices in District 9 fell 17% in May to $1,836psf, compared with $2,223psf in December 2013. Still, no pick-up was seen in the volume of transactions
  • In the primary market, non-landed prime residential homes fell 84% y-o-y to 145 units in the first five months of the year. The higher base in 2013 was driven mainly by d'Leedon, which accounted for 62.5% (575 units) of the high-end primary sales segment over the January to May 2013 period. Primary market transactions in the high-end segment were slow in 1H2014, as there was only one new launch and unsold units for existing projects did not move much
  • Will transaction volume increase with a drop in prices? So far, evidence suggests that it is very much project-specific for the high-end segment. For example, at Duo Residences (a joint venture between Malaysia's Khazanah Nationsal and Singapore's Temasek Holdings), 600 units were sold at a median price of $1,999psf in November 2013. As it was priced "below market expectations", the project enjoyed a good take-up rate of 91% in the first month. This suggests that the market is getting more selective and the projects and locations that sell will vary widely
  • There were 53,841 non-landed residential homes in the prime districts as at 1Q2014. By our estimates, 5,836 non-landed luxury units will be completed between 2014 and 2016. The combination of a higher supply of housing and a lower inflow of foreigners will increase vacancy rates and thus exert downward pressure on rentals.
                                      High-end residential districts

District                                                                                                    Areas Covered
District 4                                                                                                              Sentosa
District 9                                                                          Orchard, Cairnhill, River Valley
District 10                                                 Ardmore, Bukit Timah, Holland Road, Tanglin
District 11                                                                    Watten Estate, Novena, Thomson

The GSS... as in Great Sentosa Sell-off!

About two in five Sentosa condominium units have resold at a loss in the past year, symptomatic of the plight of luxury homes here, as financing restrictions put off buyers, industry watchers say.
Since May last year, 31 units have changed hands at six Sentosa projects: Marina Collection, Seascape, The Azure, The Berth, The Coast and The Oceanfront, according to data compiled by from URA Realis.
The profitability findings  is in line with data gathered by HSR Research which shows resale prices at the plush Sentosa district falling 25% to about $1,800psf in the first five months of this year, compared to around $2,400psf over the Jan - May 2013 period.
That said, the price movements tend to be volatile, given the single-digit number of transactions each month. There were just five transactions altogether this year, and none in the months of February, March and May.
Of the 31 transactions in the past year, profitability analysis could not be done for seven because caveats, which include information on purchase prices, were not lodged for the units. Profitability is calculated by subtracting purchase prices from selling prices. Of the remaining 24 transactions, 10 resold at a loss.
Among the loss-making transactions, four were units at The Berth, the debut project at the Cove which was launched in 2004 and completed in 2006. Three units made losses at The Oceanfront, two at The Coast, and one at The Azure.
Two in particular made seven-digit losses. A 2,892sqft unit at The Oceanfront sold for $5.65 million ($1,895psf) in November last year, after it was purchased in April 2008 for $7.2 million ($2,415psf) - a $1.55 million loss.
Another 2,820sqft unit at The Coast sold for $4.8 million ($1,702sqft) in January this year, two years after it was purchased at $6 million ($2,128psf). This was a $1.2 million loss.
Buyer who bought units at $2,100psf and above appear to have "overpaid". Those who profited from their resale deals mostly bought in at lower psf prices; a handful even got their units at $800, $900-plus psf back in 2006.
Meanwhile, several Sentosa Cove units are up for sale at auction houses here. A 2,777sqft unit  at Turquoise condo, put up for sale by a lender at a Colliers' auction this week, yield no bids, despite having reduced its opening price to $4 million from its previous $5 million.
Two Sentosa homes are up for auction by DTZ, both by lenders, one at Turquoise and another at Marina Collection. Another four are for sale by private treaty (akin to private negotiations) by JLL - two at Turquoise and two at Marina Collection.
Typically, banks repossess homes and put them up for auction as part of a repayment structure when delinquent mortgagors (borrowers) are unable to find buyers and dispose of their properties themselves.
Roaring sales in the waterfront enclaves back in 2006-2008 were hit by the financial crisis and had hardly recovered when the private housing market succumbed to successive rounds of cooling measures from 2009.
Sources: BT weekend

The wife and I wonder if the "leylonging" of private properties in Sentosa Cove will worsen given the continual slowdown in the luxury market, as foreign buying interests continue to wane in view of the cooling measures and tighter immigration policies. As most of the Sentosa homes are typically bought for investment rather than own occupation, if one is persistently stuck in a "cannot rent, cannot sell" situation, the only option is to liquidate - even if it means at a loss.

But a loss of $1+ million will definitely cause some sleepless nights, even if one can afford it...
Our related posts on Sentosa Cove:

Friday, June 27, 2014

Slower than expected take-up @The Crest

The Crest - a new condominium along Prince Charles Crescent - has garnered options for about 30 units at a preview during last weekend. The project is developed by a consortium led by Wing Tai.

Only one tower has been released, comprising around 130 units.

The average price for the 99-year leasehold project in District 10 is believed to be around $1,750 - 1,800psf. However, this is before the reimbursement of up to7% for ABSD, which will be made upon buyers showing proof of the ABSD payment.

The Crest is located near Jervois Road and the Chatsworth Park Good Class Bungalow Area. It comprises 469 units offering one- to five-bedroom configurations. Developed signed by Japanese architect Toyo Ito, the project consists of three 23-storey tower blocks and four low-rise blocks (each of five storeys high). It is situated about 450 metres from Redhill MRT station.

Units at The Crest is supposedly at least 15 - 20% larger than the current market norm. One bedrooms average around 650sqft, while the two bedrooms are around 800 - 900sqft. These compared to 440 – 540sqft (1-bedder) and 580 - 700sqft (two-bedders) in most other projects.

The sales results of The Crest contrasts sharply with that of Commonwealth Towers - a 99-year project next to Queenstown MRT Station - which sold 175 units on its first day of sales on May 1.

The lacklustre sale follows in the wake of Trilive, a 220- unit freehold condo project by Roxy-Pacific Holdings in the Kovan area - which sold only about 30 of the 80 units since sales began last Friday, at an average price of $1,550psf (after early-bird discounts).

Some market watchers have attributed the difference in sales performance between The Crest and Commonwealth Towers to the bigger lump sum quantum of the former due to its units being larger. And others can even claimed that potential buyers may be distracted by the World Cup. But the wife and I cannot help but wonder if the slow sales at recent launches is just another sign of the “new normal” in the current stuttering market.

Another point worth noting is that the site in which The Crest resides was bought at $960.28psf ppr in September 2012. However, a site next door to it was sold at $820.65psf ppr to UOL-Kheng Leong in April this year. So how the later prices their upcoming development will have a direct impact on pricing at The Crest.

Maybe Wing Tai will need to do a “Panorama” to move more units..?


Wednesday, June 25, 2014

Iskandar - Still a good buy now?

Red speckles of danger have surfaced in Malaysia's hot zone Iskandar on the back of frenzied building by gungho developers from China, stirring some agitation over the sustainability of what was once a buoyant property scene in Malaysia's southern growth corridor. Amid a housing slump back at home, China's real estate giants with great financial muscle and aptitude to finish projects in record time, are set to flood the Iskandar area with huge supply of homes.
If anything, the plans are lofty; from a sweeping media blitz in Malaysia and Singapore to trumpet their project launches, to reclaiming large swathes of land to raise a man-made island on the Johor strait, and building a gobsmacking 15 towers of 35-storey apartments under a single project.
But the timing is starkly inopportune as Iskandar's property sector is in consolidation mode after ripping through record transaction volumes last year of RM30 billion (S$11.6 billion), up by a stomping 80% from a year earlier.
Pounding further on that soft patch is a string of property curbs, particularly for foreigners, this year that turned bullish foreign buyers of properties there - the majority of whom are Singaporeans - a tad weary. The signs are acutely evident. Brisk sales for new property launches that made developers gleeful are faltering. Nowhere is that clearer than the case of Malaysian firm UEM Sunrise's luxurious 34-storey block Almas Suites in Puteri Harbour, launched last December and priced on the conservative end.
The project has so far drawn anaemic bookings of under 10%, indeed somewhat heart-breaking for the developer who only a year earlier was euphoric that its high-end project, Teega, in the same area, was almost fully snapped up within the very first month that it was launched.
But now Iskandar, which last year turned Johor into Malaysia's sweetest property spot, outdoing Klang Valley and Penang with an over 20% rise in property prices, faces another test - can it keep steady amid the mammoth projects that threaten to smoother its space?

Source: excerpts from a BT report

The above report has somewhat affirmed our concerns about putting money in Iskandar. There has been much marketing hype over the past 2 years (at least) about the attractiveness of owning apartments/houses in Iskandar. Prices are generally a fraction of what one will typically need to pay for similar units in Singapore. And given the close proximity, Singaporeans can actually opt to live in Iskandar and drive across the causeway to work in Singapore. The high-speed rail linking Iskandar to Singapore, targeted to be ready by year 2020, will further increase the convenience of commute.

And with the rapid development of the region, many of those who had invested in Iskandar properties earlier on had supposedly made decent money from capital appreciation.
That is one version of the story.

The other version points to the fact that those who had actually bought residential properties in Iskandar are only sitting on "paper gains". With new residential project launches continue to flood the market, supply already seemed to have outstripped demand. So the wife and I understand that it is a real tough sell in the resale market.

And unlike Singapore where land is scarce (in comparison, the whole Iskandar region is about 3 times the size of Singapore) and developers generally disciplined, we wonder if  developers (especially the marauding Chinese) will start falling over themselves to drop prices just to move units in Iskandar. If this happens, existing owners/investors may soon find that even their "paper gains" will evaporate...

If any of our readers have experiences with Iskandar properties that you like to share, the wife and I will be most interested to hear them.

Monday, June 23, 2014

TDSR one year on...

The Total Debt Servicing Ratio (TDSR) was introduced in June 2013 to ensure financial prudence among borrowers and strengthen credit underwriting practices among banks. The ratio determines how much an individual can borrow from the banks.

Under it, total monthly debt payments including home and car loans cannot exceed 60% of the property buyers' income. These debt payments are wide-ranging and can include home and car loans, study loan, and even credit card debts.

In the private residential market, the impact of the TDSR on sales volume quickly became apparent. There were 482 new units bought in July 2013, a drop of 73.3% compared to 1,806 unit in June 2013.
In total, 9,115 new homes were bought since the TDSR was implemented - that's half the amount bought in a year-on-year comparison from Jul 2012 to May 2013.

Analysts say the suburban homes were the hardest hit. Numbers compiled by Knight Frank Singapore showed that 63% fewer new homes in the suburbs were bought in the second half of 2013, compared to the first half of the year.

"The TDSR basically impacts on mortgage loan eligibility and affordability of private homes and the mass market segment typically caters to upgraders and middle-income home buyers," explained Knight Frank's Director of Consultancy and Research, Ms. Alice Tan.

She added that these buyers might have ended up forgoing their purchases when their loan requests were rejected.

"I think the strong performance of the Outside Central Region was one of the reasons why the TDSR was introduced. The Core Central Region was already affected by Additional Buyers' Stamp Duty, where we saw a lot of foreigners opting out, because they have to pay 10 to 15% in terms of stamp duties," said Mr. Desmond Sim, Head of CBRE Research in Singapore.

As for prices, the effect of TDSR was seen later that year. The Urban Redevelopment Authority's residential property price index slipped 0.9% in the fourth quarter of 2013, the first decline in almost two years.

Prices dipped again in the next quarter - this time by 1.3%, making it the largest drop since the second quarter of 2009, when prices fell by 4.7%.

In boosting sales, some developers have turned to cutting prices. One of the latest to join the fray is the Panorama condominium in Ang Mo Kio, which re-launched in May at a median price of about $1,241psf.

That is about 8% lower than the median price when it was first launched in January this year. But property watchers say the discounts are typically for bigger or "less prime" units, and developers are unlikely to lower prices across their projects.

"Developers also have limited room to adjust their prices due to the high land prices they have committed to, earlier on," said Ms. Tan. This is especially so for those who bought their land two to three years back.

Developers may also be creating smaller units, to balance between offering palatable prices for buyers, and maintaining their profit margins. According to figures from CBRE, the median size of units in the suburbs declined from 753sqft in the third quarter of 2013, to 732sqft in the first quarter of this year.

The impact of the TDSR was also felt in the private residential resale market. CBRE's numbers showed that sales volume in the secondary market dropped by 50% in the first half of this year, compared to the same period last year.

"Fortunately enough, mortgage rates still remain relatively low, so home owners, or investors, can still put their units into the leasing pool," said Mr. Sim. "But at the same time, low mortgage rates have not pressured them into putting the units back onto the market for sale."

But it may be increasingly difficult to find tenants, as the Government tightens its foreign labor controls and more new homes enter the market in the coming months.

The Urban Redevelopment Authority estimates that a total of 18,350 units will be completed this year, while another 21,738 units, excluding executive condominiums, are expected to be completed in 2015.

Source: CNA
Given the seemingly effectiveness of TDSR, is there a case now for our Government to review the ABSD and SSD?

Thursday, June 19, 2014

What constitute a "good location" buy?

Someone asked us what we consider as “good locations” when buying property in Singapore.
Below is our 

  1. Districts 9, 10 & possibly 11 -   Although prices are kinda stagnant right now but properties in these districts tend to maintain their values better especially during the down cycle.
  1. Within 1-km of popular primary schools –   This is a tried and tested formula, especially for those who do not have any affiliation to allow you to register within Phases 1 to 2B. Although this is no guarantee of admission, your child will at least stand a chance to ballot for any vacancies left after the initial phases. And for those who are buying for investment purposes, properties within 1-km of popular primary schools tend to be an easier let (and possibly at higher rentals too).   And yes, we will put "proximity to International Schools" under this category as well, in view of the better rental potential.  
  1. Next to MRT stations –   Whether you are talking about Newton or Woodlands, properties within close proximity of MRT stations are generally more sought after, even from buyers who actually own cars!
  1. Proximity to amenities –   We are talking about food, supermarkets and even enrichment centres. Being the food nation that we are, imagine having a selection of food choices within your doorsteps (ala Upper Thomson area, and we said this with vested interests) every time you are hungry but don’t feel like cooking. Or imagine all your children’s enrichment needs are available within walking distance from your home, which means your helper can possibly walk them to classes rather than you having to drive them all over the place.
  1. Near to main roads –   Although one may not necessary wish to stay next to a busy road, having to walk a fair distance just to get to the main road may also be less than ideal. The wife and I used to stay at Clementi Park for awhile and while we love the space of our apartment and estate, we find it a tad far from the main road. Yes we both drive and there is a shuttle bus service for those who don’t, but it is still quite a hassle especially if you have to depend on the shuttle bus. And should you decide to walk the distance out to the main road, you will probably be drenched (either with sweat or rain) by the time you get there.
The above are just our humble opinion as always so we can all agree to disagree (if necessary). And please feel free to add to our list!


Wednesday, June 18, 2014

London property: So is sub-sale allowed?

When the wife and I posted our "So you are looking to buy an UK property" piece on June 7, we created some confusion over the issue of sub-sale, i.e. selling the property to another party before completion. We had said that sub-sale is prohibited but it turned out that one of our readers had actually bought a London property thru a sub-sale.

We finally managed to retrieve the legal documents we had received from our UK solicitors for the Camden property that we used to own. On closer inspection, we realized that we were wrong (yes, we do admit our mistakes) BUT maybe not entirely so.

In the Singapore context when a sub-sale is concluded, all rights and obligations of the property is transferred to the new buyer. So in the event that the new buyer defaults, the liability falls solely on the new buyer. In another words, whatever happens after the sub-sale of your property is concluded has nothing to do with you.
But in the case of a London property, you can only assign the contract to a new buyer when you "sub-sale" your property. You remain liable even if the sub-sale process is concluded, i.e. should the new buyer defaults, the developer has legal rights to go after you to complete the purchase of the said property. In addition, the developer will continue to deal only with you (and not the new owner). So you effectively become the go-between of the developer and the new owner until legal completion.
In summary, one can actually do a sub-sale on a London property. But the developer will still go after the ORIGINAL buyer should the deal goes belly-up subsequently.
And the wife and I will definitely be more careful with our facts going forward....

Tuesday, June 17, 2014

London housing market running out of steam?

Bloomberg has reported that asking prices for London homes fell from a record this month in a sign that buyer concern about overpaying is prompting them to step back from the market. This is according to Rightmove Plc, a property website operator.

Values in London slipped 0.5% to an average of GBP589,77, the first decline this year. Prices in Kensington and Chelsea, Britain's most expensive district, fell 0.3% to GPB2.38 million. Across the UK, they rose 0.1%, a less-than-average increase for this time of year.

Only a third of London's 32 boroughs saw asking prices rise this month. The largest increase was in Westminister, the second-most expensive district, where values climbed 3.5%. Prices in Haringey, north London, plunged 4.8%.

UK home prices have surged in the past year amid near record-low borrowing costs and a strengthening economic recovery. In London, values got an extra boost from cash-rich foreign investors seeking a haven. Rightmove's report showed that UK house prices have risen 7.7% in the past year, with London up 14.5%.

Rightmove's director has cited this month's price decline in London as "an example to the rest of the country of what happens when affordability and common sense get stretched too far". But if our Singapore experience is anything to go by, one swallow does not a summer make. Or in the property sense, one month of price decline does not a cooling London market make. So we shall see...

Monday, June 16, 2014

May 2014 private home sales: A case of "咸鱼翻生“...?

It was reported in the local media today that the private residential property market has sprang back to life in May after months of remaining in the doldrums, with developers’ sales surging 96% as buyers snapped up units at the slew of new launches last month.

Developers sold 1,470 new private homes last month, nearly doubling the 749 units that they moved in April, latest data by the Urban Redevelopment Authority (URA) showed on Monday (June 16).

Including executive condominiums (ECs), new developer sales rose to 1,528 units in May from 797 units in April.

The improved sales volume came as developers launched 1,790 new units into the market in May, nearly three times more than the 600 homes recorded in the previous month.

Two projects by City Developments topped the best-selling list for the month. Coco Palms at Pasir Ris Grove moved 590 of the 600 condominium units launched at a median price of $1,018psf, while Commonwealth Towers at Commonwealth Avenue sold 275 of 400 homes at $1,626 psf.

Besides the successes of new launches, May also saw another re-launch that did well: Wheelock Properties’ The Panorama at Ang Mo Kio sold 100 of the 126 units offered last month at a median of $1,241 psf.

咸鱼翻生:  This is a Cantonese idiom that literally translate as "salted fish coming back to life". The idiom is used to describe a hopeless situation that suddenly turns hopeful.

Wednesday, June 11, 2014

Art on the Park - Melbourne

The wife and I are currently vacationing in Australia and have spent the past 2 days in Melbourne.

We happened to chance upon the advertising below for Art on the Park, a completed project that is located next to our hotel at Williams Street. Williams Street is just a couple of blocks away from Melbourne CBD and there is a beautiful park (Flagstaff Gardens) just across from Art on the Park. The famous Queen Victoria Market is a mere 5 minutes' walk away.

The sales office was closed but a search over the internet revealed that the current asking price for 1-bedroom apartment of about 545sqft is around A$456,000. So the gross rental yield is just a tad over 4.3%.

Those interested can access information about Art on the Park by clicking on the link below:

Saturday, June 7, 2014

So you are looking to buy an UK property...

The wife and I first got into the UK property scene back in July 2012, in a rather funny sort of way.
We recalled having some free time on our hands that fine Sunday afternoon, so we decided to check out an “Open House” for a residential project located near Bond Street that Colliers was marketing. For those of you who are not too familiar with what’s where in London, Bond Street is probably akin to our Orchard Road.
When we got to the venue, we realized that the project was fully sold out. To be fair, it was a rather small development of less than 20 units. And because of the location and price quantum, it was quite an easy sell. But being the enterprising marketing person that she is, the Collier lady started “selling” us another development that was located in the Camden area. Camden is a tad further out from London City Centre (but still within Zone 1 – which we will talk a bit more about later) and is a quaint little township famous for its canals and weekend markets. It also houses quite a large Asian community.
Between us, the wife was the de facto “expert” when comes to London, as she had spent some years studying there. She had always liked the Camden area, as it is located away from the hustle and bustle of London city and yet within convenient commute to the city, both by bus and tube (aka MRT).
After some deliberation (like for about 15 minutes), the wife and I decided to put money on a 2-bedroom unit of about 700sqft that faced the canal. The payment scheme was 10% down with balance payment due upon legal completion. The expected gross rental yield was around 5%. The project has subsequently TOP in January of this year and we sold it within 2 months after finding a buyer.

So what are the Pros and Cons of investing in a London property? Here are our thoughts:


1.       London (and for the most part of UK) is primarily a rental market. The average Londoner has supposedly been priced out of the property market so they mostly rent. As such, there is a large captive market for residential rentals.

2.       Housing prices in London are rising at its fastest rate in almost 4 years. This is largely attributed to a huge influx of foreign buyers over the past 2 – 3 years.

3.       There is no ABSD or SSD to content with when buying/selling a London property. Also, no capital gains tax is currently applicable for non-residents making gains from UK properties. However we understand that the UK government is preparing to introduce such a tax by April 2015.  

1.       Price rise is showing signs of slowing, with some market watchers believing that prices are already plateauing. This is largely due to more and more properties coming onto the market in the last 1 - 2 years.

2.       Rental yield has suffered considerably as properties in London becomes more and more expensive, due to the strong demand from foreign buyers in recent years.

3.       Rental income for non-resident landlords are taxable at a rate of 20%. However, certain recognized deductions (e.g. interest portion of mortgage payment) are allowed.

So what have the wife and I learnt from our first UK property venture? Below are what we deemed as the "lesser known trivia" from our Camden experience:

Trivia #1:           Location matters, not just because of rental yields or resale value.
Recall when we talk about Camden being in Zone 1? The zones are actually derived from the London transport maps – these consist of 6 main concentric rings around London. Zone 1 and 2 are in Central London while zones 6 – 9 covers the outer edge of the Capital.  What this means is that areas in Zone 1 are the closest to London City Centre. It also means that properties in Zone 1 are typically the most expensive in London, as they are most sought after by both occupants and investors.

So when someone is trying to sell you a property in London, where (or specifically, which zone) is the property located is an important consideration. Putting it in Singapore context, you could be comparing a property in say, River Valley to one that is located in Woodlands!

While talking to our bankers for our mortgage loan, we also discovered that the loan amount that the bank is prepared to extend may differ depending on which zone the project is located – we were told that for zone 1, our bank can lend up to 80% of the purchase price, but this drop to 70% for the other zones.

Trivia #2:           Resale is prohibited until legal completion
This is apparently a standard rule all over the UK. So investors looking to "flip" his property ((i.e. selling before legal completion) will be solely disappointed. It also mean that you better get that mortgage loan in order prior to legal completion, as you will definitely have to pay first before you can sell later. The wife and I only learned about this restriction after we have purchased the property.

(* Apparently there is some discrepancy between what we understand and what one of our reader was able to do. The wife and I are currently on vacation and will sort this one out when we return next week. *)

Trivia #3:           Review the Contract of Sales carefully before signing and returning
The Contract of Sales is sent by the UK lawyer handling the conveyancing to you. You are supposed to sign and return the copy back to them. The process is called exchange of contracts between Seller and Buyer.

For our Camden property, the wife and I were told that the down-payment was 10% and the same was also indicated in our Reservation Form when we put down the deposit. But the developer (in view of better than expected sales), has decided to charge a 15% down-payment subsequently. And our contract had stated that an additional 5% was payable 6 months after the signing of the contract. We refused to sign the contract and managed to argue our case successfully for the deletion of the "additional 5%" clause.

Trivia #4:           Go with a Managing Agent
At every foreign property launches in Singapore (for UK property at least), there is always representatives from the Management Company that the developer has appointed for the said project present. For a fee of about 10 - 15% of the monthly rental, these managing agent will help you "manage" the property that you have purchased, right from assisting you with the legal completion process (e.g. collection of keys and checking for defects), to finding you a tenant and purchasing the required furniture (i.e. if you are renting out the property) and even help you with refurbishment of the unit in between old and new tenants. Last but not least, the managing agent will also help compute and advise you on the taxes applicable on your property.

Appointing a managing agent will save you the hassle of doing all the above by yourself. This is especially if you do not intend to travel to manage your property at any regular interval of time.

Trivia #5:           Not all conveyance lawyer are built equal
This may also apply in Singapore but we have always worked with the same lawyer that we have gotten to know (and comfortable with) whenever we transact a property in Singapore. But when you buy a foreign property, you will probably go along with whatever solicitor that the developer appoint (since they are paying the lawyers' fee anyway).

Our experience with the UK law firm that was handling the coneyancing work for Camden has leave a lot to be desired. Maybe it was just our luck, but it has taught us to take ownership of the process else we could have been left hanging. So if you know that something is supposed to happen at that point in time but nothing seems to be happening, be proactive and contact the person (usually a legal clerk of sorts) that is handling your case. Do not simply sit and wait for things to happen. If we had just waited, we might have missed the completion dateline on the sale of our Camden property!

Trivia #6:           Opening a UK bank account
This is necessary when you want your tenant to deposit their monthly rental, or in the event that you sell your property. Some banks have branches both in Singapore and UK, which will enable you to open a Sterling Pound account in UK and have whatever monies that are due to you deposited into your local UK account. After which, you can transfer the money from UK to Singapore via intra-bank transfer at your own leisure. The advantage of this, as compared to say TT Remittance, is that the transfer is almost immediate and there is no charge if you do it over the internet.  

HOWEVER, the wife and I have discovered that opening an UK account and to have this linked with your Singapore one is not as simple a task as one might assume. The phone verification process for UK account opening is a real pain and if you think that is bad, trying to link both the UK and Singapore accounts so that you can transfer money over the internet can make you wanna tear your hair out! Having said that, the transfer process is a breeze once everything is set up properly. So it will be best to set this up early and not try to do so like a week before you need the UK account.

So there you have it. Hope the above is of some help to those who are thinking of investing in a UK property. And if anyone has more experience or advice to share, the wife and I will be most delighted to hear from you!


Wednesday, June 4, 2014

Thinking about venturing overseas..?

Quite a fair bit of sound-bites have been generated lately on the supposedly huge amount of money that Singaporeans are putting into overseas property in the past 2 years. According to the Sunday Times, an estimated $2 billion was invested during last year alone. This has probably gotten the Government a tad flustered, as alarm bells have been ringing from all over. The Monetary Authority of Singapore (MAS) was first to issue a warning to potential buyers to take note of the risks associated with overseas property purchase. The Council of Estate Agencies has also recently got into the act by publishing an online guide to highlight the main pitfalls.
The risks associated with overseas property purchase can indeed be much higher. This is especially if one is unfamiliar with that market. However, with the slew of cooling measures introduced over the past few years, it has become exceedingly difficult for Singaporeans to buy, much less make any decent money out of, local property investments. So despite all the caution about "what those glitzy adverts and fancy road-shows promised may not be exactly what you get", the myriad of miscellaneous costs and tax considerations, the interest and exchange rate risks associated with foreign property purchases... yadda yadda yadda, the fact of the matter is: with liquidity still running high amongst many Singaporean investors, where else do you want them to put their money except overseas? This is especially when for a fraction of the cost that you need to pay in Singapore, one can easily purchase an apartment in Kuala Lumpur, Bangkok, Tokyo or even London... with usually a 5 - 10% down payment and balance upon completion!
So even if one has to contend with capital gain tax on profit (e.g. Malaysia & Hong Kong),  restrictions on ownership (e.g. foreigners are limited to buy only 49% of the units in a given project in Thailand), restriction on resale (e.g. You can only resell your property to locals in Australia) and restriction on use (e.g. student housing in the UK), the lure of overseas property investments will persist as long as local investments are out of reach to the average buyer. And it is no wonder that newspaper adverts about new overseas project launches have become the norm rather than exception these days, while developers of such projects are falling over themselves to set up sales offices in Singapore.
But as per any investment, caveat emptor applies so one must really do the necessary homework before ploughing hard-earned money into an overseas property. Following are just a subset of considerations that one needs to think through:

-          Can you reasonably afford to stay "invested" for a sustained period? Although the bulk of the payment for an overseas property is normally due on completion (typically 1 - 2 years after the initial down-payment), but if that 10% down is money that you need to put food on the table, then you probably shouldn't be looking to buy. This may sound elementary to most but you be surprised how many of us do not think enough about this.

-          Assuming you need to take a bank loan for the investment, have you check to ensure that you are eligible for that loan? Remember that TDSR applies even for overseas property purchase, if you are borrowing from banks in Singapore.

-          Have you taken into consideration how the mortgage rate will affect your yield and more importantly, your ability to meet the monthly repayment, on that overseas property? The interest rates on foreign property loans are typically much higher - we are talking about almost 3% versus the 1-point-something % for local property loans.

-          Do you take the mortgage loan in Singapore $ or in the foreign currency of the country of purchase? This will require you to take an opinion on how the exchange rate of the said foreign currency will fluctuate in the short to medium term.
The wife and I have been dabbling a little in the overseas property market since 2007. We bought our first property in New Zealand but the developer went bust about a year later (without completing the project, of course). However, our deposit was actually placed in an escrow account with a New Zealander law firm (which we were aware) and was earning like 5% p.a. interest (which we weren't aware). And when our initial down-payment was refunded, the exchange rate of New Zealand dollar at that point in time had appreciated substantially. So we ended up making a tidy sum from the misadventure but the wife and I must admit that we were extremely lucky that time. The episode further highlighted some of the unforeseen risks that one needs to prepare to undertake, should you decide to make that foreign property investments.
Further to our New Zealand exploit, we have subsequently bought and sold another UK property, and have recently put our money into another residential property in Scotland (Yes MAS, we hear you!). And if anyone is thinking about investing in the UK, the wife and I will share some of our experiences thus far with you in our next post.

Monday, June 2, 2014

Just a quick shout-out to our blog "followers"...

How time flies! It’s been almost 7 months since our last post. And if indeed there are still a few of you out there, the wife and I hope that you are keeping well and enjoying the ride on this somewhat bumpy property train.
The wife and I have not been following the property market as religiously as before - we attribute this to a combination of our busier schedules and laziness, probably more the later.
During our hiatus, it looks like the TDSR (Total Debt Service Ratio) has put quite a dent in the property market. Price of new private residential properties has fallen in the last 2 quarters, albeit by only about 1% and not the 15 - 20% (yet) that some of us are hoping for. Private resale prices have also supposedly fallen for the past 9 consecutive months, as sellers cut prices to keep pace with discounts for new homes. And developers are becoming more cautious when bidding for new land sites. 
Do all these mean that the long-overdue price correction is finally happening? Someone had posted on our message board about his friend buying a resale unit at 35% off the current market price, while another had said that buyers are offering 20% less than market price. So it does sound like doom and gloom for sellers these days. However, the wife and I feel that despite the lower demand and softening prices, a substantial price drop (by this, we mean price dropping by more than 20%) over the course of the next 6 months is unlikely. While there will always be cases of “fire sale” in a bearish market, we believe that many sellers and buyers still possess the means to hold out for the time being. And as long as the current disparity between buying and selling prices persist, prices are unlikely to see a major correction. Having said that, the wife and I reckon that 2015 will be interesting, when another 50 or so new residential projects will supposedly come on-stream.  
The above is our humble opinion as always. So how has your property watching/buying experience been these past months?