Asian, Emerging Markets and Singapore get burnt

The MadScientist’s Journal

This is dedicated to the four markets that have been beaten and burnt, all of which hit their downside targets this past week. So what would be in store for these markets, more downside risks and pain, or an opportunistic technical rebound from extreme oversold conditions? Let us see…

FXI, the China ETF, had been very volatile in recent months and having failed the weekly 55EMA, it struggled to sustain the breakdown out of a range. Alas, this week, it was battered into a previously marked downside target zone, and is likely to reach the next downside target, another -5% lower.

The Nifty50 ETF, INDY, has had a terrible four weeks of late, and resting just above a support (formed by a previous Gap & Run). Slightly oversold, if the support can hold, it would be a possible consolidation for INDY. Else, a breakdown of the support line would see…

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REC weekly #0118: En-bloc owners will make the Worst Decision of their lifes…

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Firstly, to all en-bloc owners whose apartment(s) had completed the en-bloc process before the latest 5th July cooling measures,


They struck a windfall that many envy, before the en-bloc market slowed down (or “crashed”).

There are currently more than 5000 en-bloc owners, and they will be making the worst decision of their lives… IF


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Getting en-bloc is like striking the lottery (think TOTO or 4D) or hitting a multi-bagger stock investment. Often, en-bloc owners get about double for their unit compared to what they could get if they sold on the open market. For example, Florence Regency was selling for around $900k in 2017 before the successful en-bloc and each owner received about $1.8mil. That’s a good 100% extra profit. With that much cash on hand, there is a possibility to over-commit on their next housing plan. 

‘Easy come easy go’ as people say, happens. I’m sure you have heard about people selling 2 condos to buy that dream Semi-detached house, only to sell it 5 years later due to having a serious health issue or due to loss of jobs during a financial crisis. This was exactly what happened to one of my client’s family during the 2003 SARS period. Exercising financial prudence and not being over leveraged can help prevent such events from happening to you. 

En-bloc owners who decide to buy a property that cost much more than the money they received will be faced with risk from over leveraging. Often, parents also buy properties for their children with the proceeds from the en-bloc. It is crucial to exercise financial prudence in those purchases as the debt obligation, if any, would rest on their children who are most likely young adults between 24-30 years old.

We will be reviewing a real case study that happened in after the Gigantic 2007 en-bloc wave in another article. Stay tuned for that. 


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Selecting the right property is a whole topic by itself, and particularly a topic that I am passionate about and do research on a daily basis. Property investment today is a different ball game from the past, where you could close yours eyes, buy a property and probably make a fortune later (remember that $300k freehold landed). We need to understand that those days are over. If you want your property to at least appreciate with 2.5% inflation, property selection is more than just buying beside amenities like a MRT station,etc.

Mr Tam, a seller I served in 2013 whom needed to sell off his condo urgently, asked me why his brand new condo, Foresque Residences did not see capital gains while his friend who bought a unit at Waterfront Waves during the same period saw their property appreciate by more than 15%. This proves that 2 properties bought at the same time in different location can have totally different outcomes. Buying a property that performs badly can be detrimental to a property owner if there is a need to urgently sell off the unit.

As most en-bloc owners today are at or near retirement age, the “last” home they buy will be VERY important. At this stage in life, the search for an investment grade home diminishes, en-bloc owners will want a house that they love and comfortably retire in. Unless these en-bloc owners do not intend to pass the property down to the next generation, then, the investment value of the property will not be a priority. The key factor to keep in mind is, when selecting a property, one needs to consider who will be the buyers buying their unit when they need to sell the property years or decades later because what you like may not be what someone else likes. If you purchased a property that may have low demand in the future, you or your children will find it either difficult to sell off your property or the property will not see much price appreciation (if any). This consideration is very often overlooked by both buyers, as well as their advising realtors.

Over the last 18 months, I have met and advised more than 30 property buyers at their retirement age. Out of these property buyers, majority said they wished that their property still would appreciate in value over the long term so that they can pass on a valuable property to their children. Therefore, depending on one’s property purchase goals, property selection is critical.


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The above two points are related to this. Often, armed with suitcases of cash (sales proceeds) en-bloc owners are eager to look for a replacement property because en-bloc owners usually need to move out of their home within 3-6 months notice. They may not be patient enough while looking for a good house, and sometimes succumb to time pressure if they are not able to find that dream house. In 2019, there will be a tsunami of new launches from both Government land sales (GLS) and En-bloc redevelopment.

I have heard and personally know some elderly who bought houses in a rush only to regret 6 months later. In today’s market, a property is almost illiquid in the first few years due to Sellers’ stamp duty payable, therefore it is extremely important to take time to make a informed decision especially if this is going to be one’s final home (I assume that many en-bloc owners in this wave are retirees).


The largest en-bloc wave from 2005-2007 made many property owners wealthy and some not so wealthy. What en-bloc owners do with their proceeds from the en-bloc sale is crucial in determining their future wealth and retirement lifestyles.

Even before I became a broker, I am happy to have been able to assist my family, relatives and even family friends with re-investment suggestions that tremendously benefited them after they received their en-bloc sales proceeds. They bought a good property, diversified their wealth and are today living a comfortable lifestyle. Everyone is different, but if you want to retiree happily, live in a good property that you look forward to go back to after every long holiday, your children and your grand children look forward to gather at every weekend, then taking care of your financial health after an en-bloc is very important. When your financial health takes care of itself, you can focus on your physical health and spending quality time with your loved ones, because we all know – life is short.

Don’t allow yourself or people you care that had their property en-bloc make the worst decision of their life! Share this article with them so that more people are aware. As long as one person benefitted from this article, this article has reached its objective.

Once a development gets en-bloc, there will be people who come by with ideas for property, insurance, investments, etc, all targeting en-bloc owners. Instead of getting swept off with their promises, it is crucial to take time to reconsider and seek third party opinions, and do an overall financial health check and risk scenario assessment. Then revisit these proposals and see if these are suitable.

I hope that Part I of this en-bloc mini-series is informational for you. If you like to find out what you can do with your en-bloc sales proceeds whether or not you already have a house to stay, or have other investments, stay tuned for PART II of the mini-series about “What every en-bloc owner MUST know about the property market”. Click here to read!



The #1 most overlooked benefit of owning a private property in Singapore.

In a recently report by Credit Suisse, titled “HDB flats to be less attractive as buyers look for better store of value“, it was mentioned that home buyers will turn to private residential properties for store value. This has been a topic of discussion with numerous clients lately, in my opinion, this fact is debatable due to objectives of buying the property.

Over the last decade, I have always advocate my friends and clients that if they can afford to buy a private residential property (property selection is also critical), they should seriously consider. Many home buyers may overlook the benefits of having the ability to get a equity loan.

Let’s say you bought a HDB flat at Bidadari for $500,000 and after staying for 10 years, the flat is now valued at $700,000. Simply put (not including interest & transaction fees) you would have profit $200,000. And unexpectedly you need a large sum of money. Assuming this $200,000 would help, you will need to sell your flat in order to cash out your profits as banks currently do not give equity loans for HDB flats.

Image source: HDB

If you had bought a private residential property at Potong Pasir for $1,100,000 and after staying for 10 years, the flat value is now valued at $1,300,000. Similar to the HDB example, you have a $200,000 profit. As you own a private condo, you have the ability to cash out that profit (subject to bank approval). Assuming the bank approve your equity loan, you would have cash out ~$150,000 for your emergency use.

Image source: UOL-The Tre Ver

Now I am not saying that you must or will take an equity loan, my opinion is that having this flexibility and option may give you a lifeline. The best case scenario is setting aside your own emergency fund that is large enough.

In a recent article on The Business Times titled “Cash strapped Americans leverage their homes to pay bills“, it is mentioned that 24 million Americans had borrowed against their homes (equity loan) in order to repay their bills, send their kids to good universities and even for home improvement. In a country like Singapore where property is our largest asset, it is important to know our options when choosing to buy a home. The ability to take an equity loan depends on several factors like your earning power and price appreciation of your property.

In the next series of articles, I will be sharing how you can improve the chance of buying a property that will see price appreciation. Stay tuned! If you would like to find out more about equity loan you can read more here.

Disclaimer: As always please read the disclaimer provided in this blog.

The 20 year wait for Jurong Lake District (JLD), worth the wait?

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Property investors are often attracted to the government’s masterplan for growth areas. However, it is important to analyze and identify whether a growth area is worth investing in. Jurong lake district is a growth area that attracted many property investors over the past 3 years. Recently, during a lunch with one of my property investors, I was asked for my opinion about the Jurong Lake District. From this conversation, I decided to share pertinent points herein the article, which I hope will benefit my readers.

Firstly, let us look at why people invest in Jurong Lake District (JLD), below are some cited reasons:

  • JLD will be transformed into Singapore’s Second CBD
  • JLD will have new Parks and transform into Lifestyle destination
  • JLD has close proximity to the Tuas Mega Port
  • Invest early – First mover advantage

Some people had bought the area due to High Speed Rail (HSR), barring any u-turn of decision by Malaysia, HSR will be delayed or be cancelled.


Source: Singapore archives, URA (

The following abstract is extracted from the Singapore archive from a speech by Minister Wong during the JLD Masterplan exhibition in 2017. He later commented in 2018 that JLD will be unchanged regardless of HSR outcome, after Malaysia announced that the HSR would potentially be delayed or even cancelled (see image below)


Source: Straits Times- Jul 9 2018

I would agree with what Minister Wong said, that JLD will be unchanged regardless of the HSR outcome. JLD will continue to be part of Singapore’s growth plan and part of Singapore’s most important industrial park locations.

If you think that I am going to say that JLD is not worth to invest in due to not having the HSR, you would be disappointed. In order to analyze this investment, we first have to ask the following:

Question 1 : For investors who bought JLD in anticipation of capital gains from the realization of Jurong being the second CBD… how long would it really take to grow?

In my opinion, the Government will focus to grow our main CBD – Marina Bay, our FinTech and Blockchain hub. Reports have shown that many tech companies have offices in the CBD to attract talents, young millennial workforce and to foster a creative thinking environment. To add on, the government has slated JLD to be ready by 2040, which is a 20-year wait.

Question 2 : With Tuas Mega Port only fully operational by 2040, it is still a question what part Jurong Lake District will play.

In my opinion, Jurong has come a long way from being a swamp to a first world industrial park town. With the currently outlet malls like IMM and shopping malls like JEM and Westgate. However, if one is buying JLD due to the fact that it is near to Tuas Mega Port, and expect many companies to move to Jurong and therefore having more expats or workers wanting to rent properties in this vicinity, it will be wise to reconsider.

An investor would have to think about the type and quality of tenants who will rent in the JLD, the number of expats that will likely stay in the JLD area, and whether properties outside the JLD will offer more value investment. These tenants will only be flowing in closer towards year 2040.

In summary, it is too early to invest in properties in Jurong Lake District vicinity in 2018. The 22 year wait for JLD to become the 2nd CBD in 2040 would be an opportunity cost for most investors.

Without spending too much time to discuss about opportunity cost, just ask yourself how many property cycles you could see in 22 years? How much gains are you expecting from this 22 year wait? Are there other alternate investment choices? Are there other locations to consider for more immediate returns?

Investing in an asset at a location that would provide more immediate returns would be a better choice. If one would like to relook to invest in JLD, perhaps so after 2025 when there is more clarity. In the following articles, I will go through a case study on opportunity costs. Stay tuned.

Winners, Losers, Opportunities – How does the latest property cooling measures affect you?

The sudden Singapore property market cooling measures on 5th July 2018 had shocked the market as no one was expecting this measures. Many panicked causing a kneejerk reaction which caused developers to launch 3 projects on the very night these measures were announced, find out more about these measures in this article and how it affects you.

In any measure, there will be different impact on different groups of stakeholders. Inadvertently, there are winners, losers and opportunities created.

In this article, four main questions will be discussed.
  1. How does the cooling measures affect different groups of people?
  2. What is likely to happen to a few market segments?
  3. What are the side effects?
  4. Are there any winners?

For those who would like to read more about the cooling measures can do so at the appendix attached at the end. As analyst described the latest cooling measures on 5th July 2018 as a tough one, we look to decode the effects of these latest measures


1. How does the cooling measures affect the following groups of people: 

Home owners 

Going forward, home owners will require more cash/CPF for home owners to decouple and buy two properties going forward. With the new 75% LTV ratio instead of 80%, upgrades would need to top up an additional 5% (or $50,000 if the property is $1 million). With two properties and you would need to have $100,000 more in cash/CPF. This extra amount could have been used as an emergency fund. Henceforth, it will be more costly for families who intend to decouple; buy one property for stay and the another for investment. This also means that in order to own two properties, you now need to pay more and loan less, which essentially is more stable for the market. However, home owners who want to cash out their existing property investments, at a higher price, may now face challenges with home staging due to potential decreased affordability by some buyers.

First time home buyers (Singapore Citizen/SPR) 

First time home buyers or hdb upgraders are likely to benefit from the latest round of cooling measures if they have the extra 5% cash/CPF (LTV 80% drop to 75%). This is because sc or spr buying their first properties are not impacted by the increase of stamp duty. Property Developers may eventually start to offer some discounts to buyers if the demand start to taper. In line with the government’s intention to keep the property prices stable, home buyers will not have to face runaway home prices. First time buyers who do not have the extra 5% which is about $50k for a $1mil property. Will be priced out of the market. What this would do is to bring back demand to Resale HDBs and BTO Flats, which have a much lower quantum, and therefore require a much lower downpayment.

Second property investors (Singapore Citizen) 


For those buying a second property, with an existing loan, they would need to pay additional 12% Additional Buyer Stamp Duty (ABSD), and can only take a smaller loan of 45% LTV instead of 50% LTV. Consequently, they need to pay a total cash/CPF upfront of 71% (55+4+12) of cash and/CPF to purchase a second property (assuming that there is an outstanding loan), instead of upfront cash/CPF 61% (50+4+7). If there is no existing loan, then financing of up to 75% LTV is possible, and the upfront downpayment required will be cash/CPF 41% (25+4+12), instead of cash/cpf 31% (20+4+7) before the cooling measures were in place.

Third property investors (Singapore Citizen) & Second property investors (SPR) 




Singaporean Third property investors would only be able to take loan of 35% LTV (if they are taking a third property loan).  This means that the upfront cash/CPF  is now 84% (65+4+15). For Singapore Citizen third property owners but with a second property loan, or a Singapore PR buying 2nd property and taking 2nd property loan, they would require to have cash/CPF of 74% (55+4+15).  For those who are after the third property but taking first property loan, the upfront cash/CPF will be 44% (25+4+15). Clearly, largest impact of the cooling measure is on Singaporeans who intend to buy their third property.   



Foreigners will now need to pay an additional 5% ABSD, which is a total of 20%. In a case study where Foreigners were to buy their first property with the usual 60-70% loan, let us assume that they can take 70% loan, the total downpayment would be 54% (30+24). If  it was a $2 million property, the initial cash outlay required would be $1.08 million. The tax that they have to pay on a $2 million property has increased by $100,000. This inadvertently implies that only foreigners who have a real need to own a Singapore property will buy one out of necessity. Furthermore, those who are buying for investment may only consider as a form of portfolio diversification of funds and perhaps due to the stability of Singapore’s currency. Foreigners may consider investing in commercial offices or retail F&B shops as these are not affected by cooling measures.


Developers will face higher fixed cost with the additional 5% ABSD, which is required to be paid upfront (non-remittable). Developers have been facing rising costs from increased development charges, increased land cost and now the additional ABSD is essentially a further increase in land cost (acquisition costs). In normal circumstances, the Developers will transfer this cost to consumers (property buyers), but with the new cooling measures in place, it may be a challenge to transfer this costs to consumers. Therefore, Developers will have to look to reduce acquisition costs, and pay less for en bloc or land acquisitions in order to lower the launch prices. Hence, there will be a larger impact on the en bloc market which will be discussed in a later section. 

2. What is likely to happen to the markets?

Residential Rental Market – this segment is likely to remain stagnant, instead of downtrend. Some foreigners who intended to buy may decide that continuing to rent would be more economical, as they may not want to fork out the extra cash for stamp duty.

Private Residential Sales Market – this segment is likely to remain stagnant as well, and for some areas with lower demand, have a bias to the downside. Overall transaction volumes are expected to drop.

En bloc Market – this niche segment is expected to have lower prices due to the new developer’s additional 5% ABSD, added to the recently increased Buyer Stamp Duty (BSD) for properties above $1 million which affects developers having to pay 1% more tax (4% instead of 3% before). The total additional tax is about 6% (Absd 5% + 1%), subsequently increasing the developer’s fix cost by 6%. If they are unable to pass this extra cost to future buyers (due to cooling measures), they are more likely pay less for en bloc sites and land acquisitions. En bloc sales committees may need to consider a lower reserve price in order to attract Developers.

3. What are the side effects?

Property Developers/Agencies Shares – on the 6th of July 2018, we saw listed property developer stocks/shares drop by about 15% and agencies like ERA (APAC Realty) and PropNex stocks/shares drop by 20%. It is likely that we may see the continuation of a downtrend in public listed property stocks, reminiscent to 2013 when similar cooling measures were intensified.

Capital outflow (flight) – in search for better yield, some investors may consider to invest in good quality assets overseas for their investments or retirement plans. The government had already prepared for this phenomena by getting CEA to come up with certification courses like Marketing Foreign Properties (MFP) to improve knowledge and professionalism of local agents marketing foreign properties so that we can better advise on these investments. In a way, some of us already knew that the recent cooling measures were inevitable and imminent.

4. While it is all doom and gloom, what are the opportunities? Who are the winners?

Private Property sellers who want to cash out will likely price their units at a more reasonable price due to the cooling measures. Therefore, First time condo buyers with sufficient cash/cpf available could take advantage of this situation to negotiate for a better deal. First time buyers without sufficient cash/cpf for the increased downpayment for a condo purchase, may need to reconsider a resale HDB or BTO instead, due to a much lower quantum. This coupled with the potential increased demand in resale HDB flats from the En Bloc owners rightsizing, will in turn, helps to bring back demand for resale HDBs and likely will stabilize the HDB market, possibly mitigating a downtrend. Eventually, these HDB owners may upgrade to their dream condominium at a fair and better price. Selling HDB at a fair price, and buying a condo at a better price. (HDB prices revise upwards and condominium prices stagnant consequently close the gap). This is inline with what the government intends, which is to prevent the widening gap of HDB and condo prices.

Source: TodayOnline, URA Image: Widening Gap of Private vs HDB prices

Essentially, the cooling measures ensures that only cash rich investors, can make their purchases.

In addition, many property investors in Singapore have focused their attention on the local market. But in fact, there are opportunities to invest in developing countries at low calculated risks. It may be time to learn and research more about these overseas property investments. Stay tuned for more.

Appendix 1: Latest Cooling Measures 5th July 2018 (Wef 6th July 2018)








Sources: MOF, MND, MAS, ST

REC Insights Part 1 of 3 : Prime property at near Mass market prices?


In the previous article “5 things you must know before your next property investment”, I discussed about higher vacancy rates, rising interest rates and a potential oversupply situation from 2021 onwards. In addition to the previous discussed points, many Singaporeans would say that salary has not risen, or has not risen in line with inflation while property prices gone up, and most recently, gone up a huge amount that numerous property buyers are being priced out of the market. Fear not, there are and will be opportunities if you look hard enough.
Before we go on to insights (please note that this is my personal opinion only, disclaimer applies), it is important to understand what the future selling prices of en-bloc developments and government land sales will be. For the purpose of analysis, I will highlight selected estimated selling price below.
Fig 1. New Launch Price Table Source: Straits Times, Business Times. Compiled by: REC Notes: Outside Core Region (OCR), Rest of Central Region (RCR), Core Central Region (CCR)
Based on the above selling prices, new mass market developments are priced at the $1700psf range, while new city fringe developments are priced at $2000psf or higher range and new prime area developments will sell at $3000psf range.
As an investor, we often have to look for the arbitrage opportunities, or the gaps where not many investors are looking at. In my opinion, there is a window of opportunity in District 1 & 2, Marina Bay/Shenton Way/Tanjong Pagar area. Some properties in District 1 & 2 are selling for $2000-2200psf. Buying a prime CBD property at this price, which is just $100-400psf higher than a mass market / city fringe new development would be a good investment with a good margin of safety entry point. To elaborate further on Marina Bay and Tanjong Pagar Properties as an investment, the following three key factors analyzed are outlined below:
1. Price Disparity
An analysis on the property price difference between the average New Mass market (outside central region) properties and New Central Business District or CBD (central core region) properties was done and the results are shown in Fig 2 and Fig 2.1.
Fig 2. Price Disparity Table  Source: URA, Compiled by REC Research
Fig 2.1. Price Disparity Chart  Source: URA, Compiled by: REC Research
Based on Fig 2 and Fig 2.1, the trend seen is that the price gap between mass market and prime cbd properties have been narrowing. With prices of Mass market properties increasing while prices of Prime CBD property remain flat. Based on current price trends in fig 1, Prime CBD property prices are likely to rise bringing the price disparity from 1 : 1.4 back to 1 : 2.4 in 2012. Using the price disparity ratio, we can attempt to project the future price potential of Prime CBD properties which will be discussed further in point 3, price growth catalyst.


2. Location Growth Catalyst

Fig 3. List of Infrastructure Pipeline and Catalysts  Source: ST, Wiki Compiled by: REC
Marina Bay area has one of the most infrastructure spending by the Singapore government. First, the Marina Coastal Expressway (MCE) which costs S$4.3billion, was constructed to replace the East Coast Parkway (ECP) link to Ayer Rajah Expressway (AYE), creating an additional route to enter the Marina Bay CBD. The MCE would provide improved traffic going into the CBD. In addition, a total of 5 MRT lines converge into the Marina Bay and Tanjong Pagar vicinity with Marina Bay interchange having 3 MRT lines (north south line, circle line and future Thomson east coast line). Infrastructure is the first step in developing an area, after infrastructure is constructed, the government will be able to build more residential and commercial buildings. I believe this is exactly what the government has planned.
Marina Bay will have constant construction and development before it reaches its full potential some 20 years later. The first stage of marina bay’s growth was from 2005 to 2015, we are currently in the second stage of growth where the government is finishing up infrastructure developments till 2025, before more developments can be constructed, with the extension of the area towards Greater Southern waterfront city from 2025 onwards. I personally believe that Marina Bay’s growth timeline is summarized below,
a) Infrastructure Developments from 2005 to 2025
b) Next stage of demand growth from 2018 onwards and likely to have explosive growth from 2025 onwards when central subzone and straits view are built (fig 4.)
The next stage of growth has been kick off by the completion of Marina One by M+S Pte Ltd, a historical collaboration between both Khazanah and Temasek Holdings, the Sovereign Wealth Funds of Malaysia and Singapore Government. Marina One is the heart of Marina Bay, directly linked to Marina Bay MRT. Future developments will spread out surrounding this development. The next masterplan which is released every 5 years is expected to be in 2019, and is likely to cover more details of development plans about Marina Bay as well as Tanjong Pagar.
Fig 4. CBD Planning Overview Source: URA
      3. Price Growth Catalyst
Singapore’s finance industry transformation map (ITM) targets a total of 4000 new jobs (Fig 5.) created in the Finance and FinTech sector annually. This would contribute to higher rental demand which would in turn attract more investors.
Fig 5. Financial Services Industry Transformation Map
Source: Ministry of Trade and Industry
Attracting young well heeled individuals and property collectors, Wallich Residences, which is Singapore’s tallest building and residential development in Tanjong Pagar has seen units transact above $3800psf. With units on sale from $3800 to 4200psf, the trading range of CBD properties will eventually rise. Taking into consideration of the price disparity mentioned in point 1 above, based on 2018 mass market price of $1700psf, Prime CBD price should transact at $4000psf based on the old ratio of 1 : 2.4. It is only a matter of time before prices in the CBD will revise upwards.
With majority of infrastructure ready or waiting to be completed, the next phase of growth has started, for investors who missed the first wave of growth on The Sail, the next window of opportunity is here. Buying at a price of $2100psf range will provide a good margin of safety and good investment returns.
Our Views
Currently undervalued as seen from narrowing of price disparity (point 1) and multi-decade government growth plans, there are opportunities to invest selectively in properties in Marina Bay/Tanjong Pagar area with entry prices from as low as $1.1mil. For investors who have missed out the previous upcycle of this area, the next opportunity is here. If you like to find out other areas worth looking at, stay tuned for the next REC Insights article.

5 facts you must know before your next property investment








Over the past 3 months, the media has been reporting mostly good news about the Singapore Property Market and Local Property Brokers have been upbeat about the property market. Against a backdrop of what looks like a very promising – The Great Singapore Upgrade for the Property Market, this article attempts to provide deep insights that investors should consider as well as questions investors should be asking.

Below are three facts which most investors already know in the Singapore Residential Property Market :
  1. Transaction volumes are increasing
  2. Property price index (PPI) is increasing
  3. Developers unsold units are decreasing
These three facts have led investors to feel upbeat on the market and may have also created a group of investors who have fear of missing out (FOMO) the next property uptrend.
Before making your next property purchase, there are questions and facts to examine to identify whether the property market will go into a sustainable uptrend, or will there just be a knee jerk reaction due to the influx of en-bloc buyers coming into the market. The facts which are discussed in this article will be crucial in making that decision.
1. Interest Rates
Firstly, many people know that interest rates are going up, but to what extent can interest rates can go up to?
Fig 1. Source:
Figure 1 shows that the Singapore 3 Month Interbank (3M SIBOR) is on an uptrend after an extended period of low rates. Although there are many different rate packages one can take, including fixed rates, these rates will eventually increase, as mortgage interest rates are not fixed for the whole loan period. We can see that before the last 2008 financial crisis, 3M SIBOR rates were as high as 3.5% and that would lead to a mortgage rate of about 4%. There is also a possibility that we will see rates higher than 4% over the next 2 years.
Investors who are taking a mortgage should therefore ensure that even if interest rates go to 4% or 5%, they are still able to afford their monthly installments. In addition, if
the property purchased is an investment and rental is required to cover monthly mortgage payments, the next factor discussed is a critical point of consideration.
2. Vacancy Rate
Fig 2. Source: URA (OCR-Outside Central Region, RCR-Rest of Central Region, CCR-Core Central Region)
Based on URA data, vacancy rate of private residential units have been increasing from 2014. The latest Q3 2017 overall vacancy rate was 8.4%, up from 8.1% in Q2.
Investors who rely on rental income to pay for mortgage payments need to consider the following:
  1. If unit is vacant for 6 months, do you have the funds to pay for the mortgage payment?
  2. If rental drops by 30%, ie. From $3000 to $2100, are you able to top up the difference for the mortgage payment.
  3. Will there be potential supply and demand mismatch in the future, for example will there be enough demand to take up the number of units in that area in future.
When buying an investment property for capital gains or rental income, it is important to find out which areas have growth potential to reach that objective. For example, if an investor is seeking rental income, it is important to find out areas where there will likely be increase in future tenant demand or huge existing tenant demand. If you would like to find out where such areas are, look out for our next article about the geographical localities in Singapore.
3. Supply and Demand Balance
To better understand the current market position, we look at the supply and demand balance. Currently, URA data reports and shows only planned and approved supply of units that will be completed from 2018 to 2021 and beyond. These are represented in Figure 4 below as the red bars. Due to the recent enbloc frenzy and aggressive release of Government Land Sales (GLS) sites, it is important to project the number of future supply coming into the market. The recent enbloc sites and GLS from 2017 will likely be completed from 2021 onwards.
In order to project the future supply of both, enbloc sites and GLS, the following future supply (fig 3.) and assumptions (fig 3.) of sites being completed are used.
The projection of the pipeline of supply coming into the market (fig 4.) from 2021 to 2023 and beyond shows that pipeline supply reverting back to oversupply levels, which was seen between 2014 and 2017.


Fig 3. Source: URA, REC Research
There are currently about 3000 enbloc households, which creates the estimated future supply of 20,000 units. Assuming that these households buy 1 unit each, in 2018 there will be 3000 transactions added into the market. This is a 12% y-o-y increase in private residential transactions in 2018. Likewise, if each household buys 2 units, 6000 transactions will be added and a 24% y-o-y
increase in private residential transactions. Either scenario may increase transaction volumes temporarily, but does not soak up all the pipeline supply created in 2017. Overall, there is a net increase of future supply and will likely lead our residential market into an oversupply situation come 2021.
Fig 4. Source: URA, Exclusively collated by REC Research

4. Population Growth & Demographics

Understanding Singapore’s Population Demographics is important in understanding the population’s buying preference for the types of properties they may purchase. Although there are many permutations to what buying behaviors could be, we will attempt to look at it in a practical and logical manner.
We look at the Singapore’s population growth (fig 5.) and note that we have averaged just over a 1% increase yearly. The population growth rate is likely to maintain its current path, as commented by Managing Director of Monetary Authority of Singapore (MAS), Ravi Menon that “the current demographics slowdown is so severe that it is neither feasible or desirable to try to offset it completely through immigration of foreign workers” when he was commenting on Singapore’s aging population (fig 6.).
An aging population means more citizens will be planning for their retirement which would mean potentially right sizing to a smaller home to cash out some funds for their retirement. Some may feel that the house is too big and prefer a smaller house. It is reported that some owners whose houses are enbloc intend to buy HDB flats instead of purchase another private condo as their home. This change in buying preference is not positive for the current enbloc cycle as there may be less demand for the future supply of private residential properties.
Fig 5. Source: Singapore Population Trends 2017

5. Inflow of foreign buyers or talents
A recent report by Bank of Singapore noted that in 2017, foreign buyers bought about 1600 units (5.6% of total transactions in 2017), down from the peak of close to 6000 properties in 2011 (15% of total transactions in 2011). A possible reason for the decrease is due to the 15% Additional Buyer Stamp Duty (ABSD) imposed for foreign buyers. However, even if the government reduces or remove ABSD, foreign buyers from China and Indonesia which formed the majority of buyers in 2011 may not rush back to buy properties here due to Capital Controls and Tax Amnesty imposed in the respective countries.
Foreign talents have also seen a reduction in growth rate over the last 3 years as seen from Non-resident growth rate (fig 5.), which contributes to the increase in vacancy rates for private residential properties. Even if the government starts to attract new foreign talents again for our new industries like FinTech, Cyber Security and Artificial Intelligence Industries, there will be lag time before vacancy rate improves.
Our Views
Our view is that property investment will continue to be very lucrative over the long term. However, against a backdrop of mixed data and noise in the property market, location selection is more important than ever. Property investors 20 years ago could just buy almost any property in Singapore and would make a profit if they held till today. Over the last 5 years, there are groups of buyers who made profits, while also a large group who did not profit. Property selection hence is the key to invest profitably and data based analysis can aid in the process of buying a bargain in a growth area.
If you would like to find out more, look out for our next blog post on the areas to consider for resilient property investment.