Sunday, May 29, 2011

HDB resale flat prices are set to fall

What determines the price direction of an asset? In a relatively free market, supply and demand balance determines the price direction. You have more supply than demand then the prices tend to move down, you have more demand than the supply then the prices tend to move up. HDB resale flat prices moved up in the last decade because the demand exceeded the supply due to various reasons: economic growth, increase in PR approvals, reduced number of new HDB flats and low interest rates on mortgages between 2000 and 2010. Now some of these factors are changing direction:

More BTO units ahead. Since the introduction of BTO units in 2001, HDB decreased the output of flats to around 8,000 units per annum in the last decade from the average of 25,700 units per annum of 1990s. This was in response to the over-supply of HDB flats but resulted in a supply cut-back which did not match with the demand. In the recent years many  BTO projects got several times more demand than the supply. This made many couples looking for a home in resale market which also did not have enough flats due to lower number of new flats in the first half of the 2000s.

This was the hottest issue in GE 2011 and in response the government increased the release of new HDB flats to 22,000 for 2011. And the New Minister of National Development, Khaw Boon Wan, announced in new MND blog that he has ordered HDB to temporarily start building ahead of order since there is a backlog of demand. Increase in the number of new HDB flats will draw significant demand from the HDB resale market since many new weds would now have a chance to grap new flats with subsidized prices.

Just days into his new job as National Development Minister, Mr Khaw Boon Wan (picture) has instructed the Housing and Development Board (HDB) to build flats "ahead of demand" - a significant change in policy from the "Build To Order" (BTO) approach which has been in place for the past 10 years. 
Mr Khaw's announcement coincided with HDB's launch of six BTO projects - the largest number launched at once. In addition, he confirmed that the number of BTO units this year would be increased from 22,000 to 25,000 units, by bringing forward projects scheduled for early next year.
Source: HDB will build flats 'ahead of demand': Khaw
Income ceiling for new HDB flats. There are strong signals from the government that the first time HDB buyers income ceiling will be raised from 8,000 SGD per month to 10,000 SGD per month. Raising the ceiling will make many couples eligible to apply for BTO. Currently these couples do not have any other choice then to go to resale HDB or private property market. Once they have the option, demand for HDB resale flats will be reduced.

Interest rates. The last great money printing period of FED is about to end this June which was supposed to jump start the economy and reduce the unemployment. Well as expected, the only thing it could jump start was excessive speculation and since now US and Europe needs to cope with huge public debt and major Asian economies (especially China) are trying to reduce their trapped savings in US dollar, the interest rates will go up. Current interest rates are the main factor which makes severely unaffordable flats with prices 5 or 6 times the median income look "affordable".They were artificially kept low by Hedonist Western societies in the last decade to avoid the pain of their financial mistakes. This game will end soon and when it ends, the interest rates and monthly mortgage installments will go up which will reduce the demand for properties in all segments.

Number of PR approval per annum is decreasing and will not increase soon.  After steadily increasing from average of 35,000 approvals per year for 2001-2004 to its peak of 79,200 for 2008, it went down to 29,000 approvals for 2010. Many were expecting that decline in PR approvals would be a temporary trend until 2011 General Elections and after the elections trend would reverse. But during the election period, a significant number of Singaporeans made it clear that they are not happy with the current influx level of foreigners and it is very likely that the government will continue the downward trend in response to the sentiment on the ground.

Number of Singapore PRs approved per year (2001 - 2010)

This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

Friday, May 27, 2011

More BTO units ahead says new Minister for National Development

New Minister of National Development, Khaw Boon Wan, announced in new MND blog that he has ordered HDB to tender as "soon as architectural drawings and tender documents are ready":

"Currently, a tender is called only after 70% of orders have been confirmed; hence “build to order”. Given robust demand, I told them to proceed to build, knowing that the orders will definitely come. In other words, build ahead of demand, during this period of demand backlog. We can return to normal BTO approach, after we have stabilised the situation." Source: Build Ahead of Order

This means HDB supply cut-back decade started by Built-To-Order (BTO) scheme will be temporarily suspended. Under BTO scheme, which started in 2001, HDB builds flats after %70 of confirmed demand for the project. According to DTZ,  after BTO scheme is started, "the average number of HDB units completed fell to 8,260 units per annum between 2001 and 2008 from the average of about 25,700 units per annum between 1991 and 2000." Source: DTZ Insight Singapore house price debate Liquidity rules the market 

Costa Ris BTO Flats Source:
New Minister also explined that "they will bring forward projects scheduled for early next year":

"For example, if we can bring forward the projects planned for the first quarter of 2012 by a couple of months, it will be helpful.  HDB confirmed that it will be able to raise the number of BTO units from 22,000 to 25,000 units this year.

Third, for next year, we should sustain the new pace of building. As we intend to ease the $8,000 income ceiling on HDB flats, we can expect additional demand and we have to prepare for that."
Source: Build Ahead of Order

This move will definitely have effect on both resale HDB and private mass market flats. Since %30 of the new weds need to go to resale market due to overbook of BTO flats (sometimes 7 times the flats released) and 2-3 years wait time, more and early release of BTO flats will derive them from resale HDB market. Demand driven from HDB market has potential to result in resale HDB price fall which would make resale HDB more affordable and drive demand out from private housing.

Houses in Hong Kong, Australia and New Zeland are severely unaffordable

According to Demographia International Housing Affordability Survey 2011, Australia, New Zealand and Hong Kong housing prices are severely unaffordable. The survey covers 325 markets in Australia, Canada, Hong Kong, Ireland, New Zealand, the United Kingdom and the United States. In 2011, the survey included Hong Kong. The survey employs the  Median Multiple (median house price divided by gross annual median household income) to rate housing affordability. The Median Multiple is widely used for evaluating urban markets, and has been recommended by the World Bank and the United Nations and is used by the Harvard University Joint Center on Housing.

The survey separates prices into 4 affordability ratings: Median house prices up to 3 times of median household income are rated as "Affordable", median house prices 3.1 times to 4 times of median household income are rated as "Moderately Unaffordable", median house prices 4.1 times to 5 times of median household income are rated as "Seriously Unaffordable" and median house prices above 5.1 times of median household income are rated as "Severely Unaffordable".

In Hong Kong, median house prices are 11.4 times the median household income and Hong Kong is the least affordable place to buy a house among all the cities surveyed. 11.4 times is twice the "severely unaffordable" limit:
"Hong Kong ranked as the least affordable major market (82nd), with a median multiple of 11.4. Sydney ranked second most unaffordable, at a Median Multiple of 9.6 (81st), having slipped behind last year’s most unaffordable market, Vancouver at 9.5 (which ranked 80th). Melbourne ranked 79th, with a Median Multiple of 9.0. Plymouth & Devon, San Francisco, London and Adelaide all had Median Multiples of more than 7.0".
Source: 7th Annual Demographia International Housing Affordability Survey 2011

Housing affordability of major cities

But how are people still buying homes? Why demand is not dropping significantly if homes are extremely high priced? A hike in price like this should decrease the demand right? Wrong! Hong Kong home prices are actually affordable now, but temporarily for now! That is what most home buyers are missing. Temporarily, home buyers in Hong Kong can finance with ultra low mortgage interest rates between 0.8% to 2.1%. This is far below the lowest levels in the six nations covered in the survey. Consequently, Hong Kong homeowners (with significant number of mainland Chinese buying in Hong Kong) thinks housing is "affordable".

However things will probably change soon. Professor Chau Kwong-wing of the University of Hong Kong calls the present situation "... just a short-term illusion,":
 "People think they can afford an expensive flat with a reasonably cheap mortgage. Their dreams will burst and the flat will become unaffordable when the interest rate rises." The professor has a point. Variations in interest rates can mask or magnify structural affordability, which is measured by the Median Multiple. This is because interest rates are subject to fluctuation, while buyers and sellers do not renegotiate sales prices after the deal is concluded.
 People really forgets the fact that during Asian Financial crises, interest rates went up to 8%. And since currently USA and Europe can find no meaningful way to fight financial crises other than increasing their debt to unaffordable levels and printing paper money, they will most probably lead all the world with them to a high inflation and high interest. It is really scary to think what would happen to all those with large mortgage payments (large sums generate quite large monthly payments).

Saturday, May 21, 2011

Beware of online job scams has recently sent a job scam alert to its subscribers. These job scams are on the rise and targeting people who are looking for jobs overseas. According to, "scammers are pretending to be from reputable Multinational Corporations such as Oil and Gas companies, and sending job seekers an email confirming how they have been accepted for an interview overseas".

"This would of course cost money to the jobseeker (air tickets, lodging, food etc.) but the letter states that the company is willing to 'sponsor' 100% of the jobseekers' expenses. The catch? Jobseekers will have to pay a 'refundable' deposit of USD$100 upwards. Needless to say once that fee has been paid, the victim realizes that no flights or lodgings have been reserved and that the interview offer is false."
It is not a rocket science to detect a job scam. If they want money from you in any stage, it is a scam! It is that simple. It does not matter how professional or "real" they look. They may even have a professional looking web site. But it does not mean so much since it is not hard or expensive to create a professional looking web site.

Always check a company name and or web site in google with the keyword scams. This even holds for big names. Because you may be contacted by a scammer who is pretending to be from a big company. Since these scammers send mail in bulk by just changing the name section, a simple google search like " scam" or " scam" will most probably show you it is scam or not.

Do not forget. If they require money from you in advance, it is a scam:

"You should be careful of job advertisements that:
  1. Ask you to pay money before processing your application or training you;
  2. Invite you to interviews that turn out to be multi-level marketing or pyramid selling schemes;
  3. Misuse your resume information to sell you products (such as insurance, etc) or make offers not connected to the job advertised;
  4. Are generally untrue, dubious or misleading (e.g. misleading job title, job description or company description); or
  5. Use web-based public email addresses instead of company-owned email addresses."

Here you can find some examples of scams

Thursday, May 19, 2011

Looking for a job in Singapore? Beware of online scams

SingTel has realised something was wrong when it started to receive messages from job applicants in Pakistan. They claimed that a representative from SingTel human resources had been asking for money for a guaranteed interview! Singapore economy and its attractiveness as a working destination is on the rise and this is followed by these kind of online job scams. Especially foreigners looking for job in Singapore are vulnerable since they may easily think that requesting money for an interview is "normal" here in Singapore. Well it is not:

"Singapore Telecommunications Limited, a telecommunications company incorporated in Singapore and commonly referred to as SingTel, has recently become aware of a fraudulent scheme perpetrated by individuals and/or employment agencies based overseas.

These perpetuators pose themselves as representatives of SingTel’s Human Resource Department or recruiters acting on behalf of SingTel by sending emails to persons offering them attractive jobs with SingTel or providing them with contracts of employment purporting to be from SingTel.   Persons who respond to such emails or register with these employment agencies are asked to register for a test/interview or are given contracts of employment purportedly from SingTel and are asked to pay a sum of money by way of a guarantee to ensure that they will not fail to attend the test/interview or to be employed by SingTel."

If in a job application process money is requested you should be very cautious. Currently, the job scams using reputable company names is on the rise. The con artists will use various phishing techniques to pretend to be the original company. The best way to check is to either call the company hot lines or simply Google company name with "public notice online job scam" keywords. Actually you will not lose a lot if you ignore any job offer which requests money upfront.

Phishing is the most common form of deceiving people to
obtain sensitive information or to lure to a scam. Above page looks
like a facebook login page but in fact it is not.

Wednesday, May 18, 2011

Starhub and M1 will begin selling iPad2 on May 20th 2011

Less than a week after SingTel has started to sell iPad2 with a data planStarhub and M1 will start selling iPad2 with Wifi + 3G starting from Friday May 20th 2011.

Starhub offers 3 plan: prepaid, plan and MultiSim. 2.5GB worth $32 will be valid for 60 Days and monthly subscription for unlimited local data usage will be 40.02 SGD per month with 7.2 Mbsp download speed. Under their 2 years contract plan iPad2 WiFi + 3G with 16 GB memory will be 399 Singapore Dollars, 32 GB will be $499 and 64 GB will be $599.These prices are same with SingTel offers.

M1 offers 3 plans. First plan, which provides unlimited (local) data usage is for 43.87 Singapore Dollars per month with download speeds up to 7.2Mbps. Under their 2 years contract plan iPad2 WiFi + 3G with 16 GB memory will be 399 Singapore Dollars, 32 GB will be $499 and 64 GB will be $599.These prices are also same with SingTel offers.

Second plan from M1 is for 3GB limited data usage (extra usage will cost up to 38 Singapore dollars). M1 also offers iPad2 without 2 years contract with market prices.

M1's 3rd plan is pre-paid plan by which 1 GB data usage costs 20 SGD. This would be valid for 30 days or upon completion of the data bundle and ideal for existing iPad2 owners who do not use 3G access a lot.

As an existing Starhub mobile modem user, it would be great if I could convert my existing mobile modem plan to iPad2 plan and use the plan both for laptop and iPad2 (SingTel has this option). But unfortunately there is nothing like that.

For details of Starhub iPad2 ...
For details of M1 iPad2 ...

Monday, May 16, 2011

Fear the Boom and Bust - Hayek versus Keynes

Many of you probably know Keynes. He is the guy who teaches something like this: "If you wanna make glass-man wealthy you need to brake all glasses in the town." He thought spending creates wealth while in fact all the nations, companies and individuals in the history rose to glory on their or others savings. Who cares his ideas contradicts with the basics of economics like "finite resources", his ideas are politically convenient and very popular among western governments, technocrats and main stream managing the money. In the west it probably looks really cool to masses, "government spends money when people cannot".

There is another economic thought on the opposite site, Austrian School and Friedrich Hayek who teaches politically inconvenient hard realities of economics. created to excellent clips to explain the clashes of theories from these two opposite sites of economics. The tone of the clips do not try to hide on which side they are (these are pro Hayek clips).

"In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, two of the great economists of the 20th century, come back to life to attend an economics conference on the economic crisis. Before the conference begins, and at the insistence of Lord Keynes, they go out for a night on the town and sing about why there's a "boom and bust" cycle in modern economies and good reason to fear it."

"According to the National Bureau of Economic Research, the Great Recession ended almost two years ago, in the summer of 2009. Yet we're all uneasy. Job growth has been disappointing. The recovery seems fragile. Where should we head from here? Is that question even meaningful? Can the government steer the economy or have past attempts helped create the mess we're still in?

In "Fight of the Century", Keynes and Hayek weigh in on these central questions. Do we need more government spending or less? What's the evidence that government spending promotes prosperity in troubled times? Can war or natural disasters paradoxically be good for an economy in a slump? Should more spending come from the top down or from the bottom up? What are the ultimate sources of prosperity?"

Sunday, May 15, 2011

Malaysia and Indonesia by boat

Many do not consider Malaysia as a boat or yacht holiday destination but actually this country offers great places to enjoy yacht cruises. Take for example Johor and its neighbour Pahang. There are nine tropical islands on the east coast of these Malaysian states, stretching from Pulau Sibu from south to Pulau Tioman to the north and Pulau Aur to the east. The most well known, developed and the largest island of them is Pulau Tioman. It has a marina and a runway and is a great weekend escape destination from Singapore and Malaysia. Pulau Sibu, Pulau Rawa and Pulau Tinngi are also popular for weekend holidays and can be accessed from Tanjung Leman by boat. Pulau Sibu is just 70 miles away from Singapore and can be easily accessed by a chartered boat from there.  Most of these islands have at least one small resort.

Pulau Aur
On the other side, Malacca Straits, George Town, Penang, Pulau Pangkor and Langkawi. To the north, Thailand starts with its more popular destinations like Phuket and Krabi.

Batam, Indonesia is located just 26 kilometers south of Singapore and can easily be accessed by boat. The area is great with its crystal clear waters and beaches and many places for snorkelling and skuba diving. To the south of Batam and Bintan, there is an island called Riaus which is less developed compared to its northern neigbours. 

Saturday, May 14, 2011

Luxury Yacht Cruises around Singapore

Today in Boat Asia 2011 show, I have had a chance to see Lloyd Marine's new catamaran "ELYSIUM". ELYSIUM is a Lagoon 450 catamaran and is used for luxury yacht charter in Singapore for island get-aways to the Riau Islands, Indonesia, East Coast Malaysian islands such as Pulau Sibu, Rawa and Tioman, and Langkawi and Phuket to the west.

Most of the people thinks a rich man with his family cruising around for several thousands per day when they hear luxury yacht charter. Actually luxury boats can be rented as a group to have a different holiday or occasion experience and are not within only the reach of the rich. A luxury boat can be well chartered for a day or evening trip to celebrate an event, to have party or company gathering. For example ASHA from the same company, a 48 foot catamaran, can accommodate up to 25 people and can be rented for 1,900 SGD for an evening. Adding the 300 SGD for crew (needed for a trip more than 20 people) and 35 SGD fuel charge for a 5 hours journey, this will translate into just 90 SGD per person for 25 people.If you are looking for an alternative venue for a party, celebration or company event, this can be a very good experience. For those who can afford, a yacht is definitely a great place to have solemnization party. The only problem I can see is that Singapore waters, especially the south waters, are infested with commercial ships and all you can see as a view are ships and large refineries. It really is tiring to look at them from east coast and Sentosa, it probably is also tiring from on board.

But a real experience of yacht charter from Singapore, in my opinion, is a multi night cruise from Singapore to the Malaysian and Indonesian islands. There are nine islands of the east coast of Johor and Pahang, stretching from Pulau Sibu in the south to Pulau Tioman in the north. Pulau Sibu especially is around 70 miles away from Singapore so it is easily accessible from Singapore by boat. A trip of this kind is expensive but these boats can accommodate 4 couples and when chartered as a group, it would cost around 600 - 700 SGD per night. A bit expensive but still within reach of many for an alternative holiday.

You can frequently find cheap yacht charter deals in deal site. This one for exampleoffers
for 4 Hours Yacht Charter & Cruise for up to 10 Pax for only $388 (71% OFF!) 

In my homeland country, Turkey, it is very common to hire a boat to celebrate an event or just to travel as a group. There are cheap options as well as luxury ones. So it is not uncommon to see a large boat full of 200+ people accommodating a wedding in Bosporus or a small one full of 10 people on a week holiday through Turkish Riviera. Currently I can see that Singapore is still in the early stages of boating fun and options are limited and in the expensive region. Still these options are more accessible then you usually think.

See also:

Wednesday, May 11, 2011

SingTel will begin selling iPad2 on May 14th 2011

SingTel, will start selling iPad2 with a data plan by May 14th 2011. The plan prices will be 399 SGD for the 16GB 3G + Wi-Fi, 499 SGD for 32GB 3G + Wi-Fi and 599 SGD for 64GB 3G + Wi-Fi. There will be two data plan options: mobile broadband and mobile multi sim.

Other than this upfront payment for the device, A 7.2Mbps Mobile BroadBand plan with iPad 2 costs 40 Singapore Dollars monthly for a 2 years contract and in return they get 50 GB of data access free. By this plan and extra 5 Singapore Dollars you can obtain a USB modem to connect your laptop or PC through the same plan.

Existing SinTel multi sim card users can also have option to apply MultiSim plan for a new iPad2. In Multi-SIM with iPad 2, 16GB 3G + Wi-Fi costs SGD 818, 32GB 3G + Wi-Fi costs SGD 948 and 64GB 3G + Wi-Fi costs SGD 1078.

After the episode of iPad2: Battle of Beijing, SingTel is taking necessary measures for smooth sale and you can register your interest through their web site. You have until Friday, 13 May at 12noon to register your interest and it is likely that you cannot find any iPad2 if you do not register up front.

Monday, May 2, 2011

What your friendly property agent won't tell you

For a broker, "now" is always the best time to buy an asset he is brokering. For a stock broker, "now" is always the best time to buy stock and for a property agent "now" is always the best time to buy a property. But aren't the property prices are very high? "Buy now or they will get higher" your friendly agent will say. The reason must be obvious to you, a broker/agent only earns money when someone buys! And wealth management advises is not their business. It is you who needs to be careful while planning to buy a big ticket asset, especially if you are going into a long debt payment period like mortgage.

A couple of days ago I have read an article written by a property agent telling "5 reasons to buy Singapore property now". One of them was that if you buy a 1 million dollar condo, mortgage payments would be 3,000 SGD now and you can rent the condo for 4500 SGD. So you can actually make money by purchasing a house! Well yes but one important dimension is missing from his equation. Time!

There are two very basic economic rules people never fail to forget even if they look very obvious:

1) If something cannot happen, it will not happen. For example can prices increase indefinitely? They cannot so there will not be an indefinite price increase. But people tend to say "this time different" and ignore this simple rule.

2) What goes up, must come down and what comes down, must go up. Interest went to record lows in the last few years thanks to efforts of FED to rescue US economy by destroying US dollar. It will go up. Rents and prices sharply went up, they will go down. Simple. But you never fail to find people telling themselves and others that this time, it is different.
Buying property is a long term investment yet we calculate affordability based on our current financial situation.  If interest rates are low on a relative basis, they can and probably will increase over time.  These cycles can last for months, even years giving the novice investor the impression that he or she can easily afford to carry the mortgage or even add more property to the portfolio.  Understand that rates may climb and hedge yourself against rising interest rates by diligently paying off debt during low interest rate cycles; when rates climb to 5%, 6%, 7% and above, you will be happy you did.
I am not trying to tell that do not buy now. I am just telling that make your plans by following these 2 basic rules and ask yourself these questions: Can you still effort to pay when what went up comes down and what came down goes up? Are you making your decisions based on an assumption that what cannot happen will happen?

The property agent above makes his calculations based on current ultra low 3-month SIBOR rates. He does not warn you that the equation can turn upside down when rents fall and rates goes up to long term averages of 4%. Can you also weather higher rates which are very likely after a sovereign debt crisis in West?

Ask yourself these questions and do your homework, no one will do it for you. Do not let kiasu to manage your investment decisions.

This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.

Sunday, May 1, 2011

Latest Singapore condo, landed property transaction prices

What are the latest residential property transaction prices in Singapore? What is the price of a condominium flat in Singapore? In Singapore you can check The Strait Times where transaction price tables are regularly printed. If you do not have access to printed media, you can make a google search and you will most probably end up with the asking prices. But what really matters are the property transaction prices and there is a place where you can get some general information on these prices.

Singapore Urban Redevelopment Authority (URA) has a e-Service named "Private Residential Property Transactions with Caveats Lodged" where you can reach caveats lodged for the last 12 months on Singapore private property. The data is updated twice a week on Tuesday and Friday (if there is a public holiday on one of these days, data is updated next working date).

What does caveat lodged mean? URA defines caveat as "a legal document lodged with the Singapore Land Authority by a purchaser to protect his/her interests after an option to purchase is exercised or a Sales & Purchase Agreement is signed."[1] When a caveat is lodged on a property another caveat cannot be lodged unless permission is obtained from the buyer who lodged the caveat.

URA search tool only contains transactions with caveat lodged and a property can be sold without caveat so it does not show all transactions within last month. Still it contains many transactions to give an idea of transaction prices.

There are two modes of search. You can either filter data by private property project name(s) or select property type (landed property, apartments & condominiums or executive condominium) and postal districts.

URA Residential Property Transactions eService

Search results will give you a list of properties with their total transaction price, area (in square foot), type of area (i.e. strata), unit price (per square foot) and date of the transaction. This table can be sorted by one of these fields and exported to pdf (an export to excel would be very handy to analyze the data). Note that the data is intended to give general information on prices and to not be relied on solely to go into a transaction. It is only a good start point to have some general idea.

For professionals and people who require more info, URA provides a paid service called REALIS  which provides detailed data on price trends, vacany rates, rental index, transaction details, unsold units, completed projects etc. on Singapore property.

[1] - URA Frequently Asked Questions

This blog article is to provide general information only and should not be treated as an invitation to buy or sell any property or as sales material.  Users of this report should consider this report as a one of the many factors in making their investment decision. Users should make reference to other sources of information and specific investment advice to obtain a more objective view of the property market. Asia Singapore shall not be responsible for losses suffered.