Prospective buyers can consider the secondary market, where they may be able to find larger completed units, says CHIA SIEW CHUIN
THE private housing market in Singapore scaled new heights in 2010 and 2011 as prices escalated past previous peaks, while the volume of new home sales hit fresh highs. Though attention was mostly focused on the primary market, the secondary market was also active with healthy price gains.
Secondary market transactions of private residential property totalled some 16,357 units last year. Although 27.7 per cent lower than the 22,608 units sold in 2010, secondary market transactions still made up more than half of all private home sales for 2011, at 50.7 per cent.
Prices of private homes in the secondary market also strengthened. According to the National University of Singapore’s Singapore Residential Price Index Series (SRPI), prices of such properties rose by 25 per cent between end-2009 and end-2011. The SRPI tracks price changes in its basket of completed non-landed private homes.
This outperformed the 24.4 per cent rise for all private residential property types and the 19.2 per cent gain for non-landed private homes, going by the Urban Redevelopment Authority’s (URA) price indices over the same period. These URA indices include completed and uncompleted homes.
Hotspots in Singapore
In 2011, buyers who bought from completed non-landed private residential projects at least five years old were particularly keen on five districts. Ranked in terms of transaction volume, they were 15, 23, 16, 10 and 19. Based on caveat records in the URA’s Real Estate Information System (Realis) on Jan 30 this year, these districts chalked up the highest transaction volume for secondary market non-landed homes.
Singaporeans accounted for more than 54 per cent of all such transactions in each of these hotspot locations.
Buyers from China were most active in districts 23 (covering areas such as Hillview, Diary Farm, Bukit Panjang and Choa Chu Kang) and 19 (including Serangoon Gardens, Paya Lebar, Hougang and Punggol). They accounted for a significant 31.8 and 27.7 per cent respectively of all foreign purchasers of resale non-landed residential properties in these locations last year.
Homebuyers from India favoured the eastern part of Singapore, where they formed the largest proportion of foreigners who picked up resale non-landed homes in districts 16 and 15 – at 31.7 and 26.7 per cent respectively.
Indonesians were the largest group of foreign buyers in district 10, with a 20.3 per cent share.
District 15: The three most actively transacted developments in the secondary market in district 15 were Costa Rhu, Mandarin Gardens and Water Place. In Costa Rhu, units from 990 square feet to 5,813 sq ft were sold at between $1.18 million and $5.05 million last year. Water Place commanded prices of $1.1 million to $1.94 million for units between 904 sq ft and 1,636 sq ft. At Mandarin Gardens, prices ranged from $700,000 to $1.93 million for units measuring 732 sq ft to 2,034 sq ft.
These three 99-year leasehold developments are sought after for their proximity to the city, the waterfront as well as the green lungs at the Marina Bay Golf Course and the East Coast area. They are also close to established lifestyle and food and beverage haunts in the Katong and Geylang neighbourhoods.
Buyers are also likely to be attracted to the spacious living and dining areas of Costa Rhu units. In Mandarin Gardens, residents get to enjoy an Olympic-sized swimming pool and four tennis courts. Over at Water Place, all apartment blocks are widely spaced out, providing a sense of space.
Buyers are also known to purchase units in these developments for potential capital appreciation and rental income. For instance, those who bought units in Costa Rhu and Water Place in the Tanjong Rhu area in 2010 and sold them in 2011 saw capital gains of 18-19 per cent, according to caveats lodged.
This is before taking into account the seller’s stamp duty (SSD) payable on all residential properties bought on or after Feb 20, 2010 and sold within 12 months from the date of purchase. The stamp duty rates applicable are one per cent for the first $180,000 of the sale price, 2 per cent for the next $180,000, and 3 per cent for the balance.
However, prospective investors should note that under the prevailing SSD regime effective Jan 14, 2011, aimed at dampening speculative activity, the holding period for the imposition of SSD has been extended to four years. The SSD rates have also been hiked to 16 per cent, 12 per cent, 8 per cent and 4 per cent of the sale price for residential properties bought on or after Jan 14, 2011, and sold within the first, second, third and fourth year of purchase, respectively.
In the leasing market, units at Costa Rhu and Water Place garnered net rental yields of 2.5 per cent to 4.1 per cent last year. Prices at Mandarin Gardens in Siglap appreciated by about 17 per cent last year and net rental yields ranged from 2.4-3.7 per cent during the year.
District 23: In this district, the three most sought-after developments last year were Regent Heights, Northvale and Palm Gardens. According to caveat records, units measuring 689 sq ft to 2,594 sq ft found in these 99-year leasehold developments changed hands at prices ranging from $705,000 to $1.6 million last year.
Those who bought units in these developments in 2010 and sold them last year enjoyed capital gains of between 11 per cent and 30 per cent. They also reaped rental yields ranging from 2.8-4.5 per cent.
District 16: In this district in the east, buyers in the secondary market last year were mostly keen on The Bayshore, Costa Del Sol and Bayshore Park. These 99-year leasehold developments are close to established housing estates such as Bedok and Marine Parade as well as the airport. They also boast impressive views of the nearby East Coast Park and the sea.
Buyers of apartments at Costa Del Sol are also likely to have been attracted to the large living and dining areas of the units as well as the functional and regular layout of the rooms.
In 2011, units in these developments were transacted at prices ranging from $580,000 to $3.6 million for units measuring 624 sq ft to 3,800 sq ft. Those who bought units in The Bayshore and Bayshore Park in 2010 and disposed of them in 2011 realised capital gains of about 8 per cent to 20 per cent.
Those at Costa Del Sol saw a price increase of about 17 per cent to 30 per cent. Rental yields for the three projects ranged from 3-5 per cent in 2011.
District 10: Valley Park, The Tessarina and Duchess Crest were the three most transacted developments in the coveted district 10 last year. Units measuring 753 sq ft to 1,808 sq ft in the 999-year leasehold Valley Park in River Valley Road were transacted at prices ranging from $960,000 to $2.77 million in 2011.
At the freehold Tessarina on Wilby Road, buyers bought units ranging from 969 sq ft to 1,367 sq ft, at prices ranging from $1.31 million to $2 million last year. At Duchess Crest, a 99-year leasehold condominium on Duchess Avenue, buyers bought units of 936 sq ft to 2,088 sq ft at prices ranging from $1.14 million to $2.63 million in the same year.
Valley Park is popular as it is conveniently located next to Valley Point Shopping Centre and is close to Great World City. Units in the project also have large living and dining areas as well as service yards. Similarly, units at The Tessarina have large bedrooms and good layouts.
Those who bought units at Valley Park and The Tessarina in 2010 and sold them last year saw capital gains of between 10 and 20 per cent. In Duchess Crest, price gains in the same time frame were higher – between 25 and 29 per cent. Units in these three developments provided rental yields of 2.1-3.7 per cent in 2011.
District 19: Secondary market buyers in this district mostly opted for Kovan Melody, Rio Vista and Compass Heights last year. These 99-year leasehold developments are popular largely for their attractive locations. Kovan Melody, for instance, is adjacent to the Kovan MRT station. Units measuring 872 sq ft to 1,518 sq ft in size were transacted at prices ranging from $845,000 to $1.51 million last year. Investors in such units achieved rental yields of 3.1-3.8 per cent.
Compass Heights is integrated with the Compass Point mall, the Sengkang MRT station and the Sengkang bus interchange. Such integrated developments have proven to be popular. In 2011, Compass Heights commanded prices ranging from $675,000 to $1.68 million, for units between 667 sq ft and 2,519 sq ft. Rental yields for this development were in the range of 2-3.9 per cent.
Meanwhile, those who bought units in Kovan Melody and Compass Heights in 2010 and sold them a year later reaped capital gains of 13 per cent to 33 per cent.
Rio Vista is situated adjacent to Sungei Serangoon, the Serangoon bicycle track and park connector, and is close to Punggol Park. The location offers residents a green and park-like living environment. Units in the development also offer large service yards and private enclosed spaces. In 2011, units measuring 1,055 sq ft to 2,573 sq ft were sold at prices ranging from $785,000 to $1.8 million. Prices of units at the development appreciated by about 14 per cent in 2011 and rental yields ranged from 3-3.9 per cent.
Prospective buyers, however, need to be clear about the pros and cons of buying homes in the secondary market and assess if the available options meet their needs.
Those who buy such properties will have the advantage of occupying the property immediately or getting immediate rental returns. Another draw of buying into an older project is the availability of larger units compared with what’s on offer at most new launches these days. In addition, buying a completed unit allows one to visually assess the unit as compared to buying an uncompleted unit off the plan. The downside, particularly with older units, is dealing with potential problems with electrical fittings and plumbing and general wear and tear. There may be a need for extensive renovations in some cases.
Some buyers may be put off by the higher initial monthly repayments required for resale homes compared with progress payments for uncompleted units. Another drawback could be the more stringent rules for financing properties whose leases are running low. For such properties, there are limitations on the withdrawal of funds from the Central Provident Fund as well as for financing loans.
Overall, options abound in the secondary market and the hotspot locations highlighted here can point potential homebuyers and investors to some attractive choices.
The writer is director, research & advisory, Colliers International
Source: Business Times 23 Feb 2012