What determines market value of property?
I REFER to Mr Patrick Tan's letter, 'Valuation the culprit in artificially inflating HDB flat prices' (June 17).
The market value of a property is the estimated amount for which it should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing where both parties acted knowledgably, prudently and without compulsion. It is not a situation of a willing buyer and an unwilling seller where the terms of purchase are favourable to the buyer. Nor is it a situation of an unwilling buyer and a willing seller where the terms of sale are favourable to the seller.
The transacted prices of comparable properties are generally the best evidence of the market value for standard properties like HDB flats. In the case of HDB flats, cash top-up is part of the price of the property sold and the transaction price is therefore a legitimate piece of evidence to rely on when valuing a property. The valuer's job is to interpret the market, not make the market. The market is the final arbiter of what is an appropriate valuation. It is neutral as to affordability issues. The market itself will eventually adjust downwards if buyers deem the cash top-up excessive and refrain from transacting.
Valuers have to examine the micro and macro factors of the particular segment of the real estate market, together with the economy sentiment. Such factors will include demand and supply of the various micro residential markets, and legislation and policies pertaining to the particular real estate segment.
Factors affecting the private and the HDB residential market may be slightly different, and thus the property market cycle of each real estate segment is never identical.
This also accounts for the difference in values of a property in different timeframes and different values for similar properties in different locations.
Janet Han (Ms)
Secretariat
Singapore Institute of Surveyors and Valuers
Saturday, June 28, 2008
Tuesday, June 24, 2008
Business Times: Singapore property market approaching peak: report
Singapore property market approaching peak: report
By UMA SHANKARI
SINGAPORE is still a safe haven for property investments but a market peak is approaching, Pacific Star says in a recent report.
The Singapore-based property group is most bullish on the retail sector here, recommending that investors add to investments in that segment. The residential and office sectors, on the other hand, are rated 'neutral'.
In the same vein, OCBC Investment Research reiterated its 'neutral' view on the residential sector here in a June 12 report.
According to Pacific Star, the retail market here is tightening. Vacancy rates have fallen to levels not seen since 1993 and rents continue to climb slowly, with an increase of one per cent in Q1 this year, after a 0.6 per cent rise in Q4 2007.
Retail spending is expected to increase in line with growing tourism and rising incomes.
'Marketing agents report that Orchard Central and Ion Orchard, two prime (upcoming) shopping centres in Orchard Road, are attracting strong rental enquiries from retailers that currently do not operate in Singapore,' Pacific Star's report said. 'Rents at Ion are expected to significantly surpass current prime retail rents.'
For the office sector, the current demand-supply imbalance is expected to support rents till 2009, said Pacific Star. 'Office demand is still firm with leasing agents lamenting the lack of available space rather than a lack of enquiries, although the number of enquiries would have fallen somewhat.'
But an above-normal supply of office space will put pressure on rents from 2010, even if growing demand from the services sector prevents any excessive correction, it said.
In the residential segment, Pacific Star expects the current stupor to continue, as there are few catalysts for the rest of 2008. It believes prices and transaction volumes will continue to soften for the rest of the year.
However, the initial catalysts for recovery are expected in 2009, when Singapore's economic growth is expected to exceed that of 2008, according to Pacific Star.
The recovery will be fuelled by immigration and higher incomes that will make it more affordable for Singaporeans to buy mid and high-end private homes, it said.
In a report on the residential market here, OCBC sounded a warning, saying past trends point towards another price correction over the next few quarters.
On the other hand, interest in mass market properties should come back, said OCBC.
'Given that only five projects with total of 1,139 units are expected to be launched in the outside central region between Q2 2008 and Q3 2008, this should ease concerns of oversupply and drive the take-up rate higher over the next few quarters,' analyst Foo Sze Ming noted.
By UMA SHANKARI
SINGAPORE is still a safe haven for property investments but a market peak is approaching, Pacific Star says in a recent report.
The Singapore-based property group is most bullish on the retail sector here, recommending that investors add to investments in that segment. The residential and office sectors, on the other hand, are rated 'neutral'.
In the same vein, OCBC Investment Research reiterated its 'neutral' view on the residential sector here in a June 12 report.
According to Pacific Star, the retail market here is tightening. Vacancy rates have fallen to levels not seen since 1993 and rents continue to climb slowly, with an increase of one per cent in Q1 this year, after a 0.6 per cent rise in Q4 2007.
Retail spending is expected to increase in line with growing tourism and rising incomes.
'Marketing agents report that Orchard Central and Ion Orchard, two prime (upcoming) shopping centres in Orchard Road, are attracting strong rental enquiries from retailers that currently do not operate in Singapore,' Pacific Star's report said. 'Rents at Ion are expected to significantly surpass current prime retail rents.'
For the office sector, the current demand-supply imbalance is expected to support rents till 2009, said Pacific Star. 'Office demand is still firm with leasing agents lamenting the lack of available space rather than a lack of enquiries, although the number of enquiries would have fallen somewhat.'
But an above-normal supply of office space will put pressure on rents from 2010, even if growing demand from the services sector prevents any excessive correction, it said.
In the residential segment, Pacific Star expects the current stupor to continue, as there are few catalysts for the rest of 2008. It believes prices and transaction volumes will continue to soften for the rest of the year.
However, the initial catalysts for recovery are expected in 2009, when Singapore's economic growth is expected to exceed that of 2008, according to Pacific Star.
The recovery will be fuelled by immigration and higher incomes that will make it more affordable for Singaporeans to buy mid and high-end private homes, it said.
In a report on the residential market here, OCBC sounded a warning, saying past trends point towards another price correction over the next few quarters.
On the other hand, interest in mass market properties should come back, said OCBC.
'Given that only five projects with total of 1,139 units are expected to be launched in the outside central region between Q2 2008 and Q3 2008, this should ease concerns of oversupply and drive the take-up rate higher over the next few quarters,' analyst Foo Sze Ming noted.
Thursday, June 19, 2008
Straits Times: Positive outlook for Asian property
Positive outlook for Asian property
Inflows from outside region rising as a result of credit crisis in US and Europe, says report
By Joyce Teo, Property Correspondent
THE flow of capital into the Asia-Pacific's real estate market from outside the region is accelerating, a new report on property investment has found.
This is the result of the credit crisis in the United States and Europe, said the report by KPMG, FTSE Group and Asian Public Real Estate Association (Aprea).
The acceleration is coming off the back of prolonged steady growth, which has been powered by a combination of opportunistic and increasingly longer-term investments, it found.
'With the credit crisis in the US and Europe, investors are seeing a slowdown there, so they are looking to Asia for growth,' said FTSE Group's head of quantitative research (Asia-Pacific), Mr Jamie Perrett.
Many institutional investors, such as pension funds, are looking to diversify their portfolios and increase their property allocations, he told The Straits Times.
Real estate as an asset class has outshone equities and long-term government bonds over the past decade, providing average returns of 7 per cent to 8 per cent, said the report.
And, while returns on real estate investments are expected to decline in most countries, returns in the Asia-Pacific are expected to remain higher than the global average of slightly over 5 per cent for the coming year, it said.
Market sentiment in Asia has been hit by the credit crunch and it is unclear when a rebound will occur, but the regional outlook should remain positive, said Aprea's chief executive officer, Mr Peter Mitchell.
The interest in investing in Asia remains but there are signs of a wait-and-see approach, he said. 'We need to take a longer-term perspective.'
Real estate investment trusts (Reits) are not growth stocks but good defensive stocks and inflation hedges, said Mr Mitchell. Projections show Asia's Reit market with a capitalisation exceeding US$100 billion (S$136.8 billion) by 2010.
'Despite the current tightening of credit from banks, the deals will continue to take place. But they may take longer, the price may be higher and it could lead to a temporary slowing in the supply cycle,' said Mr Andrew Weir, KPMG's partner in charge of property and infrastructure in China and the Asia-Pacific, in a statement.
'However, the current sub-prime fallout elsewhere may well act as a catalyst for the inevitable further development of the Asia-Pacific as a centre of property and investment management.'
According to the report, real estate funds remain the dominant source of capital for property investments in Asia this year.
Asian real estate, it said, may be experiencing some short-term pain but will eventually benefit from the credit crunch.
'In time, the credit crisis will result in Asia being regarded on a more equal and level-playing field compared to the more mature but struggling markets of the US and Europe.'
Yesterday, FTSE and Aprea also announced that they signed an agreement to develop new indexes for the Asia-Pacific real estate sector.
Said Mr Mitchell: 'It will give more visibility to Asian real estate markets, thereby enhancing the region's access to global capital.'
Inflows from outside region rising as a result of credit crisis in US and Europe, says report
By Joyce Teo, Property Correspondent
THE flow of capital into the Asia-Pacific's real estate market from outside the region is accelerating, a new report on property investment has found.
This is the result of the credit crisis in the United States and Europe, said the report by KPMG, FTSE Group and Asian Public Real Estate Association (Aprea).
The acceleration is coming off the back of prolonged steady growth, which has been powered by a combination of opportunistic and increasingly longer-term investments, it found.
'With the credit crisis in the US and Europe, investors are seeing a slowdown there, so they are looking to Asia for growth,' said FTSE Group's head of quantitative research (Asia-Pacific), Mr Jamie Perrett.
Many institutional investors, such as pension funds, are looking to diversify their portfolios and increase their property allocations, he told The Straits Times.
Real estate as an asset class has outshone equities and long-term government bonds over the past decade, providing average returns of 7 per cent to 8 per cent, said the report.
And, while returns on real estate investments are expected to decline in most countries, returns in the Asia-Pacific are expected to remain higher than the global average of slightly over 5 per cent for the coming year, it said.
Market sentiment in Asia has been hit by the credit crunch and it is unclear when a rebound will occur, but the regional outlook should remain positive, said Aprea's chief executive officer, Mr Peter Mitchell.
The interest in investing in Asia remains but there are signs of a wait-and-see approach, he said. 'We need to take a longer-term perspective.'
Real estate investment trusts (Reits) are not growth stocks but good defensive stocks and inflation hedges, said Mr Mitchell. Projections show Asia's Reit market with a capitalisation exceeding US$100 billion (S$136.8 billion) by 2010.
'Despite the current tightening of credit from banks, the deals will continue to take place. But they may take longer, the price may be higher and it could lead to a temporary slowing in the supply cycle,' said Mr Andrew Weir, KPMG's partner in charge of property and infrastructure in China and the Asia-Pacific, in a statement.
'However, the current sub-prime fallout elsewhere may well act as a catalyst for the inevitable further development of the Asia-Pacific as a centre of property and investment management.'
According to the report, real estate funds remain the dominant source of capital for property investments in Asia this year.
Asian real estate, it said, may be experiencing some short-term pain but will eventually benefit from the credit crunch.
'In time, the credit crisis will result in Asia being regarded on a more equal and level-playing field compared to the more mature but struggling markets of the US and Europe.'
Yesterday, FTSE and Aprea also announced that they signed an agreement to develop new indexes for the Asia-Pacific real estate sector.
Said Mr Mitchell: 'It will give more visibility to Asian real estate markets, thereby enhancing the region's access to global capital.'
Wednesday, June 11, 2008
Straits Times: Prices of some new properties coming down
June 12, 2008
Prices of some new properties coming down Move may signal end of months-long stand-off between buyers and sellers
By Fiona Chan, Property Reporter
GOOD news for homebuyers: The prices of some new developments are finally starting to come down.
At least two new projects have been tagged with prices below what they were expected to fetch just months ago.
This may be because developers are faced with no sign of improvement in the cooling property market, consultants say. They may be choosing to move units by making their projects more affordable rather than continuing to wait out the gloomy sentiment.
One example is Dakota Residences in Dakota Crescent, a 99-year leasehold project by Ho Bee Investment and NTUC Choice Homes.
Sales of its 348 units will start next Saturday at an average of about $950 per sq ft (psf) - below the $1,000 psf to $1,100 psf that Ho Bee had previously targeted.
This means a 1,300 sq ft three-bedroom unit would cost about $1.24 million, down from as much as $1.43 million previously.
'After the land cost and building cost, the break-even price is actually almost $900 psf,' said a property agent, who asked not to be named.
The Straits Times understands that about 120 units will be released in the first phase, and prices may go up by at least 5 per cent for the remaining units, depending on demand.
For now, the two- and three-bedroom units that face away from Geylang River are said to cost $950 psf to $970 psf, while the bigger four-bedroom units facing the river will go for $1,000 psf.
City Developments' (CDL) Shelford Suites in Shelford Road has also started previews for its 77 units at about $1,600 psf on average.
Market watchers said this was lower than expected, as two units were sold in March for $1,869 psf and $1,905 psf.
Shelford Suites' launch had been delayed for months as CDL waited for sentiment to improve.
Property consultants say the act of lowering prices may be the beginning of the end of a months-long stand-off between homebuyers and home sellers that has led to a slump in transactions.
Would-be buyers have proved strongly resistant to current property prices, which have jumped 36 per cent in the last five quarters, while sellers have refused to reduce their prices until now.
But while lowering prices may jump-start the market, a one-off reduction may not be enough to sustain sales, said Mr Colin Tan, the head of research and consultancy at Chesterton International.
'Developers will have to continue to reduce prices if they want to maintain sales, as many projects are still out of the reach of owner-occupiers,' he said.
Meanwhile, developers are gearing up to launch more mid-tier projects for an increasingly price-sensitive market.
East Bay, a 40-unit condominium at Tay Lian Teck Road off Upper East Coast Road, will be on sale in the coming weeks. Prices average $1,100 psf, starting at about $600,000.
Also in the east, Ivory at Ceylon Road has sold about five of its 28 units. Prices start at $558,000 for a 640 sq ft two-bedroom apartment, averaging $800 psf.
At 353 Pasir Panjang Road, a 19-unit boutique project will be completed soon, though sales have just started. A handful of units have been sold so far, with one-bedroom apartments going for $550,000, and three-bedroom units priced at $1.4 million to $1.5 million.
Prices of some new properties coming down Move may signal end of months-long stand-off between buyers and sellers
By Fiona Chan, Property Reporter
GOOD news for homebuyers: The prices of some new developments are finally starting to come down.
At least two new projects have been tagged with prices below what they were expected to fetch just months ago.
This may be because developers are faced with no sign of improvement in the cooling property market, consultants say. They may be choosing to move units by making their projects more affordable rather than continuing to wait out the gloomy sentiment.
One example is Dakota Residences in Dakota Crescent, a 99-year leasehold project by Ho Bee Investment and NTUC Choice Homes.
Sales of its 348 units will start next Saturday at an average of about $950 per sq ft (psf) - below the $1,000 psf to $1,100 psf that Ho Bee had previously targeted.
This means a 1,300 sq ft three-bedroom unit would cost about $1.24 million, down from as much as $1.43 million previously.
'After the land cost and building cost, the break-even price is actually almost $900 psf,' said a property agent, who asked not to be named.
The Straits Times understands that about 120 units will be released in the first phase, and prices may go up by at least 5 per cent for the remaining units, depending on demand.
For now, the two- and three-bedroom units that face away from Geylang River are said to cost $950 psf to $970 psf, while the bigger four-bedroom units facing the river will go for $1,000 psf.
City Developments' (CDL) Shelford Suites in Shelford Road has also started previews for its 77 units at about $1,600 psf on average.
Market watchers said this was lower than expected, as two units were sold in March for $1,869 psf and $1,905 psf.
Shelford Suites' launch had been delayed for months as CDL waited for sentiment to improve.
Property consultants say the act of lowering prices may be the beginning of the end of a months-long stand-off between homebuyers and home sellers that has led to a slump in transactions.
Would-be buyers have proved strongly resistant to current property prices, which have jumped 36 per cent in the last five quarters, while sellers have refused to reduce their prices until now.
But while lowering prices may jump-start the market, a one-off reduction may not be enough to sustain sales, said Mr Colin Tan, the head of research and consultancy at Chesterton International.
'Developers will have to continue to reduce prices if they want to maintain sales, as many projects are still out of the reach of owner-occupiers,' he said.
Meanwhile, developers are gearing up to launch more mid-tier projects for an increasingly price-sensitive market.
East Bay, a 40-unit condominium at Tay Lian Teck Road off Upper East Coast Road, will be on sale in the coming weeks. Prices average $1,100 psf, starting at about $600,000.
Also in the east, Ivory at Ceylon Road has sold about five of its 28 units. Prices start at $558,000 for a 640 sq ft two-bedroom apartment, averaging $800 psf.
At 353 Pasir Panjang Road, a 19-unit boutique project will be completed soon, though sales have just started. A handful of units have been sold so far, with one-bedroom apartments going for $550,000, and three-bedroom units priced at $1.4 million to $1.5 million.
Sunday, June 8, 2008
Business Times: German fund to pour up to 4b euros into Asia
June 5, 2008
German fund to pour up to 4b euros into AsiaFavourite markets are Japan, South Korea, Singapore and Malaysia.
(HONG KONG) German fund manager Union Investment Real Estate plans to invest up to four billion euros (S$8.44 billion) in Asia over five years, hoping its drive for diversification will also give returns an extra kick.
German open-ended property funds, including those run by Union Investment, have been busy snapping up property abroad since a redemptions crisis forced them to sell many assets in their home market in 2005 and early 2006.
Union Investment opened an office in Singapore in 2006, and is keen to ramp up its investment in Asia from the current 600 million euros, according to its Asia head, Steffen Wolf.
Globally, the firm has around 15 billion euros of assets under management.
'Asia is very much top of our priority list,' Mr Wolf said in a telephone interview from Singapore. 'We should be looking at between two and four billion euros over, say, five years.'
A pall was cast over Germany's entire open-ended property funds industry in 2005 when attempts to correct inflated valuations of assets spurred thousands of investors to try to cash in investments before fund units were repriced.
Deutsche Bank took the unprecedented step of freezing redemptions in its flagship Grundbesitz-Invest fund, and funds managed by Germany's biggest open-ended fund manager DekaBank were also hit.
But Mr Wolf said Union Investment had seen more money flow into its funds in the last year, despite a global credit crunch that has weakened commercial pro-perty prices in several markets, including the United States and Britain.
'Investors are quite aware of our risk and return profile, and are shifting from stocks to safer alternatives - savings accounts, government bonds or property,' he said.
Union Investment's funds, such as Unilmmo Global and Unilmmo Europa, usually give annual total returns of 4-6 per cent, while its investments in Asia are giving 5-6 per cent, Mr Wolf said.
Despite signs that the Tokyo office market is weakening, Japan tops the firm's list of favourite Asian markets, which also includes South Korea, Singapore and Malaysia.
Analysts believe prices for second-grade and small offices in Tokyo will fall this year, sending yields higher by as much as 200 basis points from about 4 per cent now. Mr Wolf agreed that the office market was softening, but said the type of top-notch buildings it wants to buy will hold their value.
'We're actually quite confident and we're in the process of buying more assets,' Mr Wolf said. 'We believe fundamentals are okay, there's still demand and not enough decent supply. I think the market will pick up in the next 12 to 24 months.' Union Investment has already bought 12 buildings in Tokyo.
And on Monday, rival open-ended fund Grundbesitz Global said it bought a Tokyo office block - the Nikko Building - from a Japanese property firm for 117 million euros.
German fund to pour up to 4b euros into AsiaFavourite markets are Japan, South Korea, Singapore and Malaysia.
(HONG KONG) German fund manager Union Investment Real Estate plans to invest up to four billion euros (S$8.44 billion) in Asia over five years, hoping its drive for diversification will also give returns an extra kick.
German open-ended property funds, including those run by Union Investment, have been busy snapping up property abroad since a redemptions crisis forced them to sell many assets in their home market in 2005 and early 2006.
Union Investment opened an office in Singapore in 2006, and is keen to ramp up its investment in Asia from the current 600 million euros, according to its Asia head, Steffen Wolf.
Globally, the firm has around 15 billion euros of assets under management.
'Asia is very much top of our priority list,' Mr Wolf said in a telephone interview from Singapore. 'We should be looking at between two and four billion euros over, say, five years.'
A pall was cast over Germany's entire open-ended property funds industry in 2005 when attempts to correct inflated valuations of assets spurred thousands of investors to try to cash in investments before fund units were repriced.
Deutsche Bank took the unprecedented step of freezing redemptions in its flagship Grundbesitz-Invest fund, and funds managed by Germany's biggest open-ended fund manager DekaBank were also hit.
But Mr Wolf said Union Investment had seen more money flow into its funds in the last year, despite a global credit crunch that has weakened commercial pro-perty prices in several markets, including the United States and Britain.
'Investors are quite aware of our risk and return profile, and are shifting from stocks to safer alternatives - savings accounts, government bonds or property,' he said.
Union Investment's funds, such as Unilmmo Global and Unilmmo Europa, usually give annual total returns of 4-6 per cent, while its investments in Asia are giving 5-6 per cent, Mr Wolf said.
Despite signs that the Tokyo office market is weakening, Japan tops the firm's list of favourite Asian markets, which also includes South Korea, Singapore and Malaysia.
Analysts believe prices for second-grade and small offices in Tokyo will fall this year, sending yields higher by as much as 200 basis points from about 4 per cent now. Mr Wolf agreed that the office market was softening, but said the type of top-notch buildings it wants to buy will hold their value.
'We're actually quite confident and we're in the process of buying more assets,' Mr Wolf said. 'We believe fundamentals are okay, there's still demand and not enough decent supply. I think the market will pick up in the next 12 to 24 months.' Union Investment has already bought 12 buildings in Tokyo.
And on Monday, rival open-ended fund Grundbesitz Global said it bought a Tokyo office block - the Nikko Building - from a Japanese property firm for 117 million euros.
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