Giving outsiders confidence to invest

Giving outsiders confidence to invest

JAKARTA (JP): Prema says that buying property in Singapore is
simple. The brokers are reliable and deals do not involve "black
money".

It is true that the laws are very strict but they are also
very clear, making the process of buying and selling property
very easy. All transactions are transparent, involving a lawyer
and that reduces worries over the legal status of a deal.

Many a moneyed Indonesian today has a second home in Singapore
as the city-state is considered a safe haven in every respect.

Property in Singapore is considered good in terms of capital
appreciation and rental returns.

Apart from business purposes, Singapore is close enough to
home and, therefore, Indonesians often send children to study
there and like all foreigners, including Indonesians they can buy
condominiums and apartments above six stories without much ado.
The only difference is that foreigners do not borrow in the local
currency but in US$ or other equivalent currencies up to 65
percent of the value or purchase price of the property.

"All this goes to provide a real sense of security," says
Prema. And Prema should know because she has recently bought a
four-room house from the government.

Ever since she came to work in Singapore in 1995, she had to
move residences four times, dishing out as much as S$1,500 each
month. Then she applied for a subsidized apartment from the
housing development board (HDB) as she discovered that property
tax, maintenance and other expenses are only a fraction of what
is paid for private property.

Besides, she felt her money was safe invested in public
housing since the government is unlikely, even in the worst of
economic circumstances, to let HDB prices drop too low. She could
buy a home because she discovered that she was allowed an 18-year
loan from her provident fund account at an interest rate of only
4.7 percent. Although considered far more prestigious to own
private property, Prema preferred not to risk putting her hard
earned salary into a market that is so unpredictable.

"Thanks to all these fantastic government policies I am now
the owner of a home in one of the most affluent countries in the
world," smiles Prema, a single, working mother in her early 40s.

For the last three decades the Singapore government, through
HDB, has encouraged home ownership by offering apartments for
sale to Singapore citizens and permanent residents at subsidized
rates. For many young couple, owning a HDB flat is the first step
to eventually owning private property, finances permitting. After
purchasing an apartment from HDB they invariably resell it to
others in the open market after five years and often make a
profit on the resale.

"Certain government regulations may have narrowed down the
profit margin considerably but a HDB flat still remains a good
investment," feels Cynthia Wong, associate director for regional
research and consultancy, Jones Lang LaSalle.

In contrast to other market segments, the residential property
market, however, turned in a patchy performance last year in the
face of a supply-demand imbalance in the past. Statistics by
researchers show that transactions declined by half and price
gains in early 2000 were almost eroded by year end. With the
easing of the price of apartments, demand from HDB households
buying into private residential properties also slackened.

By end 2000, average prices of freehold apartments in the
prime areas ranged from S$1,000 per sq ft to S$1,200 per sq ft,
compared with S$620 per sq ft to S$660 per sq ft for leasehold
apartments in other areas.

But latent demand is said to remain firm as each launch always
witnesses large crowds. The difference is that ever since an
economic crisis hit Southeast Asian economies in 1997, buyers
have become cautious and highly selective. They are also more
savvy, concentrating on lifestyle developments which remains
limited in supply. The combination recently of landed property
with club facilities at affordable prices resulted in the sellout
of three leasehold cluster housing developments at Horizon
Gardens, The Teneriffe and Horizon Green within a week of launch.

Due to the crisis, applications for new HDB flats reached an
all-time low since 1968 in March 1999 although the resale flat
applications surged 56 percent during the same time. Rental of
luxurious bungalows has increased by almost 10 percent due to
limited supply and the increase of expatriates into Singapore.

According to analysts at the end of last year, the mood of
buyers was found to be cautious and sales were low. Developers
did launch over 1,700 apartments in new projects late last year
but this is less than half the number launched in the previous
quarter of the same year. The total number of new apartments sold
also fell to about 1,000 from 2,149 while the prices of new
launches either remained flat or moderated slightly.

A glance over all of last year shows that the residential
market went through many a hiccup. Overall, the 4.6 percent
increase in average residential prices in the first half of 2000
was offset by the estimated 5 percent decline in the second half
and sentiments remained weak due to the volatile condition of the
stock market throughout the year. To put the record straight for
the long run, prices were allowed a breather last year as
residential prices were perceived to have recovered too quickly
in 1999.

Potential home buyers took a break too as they looked to other
forms of investments besides residential property. The mood was
sedate as buyers seemed more selective in their purchases keeping
in mind location, pricing, quality and lifestyle appeal. The
third quarter of last year was the most active with 2,149
apartments sold and 3,525 launched.

Developers too paused to pull up their socks and to think
before building. They planned better, made price adjustments and
were more attentive to the demand of buyers. Cluster housing
projects proved to be popular as an alternative to landed housing
for upgraders. Many new developments incorporated new technology
like broadband access while developments such as Caribbean at
Keppel Bay offer local area network, WebPad, PC-based web-camera
and WAP-enabled condominium portal to cater to the Internet-
powered lifestyle. The current appeal is found to be for
waterfront living like the Keppel Harbor project.

Considering Singapore's steady economic growth in 2000 and
stable growth predicted into 2001, the fundamentals are intact.
The market is expected to continue trading at current price
levels with developers competing on life style themes, project
quality and other incentives to induce purchases. While potential
home buyers who have still to commit are expected to remain
highly price sensitive given the enormous choice of apartments to
chose from.

Since the residential market is influenced terribly by the
stock market, the prediction is that renewed optimism in the
local stock market will boost confidence and developers will
happily launch another 6,000 to 8,000 new apartments. On the
other hand, if the stock market continues to be volatile,
developers will be left with little choice but to cautiously
launch 5,000 to 6,000 new apartments of lower cost projects with
competitive pricing.

Some projects likely to be launched in 2001 include Amaryllis
Ville, Binjai Crest, Compass Heights, Grange Residences, The
Linc, Keppel Land's condominium project at Butterworth Lane, MCL
Land/ Ho Bee's condominium project at Hougang Avenue 7 and
executive condominiums at Bishan Street 11 and Tampines Street
34.

Wherever one decides to put one's money, whether in a home
subsidized by the government or developed privately, the motto
remains to look before you leap. It is important to be sure
before buying property about the credentials of the developer,
the stage of development, location and exactly what it looks
like. For it is not enough to want property after seeing it in a
beautifully printed brochure alone.

There are instances when investors have paid for property
before having seen it to find that the view from the apartment is
blocked by an ugly roof top, the size of rooms is not what is
mentioned in the advertisement or that the nearest paved road is
a couple of kilometers away from the complex.

It is also important to know the rules of the country before
investing in property there. Although laws on the purchase of
houses or condominiums are generally easier in most countries, it
is best to be very sure before committing to any thing. Singapore
encourages foreigners to buy property but it is best to first
familiarize one's self with the entire set of rules regarding
property ownership. And in these uncertain times it is also
advised to be constantly in touch with Singapore's investment
climate. Just in case.

"However, opportunities may present themselves even when times
are uncertain. Stick to prime districts and you will never go
wrong," says Jerry Tan, residential director for Colliers
Jardine, Singapore.

These days, the computer is one of the best ways to get all
the information required. The lengthening list of online property
portals are full of tips. The Singapore based CXHub is only one
property portal that looks forward to handling at least 60
percent of the private residential market, potentially worth more
than S$2 billion per year in contracts online before trying to
grab the private nonresidential market worth another S$400
million per year as well.

So go ahead and click, to find out what promises are made to
you.

-- Mehru Jaffer