Sun, 14 Jan 2001

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