Issue 66

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CONTENTS
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The 2 Numbers Smart Property Investors Must Know: COCR and IRR

FROM THE

EDITOR

Welcome to the 66th edition of the Singapore Property Weekly. Hope you like it!

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Singapore Property News This Week Resale Property Transactions (August 8 August 14)

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SINGAPORE PROPERTY WEEKLY Issue 66

The 2 Numbers Smart Property Investors Must Know: COCR and IRR
By guest contributor Gerald Tay
In the first part of this article, we talked about the importance of looking at numbers instead of location when buying investment property. There are two vital numbers that novice investors and speculators frequently ignore: the Cash-on-Cash Return and Internal Rate of Return. Lets now take a closer look at those two vital numbers. Cash-on-Cash Return (COCR) Most novice investors and speculators look at net yield only. This can be highly deceiving as it does not tell you if your money is safer in the bank or if you can get higher returns in other investments.
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SINGAPORE PROPERTY WEEKLY Issue 66 The calculation of net yield is typically based on the purchase price, rental income and net of all expenses except mortgage payments. The difference between net yield and COCR is that the latter factors in both the principle payment as well as the interest on the mortgage loan, including all other expenses incurred. Novice investors and speculators only look at the purchase price or PSF because they buy on the hope of capital appreciation, which can be highly dangerous. Professional investors look at the COCR that is, if you were to put in your initial sum of capital (including stamp duty, downpayment, renovations costs, legal fees, etc) minus all property-related expenses (including mortgage and interest), what will the actual return on capital be in the first year? Will your money be safer in the bank instead?
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Internal Rate of Return (IRR) Professional investors use this tool to measure and compare the profitability of investments. It can also be defined as the annualised effective compounded rate of return. It is quite similar to COCR, except that it measures a period (years) of different cashflows yielded by the investment till the point of exit. Because it is a rate of return, it is an indicator of the efficiency, quality and yield of an investment. An investment is considered acceptable if its internal rate of return is higher than the minimal acceptable rate of return or cost of capital. Example: If your minimal acceptable rate of return according to your overall investment plan is 10%, and the IRR for the investment deal upon exit after five years (before inflation and possible interest rate increases) is 8%,
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SINGAPORE PROPERTY WEEKLY Issue 66 then it is definitely not worth your while to enter. Similarly, if your cost of money (borrowing) is 1% today, your acceptable rate of return is 8% and your investment potentially yields an IRR of 10% over five years, then it may be worthwhile to enter as there is a safety margin and it meets your target requirement. How professional investors think about the purchase price The COCR and IRR measure the actual performance of your property and take into account the value you can get out of your investment property. When I look at an investment, the purchase price is the last of my considerations. It is only used because I need to compute both my COCR and IRR to determine the value of the investment.
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Novice investors and speculators pay the sellers price or market price. Professional investors dictate the price to pay to the seller, not the other way round! If the price does not reach my targeted benchmark for both the COCR and IRR in my negotiations, I will walk away from the deal, no matter how good an investment others say it is. The purchase price can be high, but if I can get value through both the COCR and IRR, I know I have a winning investment. Put money in your pocket immediately Remember, a good property will always put money in your pocket. A bad property takes money out of your pocket. Buying a property in a not-so good or average location but that puts money in your pocket today is lot better than buying a property in a good location that takes money out of your pocket every month.
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SINGAPORE PROPERTY WEEKLY Issue 66 But please do not rush to buy properties in areas where (as the Chinese saying goes) even the birds dont lay eggs based on this statement. Do your own due diligence first! Make investment decisions based on actual numbers So now you know why professional investors seldom lose money because they make key critical buying decisions based on actual numbers, not on speculation that a property has goo growth potential or because it is in a good location. Professional investors do not count on potential to make money that is a bonus. The smart investor will gain both good cash-flow as well as capital appreciation if this bonus happens. If the promised potential growth does not happen for whatever reason, there is still positive cashflow from the property. The next time someone tries to sell you an investment property (especially the new launches nowadays), simply ask for these two numbers from them. If they stare at you with a blank look (most likely because they have
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I know someone who bought a three bedroom condo in Woodlands during the SARS period in 2003. She bought it at a very low price, in the region of S$400,000, and paid cash for it. Today, she is enjoying the rental income generated every month from her tenants, with a net yield above 10%.
I am not saying you need to pay full cash payment for a property to be able to enjoy such yields. I strongly believe leverage is a very powerful tool especially in real estate investment. All my properties are leveraged. My point is that if those unleveraged numbers make financial sense, then the property is a good investment even in an average location like Woodlands.
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SINGAPORE PROPERTY WEEKLY Issue 66 never heard of COCR and IRR) and say it is a good investment simply because it has a really good potential net yield and it is in a good location, take that as a red flag! Any investment will carry a certain amount of risk understanding these two key numbers will help mitigate those risks substantially and propel you forward in your investment journey. By guest contributor Gerald Tay, CEO and Chief Trainer at CREi Academy Group.

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SINGAPORE PROPERTY WEEKLY Issue 66

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SINGAPORE PROPERTY WEEKLY Issue 66

Singapore Property This Week

Residential
Sims Drive freehold factory sold for $43m The landed factory near the junction of Sims Drive and Lorong 17 Geylang which sits on a 34,912.7 sq ft site was sold to a subsidiary of Fong Tat Group at $43.18 million or $495 psf ppr based on the 2.5 GPR. No development charge is payable for the redevelopment of the site zoned Business 1. Industrial property prices rose by 7.3% and 8.4% in Q1 and Q2 and this trend is likely to continue given the demand from companies and investors turning their interest into this market sector. (Source: Business Times) 30-year leasehold Bukit Batok industrial site draws $32.3m top bid The 161,578 sq ft site at Bukit Batok Street 23 attracted a total of four bids, with the top bid at $32.3 million, or $80.03 psf ppr from Soilbuild Group Holdings. This price is a reflection of a fair market price, a result of the cooling measures such as the capping of leases for all industrial sites at 30 years, and the restrictions on strata sub-division. The site zoned Business 1 has a maximum permissible gross plot ratio of 2.5 and a maximum building height of 153 metres above mean sea level. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 66 Commercial Thomson View condo up for sale again The 99-year leasehold 540,314 sq ft residential site at Upper Thomson Road is asking for $580 million or $685 psf ppr if a $107 million premium to enhance the property's use and a $90 million premium to top up the lease are included. If another $46 million development charge is paid for the additional 10% GFA for balcony area, it would increase to $659 psf ppr. It has a 2.1 GPR and is zoned for residential use. The tender will close on Sept 4 at 3pm. (Source: Business Times) Increased sales in luxury property market Sales in the luxury property market nearly doubled in Q2, but prices have falling, with the prices for non-landed new sales falling by 5% to $2,374 psf in Q1 and to $2,230 psf in
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Q2, possibly as a result of the large supply of 12,855 units (731 completed units and 12,124 uncompleted).Meanwhile, the sales have been on the rise, with new sales increasing by 246%to 235 units in Q2, sub-sales increasing by 34%to 94 units, and resales increasing 86% to 585 units. (Source: Business Times) Busy bungalow market There had been a number of bungalows transacted recently, including a few in Good Class Bungalow Areas (GCBAs). These bungalows include a 999-year leasehold twostorey bungalow with a 9,500 sq ft built-up area at Yarwood Avenue sitting on a 16,278 sq ft site sold for $19.5 million or $1,198 psf, a freehold two-storey bungalow at Oriole Crescent sold for $18.2 million - or $1,726 psf based on a 10,546 sq ft land area, and a sixbedroom bungalow with a gym and a pool in
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SINGAPORE PROPERTY WEEKLY Issue 66 Camden Park which was sold for $25 million, or $1,659 psf on the 15,070 sq ft land area. A new two-storey, seven-en-suite-bedroom bungalow with a 17,000 sq ft built up area in Binjai Park was also sold at $32.9 million or $1,471 psf based on the 22,360 sq ft site area while a small freehold five-bedroom bungalow at Woollerton Drive was sold for $12.6 million or $1,570 psf based on the land area of 7,987 sq ft. Deals transacted outside GCB Areas include a two-storey fourbedroom bungalow with a roof terrace, home theatre and pool room at Trevose Crescent, which was sold for $13.7 million or $1,788 psf based on a 7,662 sq ft land area. Buyers of these GCBs are mostly Singaporean buyeroccupiers, and given the reasonable prices, there may be more GCBs deals. (Source: Business Times) Three 99-year residential sites yielding up to 1,600 units launched for sale The first site, at New Upper Changi Road, is a 343,170.4 sq ft plot for condominium/flat development with a 549,077.3 sq ft maximum GFA that can yield 540 units. The site is expected to draw much interest with eight to 12 bids, and a top bid of $630-$700 psf resulting in a $1,050-1,100 breakeven price. Since it is located near Tanah Merah MRT and the upcoming Bedok Mall, it could potentially sell for $1,200-$1,350 psf. However, there aredownsides to the site, such as competition from two neighbouring sites sold earlier. Next is a 177,658.2 sq ft EC site at Woodlands Avenue 6/Woodlands Drive 16 witha 497,442.9 sq ft maximum GFA that can yield 465 units.
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SINGAPORE PROPERTY WEEKLY Issue 66 The site is expected to be fairly attractive, drawing three to seven bidders with a top bid of $300-$350 psf ppr, since it there has been limited supply of EC sites in the region. Its expected breakeven price and average selling price are $600-680 psf and $730-750 psf respectively. The final site is a 2.38-hectare site reserve site at Prince Charles Crescent which was triggered for sale by a $390 million commitment. It has a maximum permissible GFA of some 537,656.8 sq ft, and is expected to attract a $760-850 psf ppr top bid. Tender for the three sites will close at 12 noon on Sept 20, Oct 9 and October 16 respectively. (Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 66

Non-Landed Residential Resale Property Transactions for the Week of Aug 8 Aug 14
Postal District 1 1 2 3 4 4 5 5 5 5 5 5 5 5 5 5 8 9 9 9 9 9 9 9 10 Project Name ONE SHENTON ONE SHENTON THE BEACON QUEENS MARINA COLLECTION THE OCEANFRONT @ SENTOSA COVE THE MAYLEA WEST-N LANDRIDGE CONDOMINIUM THE PARC CONDOMINIUM BOTANNIA THE ESTIVA BOTANNIA THE CASSANDRA DOVER PARKVIEW PARK WEST CITY SQUARE RESIDENCES VIDA KIM SIA COURT THE SUITES AT CENTRAL THE PIER AT ROBERTSON ASPEN HEIGHTS ASPEN HEIGHTS ASPEN HEIGHTS NASSIM MANSION Area (sqft) 1,098 1,066 1,109 915 2,099 1,216 1,023 1,216 1,776 1,292 1,249 980 1,227 1,324 1,249 872 872 517 1,421 1,442 1,206 1,572 1,044 2,691 3,412 Transacted Price ($) 2,316,780 1,980,000 1,560,000 1,250,000 5,877,200 2,432,000 1,350,000 1,600,000 2,150,000 1,550,000 1,440,000 1,120,000 1,380,000 1,444,000 1,350,000 810,000 1,363,800 1,165,000 3,000,000 3,000,000 2,468,000 2,545,020 1,633,000 4,000,000 9,800,000 Price Tenure ($ psf) 2,110 99 1,858 99 1,407 99 1,366 99 2,800 99 1,999 99 1,320 FH 1,315 FH 1,211 FH 1,200 FH 1,153 956 1,143 FH 1,125 956 1,091 FH 1,081 99 929 99 1,564 FH 2,255 FH 2,111 FH 2,080 FH 2,047 FH 1,619 999 1,564 999 1,486 999 2,872 FH Postal District 10 10 10 10 10 10 10 11 11 11 11 14 14 14 14 14 14 15 15 15 15 15 15 15 15 Project Name DRAYCOTT EIGHT THE LOFT BALMORAL HILLS JEWEL OF BALMORAL ZENITH WATERFALL GARDENS HOLLAND PEAK SKY@ELEVEN SHELFORD REGENCY NINETEEN SHELFORD ROAD HILLCREST ARCADIA CITY PLAZA THE TRUMPS ASTORIA PARK CASA SARINA SIMS GREEN WING FONG COURT THE SEA VIEW THE ESTA THE SEA VIEW THE MAKENA ONE AMBER THE ESTA ESTIQUE MANDARIN GARDEN CONDOMINIUM Area (sqft) 2,895 1,324 1,841 829 743 1,830 2,551 2,271 1,281 1,604 1,098 915 1,356 1,195 1,119 1,238 1,098 560 1,130 2,723 1,292 1,335 1,410 603 829 Transacted Price ($) 6,500,000 2,800,000 3,690,000 1,600,000 1,390,000 3,019,000 2,880,000 3,951,540 1,630,000 2,000,000 1,050,000 980,000 1,450,000 1,160,000 1,050,000 1,070,000 830,000 1,100,000 1,582,000 3,800,000 1,780,000 1,838,200 1,940,188 780,000 1,058,000 Price Tenure ($ psf) 2,245 99 2,115 99 2,005 FH 1,930 FH 1,872 999 1,650 FH 1,129 FH 1,740 FH 1,273 FH 1,247 FH 956 99 1,071 FH 1,069 99 971 99 938 FH 864 99 756 FH 1,965 FH 1,400 FH 1,395 FH 1,378 FH 1,377 FH 1,376 FH 1,294 FH 1,277 99

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SINGAPORE PROPERTY WEEKLY Issue 66

Postal District 15 15 15 15 16 16 16 16 16 16 16 16 16 16 17 17 17 17 18 18 18 18 19 20 20 20 20 20 Project Name COSTA RHU SIGNATURE CREST THE ESPIRA MANDARIN GARDEN CONDOMINIUM COSTA DEL SOL LANDBAY CONDOMINIUM CHANGI COURT THE BAYSHORE CHANGI COURT CASAFINA THE TANAMERA EASTWOOD CENTRE CASAFINA VENEZIO FERRARIA PARK CONDOMINIUM FERRARIA PARK CONDOMINIUM BALLOTA PARK CONDOMINIUM LOYANG VALLEY OASIS @ ELIAS SAVANNAH CONDOPARK CHANGI RISE CONDOMINIUM ELIAS GREEN THE YARDLEY CLOVER BY THE PARK BISHAN 8 THE GARDENS AT BISHAN BISHAN POINT LAKEVIEW ESTATE Area (sqft) 1,012 1,496 872 1,787 1,313 1,184 1,367 1,012 1,389 1,432 947 926 1,378 2,486 1,023 1,195 1,281 1,055 1,206 1,453 1,023 1,367 1,302 1,755 1,184 883 1,184 1,615 Transacted Price ($) 1,200,000 1,655,000 950,000 1,660,000 1,740,000 1,300,000 1,415,000 1,022,000 1,300,000 1,280,000 838,000 770,000 1,080,000 1,680,000 1,010,000 1,170,000 980,000 780,000 1,055,000 1,250,000 870,000 875,000 1,432,200 2,250,000 1,350,000 910,000 1,170,000 1,405,000 Price Tenure ($ psf) 1,186 99 1,106 FH 1,090 FH 929 99 1,325 99 1,098 FH 1,035 FH 1,010 99 936 FH 894 99 885 99 832 99 784 99 676 FH 988 FH 979 FH 765 FH 739 99 875 99 860 99 851 99 640 99 1,100 FH 1,282 99 1,140 99 1,031 99 988 99 870 99

Postal District 20 21 21 21 21 21 21 21 21 21 22 23 23 23 23 23 23 23 23 26 27 27 27 28 28

Project Name LAKEVIEW ESTATE MAPLEWOODS MAPLEWOODS GARDENVISTA GRAND REGENCY CAVENDISH PARK PANDAN VALLEY CLEMENTI PARK GOODLUCK GARDEN PINE GROVE THE LAKESHORE THE PETALS DAIRY FARM ESTATE GLENDALE PARK THE JADE GUILIN VIEW REGENT HEIGHTS REGENT GROVE PHOENIX HEIGHTS THE CALROSE SELETARIS ORCHID PARK CONDOMINIUM YISHUN SAPPHIRE SERENITY PARK GRANDE VISTA

Area (sqft) 1,615 1,033 1,313 926 818 1,410 1,755 1,345 1,701 1,679 1,184 1,259 2,207 1,249 1,755 1,281 1,023 1,163 1,335 1,238 1,647 980 1,206 1,313 1,658

Transacted Price ($) 1,210,000 1,450,000 1,800,000 1,110,000 930,000 1,550,000 1,850,000 1,340,000 1,660,000 1,370,000 1,180,000 1,250,000 2,150,000 1,190,000 1,550,000 1,016,800 790,000 895,000 739,000 1,418,000 1,258,000 678,000 828,000 1,230,000 1,420,000

Price Tenure ($ psf) 749 99 1,403 FH 1,371 FH 1,199 99 1,137 FH 1,099 99 1,054 FH 996 FH 976 FH 816 99 997 99 993 FH 974 FH 953 FH 883 99 794 99 773 99 770 99 554 99 1,146 FH 764 FH 692 99 687 99 937 FH 857 999

NOTE: This data only covers non-landed residential resale property transactions with caveats lodged with the Singapore Land Authority. Typically, caveats are lodged at least 2-3 weeks after a purchaser signs an OTP, hence the lagged nature of the data. Page | 13

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