Issue 210

Copyright 2011-2014 www.Propwise.sg. All Rights Reserved.

CONTENTS
p2

FROM THE

EDITOR

Should Investors Buy Overseas Properties

with Rental Guarantees?

Welcome to the 210th edition of the

Singapore Property Weekly.
Hope you like it!

p9

Singapore Property News This Week

p13

Resale Property Transactions

Mr. Propwise

(May 13 May 19 )

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SINGAPORE PROPERTY WEEKLY Issue 210

Should Investors Buy Overseas Properties with

Rental Guarantees?
By Gerald Tay (guest contributor)
I want to highlight the risk to investors of the
latest money making scheme to sweep the
property industry. Overseas properties are
being heavily promoted at various property
networking events. These properties usually
come with a Rental Guarantee.
So What Is Rental Guarantee?
A rental guarantee means the developer is
giving a buyer the certainty of rental income
for a predetermined period, usually two years.
This saves the buyer from having to look for a
tenant, particularly in the coming few years
when economic uncertainty and a rising
supply of homes may drive up vacancy rates.
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SINGAPORE PROPERTY WEEKLY Issue 210

Some developers are offering 6 to 7 percent
guaranteed returns for two or three years to
entice buyers.
There are two types of Rental Guarantee
Property Schemes offered to unwitting
buyers:
1. Developers Guarantee
2. Multiple-Let Guarantee
1. Developers Guarantee
Here's how this scheme can lose a typical
investor $100,000 in two years: A developer
has 150 units and needs to sell them for
$450,000 each. But the market is oversupplied and their true value is only
$400,000. The market rental is only $400 a
week. At a purchase price of $450,000, the
investor's gross return is only 4.6%. Investors
wont find those numbers attractive.
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Heres where the deception starts. The

developer prices the units at $450,000 and
guarantees a rent of $520 a week for two
years. This provides a return of 6%. It now
looks good to investors.
The developer will lease the apartments on
the true market value of $400 and make up
the $120 shortfall to the investor. It sounds
like the developer is making a loss, but it's
not. The cost to the developer to finance the
guarantee of $120 a week comes to a total of
$12,480 over two years.
But the buyer has paid to the developer
$450,000 for a unit that's worth only
$400,000. The Developer has profited
$37,520 upfront from the buyer. In a 150 unit
development, the developer will make an
extra $5.63 million by selling apartments for
more than they're worth to ignorant buyers.
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SINGAPORE PROPERTY WEEKLY Issue 210

All thanks to a dodgy rental guarantee.
The investor ends up with a financial
nightmare. When the two-year rental
agreement expires, the investor has to find
tenants in the open market at only $400 a
week.
Previously, with the developer's guarantee,
the investors can earn $27,040 a year in
rental income. Without the guarantee, that
income has dropped to $20,800 a year. The
investors returns have fallen from 6% to
4.6% overnight.
And the problem magnifies at the time of exit.
If the investor decides to sell, they find
themselves competing with developers selling
new units with new guaranteed 6% returns on
top of the other existing supply in the market.
At $400 a week rental income and a 6%
return expected by the next buyer, the
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apartment is now worth only $347,000 in the

open market.
The investor has lost $103,000 in two years
on Fools Gold. Many developers inflate the
price of the property to factor in the rental
guarantee as a cost of selling the property.
Investors need to think very carefully about
the investment as it stands on its own
without any guarantee in place. The only
buyers for such properties are usually foreign
investors who are seeking yield. Locals will
typically not buy or rent these properties since
most are located at or near prime areas.

I know of many Singaporean buyers who fail

to understand a fundamental rule when
investing in overseas property: Only invest in
overseas real estate where the locals can
afford to buy or rent. If your market consists
primarily of foreign buyers and renters,
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SINGAPORE PROPERTY WEEKLY Issue 210

youre asking for trouble.
2. Multi-Let Guarantee
Its a simple concept: Rent a house, then sublet the rooms to sub-tenants and make as
much profit as possible.
The scheme involves property entrepreneurs
acting as middlemen between tenants and
landlords
to
sublet
rooms.
These
entrepreneurs contact landlords directly or
through property management agencies and
offer long term guaranteed rent to buyers.
They also offer to carry out minor repairs to
the property and to find and manage tenants
on behalf of the landlord. This means that
willing landlords can avoid the day-to-day
hassles of managing a property and at the
same time enjoy a guaranteed revenue
stream.

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The tenant agrees to look after the property,

take care of maintenance issues and in some
cases even carry out a refurbishment of the
property. Then, the tenant sub-lets as many
rooms as possible to willing sub-tenants who
are happy to rent a converted lounge or
dining room and live in a house shared with
six other strangers. The renter then creams
a profit on the difference between the rent he
is paying the owner/landlord and the rent
coming in from the sub-tenants as a result of
the multi-let.
Many property gurus claim to make high
profits on their property portfolios without
having to buy properties or raise large cash
sums for renovations or a deposit. They claim
to earn tens of thousands a month on the
hundreds of properties they own.

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SINGAPORE PROPERTY WEEKLY Issue 210

What they dont mention are the dirty behindthe-scenes secrets.
Sub-letting of rooms is illegal in many
countries. As well as making money from
illegal sub-letting, these high-profile gurus
are supplementing their income by providing
workshops,
seminars
and
How-to
publications.
In many countries like the UK, Sub-Letting
must be licensed by local councils and are
subject to strict regulation. It can be costly to
conform to these regulations and there are
heavy penalties for letting out rooms without a
license. It may even lead to repossession for
breaking the law. Even if the landlord is
unaware that their property is being used for
sub-letting illegally, they may still be liable.
Some middlemen may pose as tenants, but
then convert the property and sub-let
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individual rooms without the landlords

knowledge. The first time the landlord may
know that there is a problem may be when
neighbours complain about the number of
people living in the property. Sometimes the
landlord will receive the agreed upon rent, but
in other situations the landlord may never see
a penny.
One case in which a Singaporean buyer
shared with me was, his tenant took leases
on cheap USA single family homes and
illegally subdivided them into rooms. Up to
fifteen illegal tenants lived in each house and
the tenant didnt pass on the rent to the real
landlord. The owners property manager
called him months later to inform him that his
property was harbouring illegal convicts on
the local police Wanted list! What followed
was expensive legal action that turned out to
be a financial nightmare for him.
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SINGAPORE PROPERTY WEEKLY Issue 210

Another rental guarantee scheme that goes
wrong is the recent case of Eco House who
suspended their global operations (including
Singapore) leaving more than 2000 of their
investors in the lurch.
How safe is my money?
My co-partners and I have been very
successful investing in overseas properties.
90% of investors lose money because they
ask the WRONG question, How do we make
money?
They completely ignore asking the most
important question which is the key difference
between successful and loser investors, How
NOT to lose money?
Words of Wisdom for Overseas Property
Buyers: Avoid ALL rental guarantee property
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schemes available in the market

Rental guarantee is a paper promise
nothing else! Going for any legal recourse
is a foolish action. Why bother getting
yourself into such a mess when you can
avoid buying it in the first place?
Find and partner with a credible
experienced investors in the country you
want to buy into. Someone who has deep
underground knowledge of the unknown
terrain and who has done it many times
before. Make sure he has a vested
interest in you and your property.
If the above is hard to accomplish, avoid
buying altogether. Cash is king when
better opportunity comes along in your
home market.
Buy only properties which locals can
afford to buy and rent.
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SINGAPORE PROPERTY WEEKLY Issue 210

When buying overseas properties, a lot of
things can go wrong. It's a classic case of
buyer beware: rental guarantees often
guarantee investors nothing but heartache.
By guest contributor Gerald Tay, who is the
founder and coach at CREI Academy Group
Pte Ltd, an organization dedicated to
empowering retail property investors with
smarter investing philosophy and strategies.
He is a full-time investor with over 13 years of
solid experience in building his wealth
through Property Investment and is financially
wealthy today.

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SINGAPORE PROPERTY WEEKLY Issue 210

Singapore Property This Week

Residential
First smart HDB launches in Punggol
In this months build-to-order exercise, the
first smart HDB home has been launched.
Located at Punggol, Northshore Residences I
and II consist of 12 blocks. Of the 1,402 units
available, 546 are two-bedders, 112 units are
three-bedders, 519 units are four-bedders
and 225 units are five-bedders. The project is
slated to be completed in 2020. After a
$60,000 grant, the two-bedders are priced
from $28,000, the three-bedders are priced
from $132,000; the four-bedders cost
$249,000; and the five-bedders are priced
from $354,000. Market experts expect that
there will be high application rates as the
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four- and five-room flats are cheaper

compared to resale flats that are of similar
sizes in the vicinity. The HDB project will
serve as a test-bed for smart technology such
as a smart car park management system and
a waste conveyance system.
(Source: Business Times)
9,431 HDB flats launched for sale
9,431 flats were launched for sale in this
months build-to-order (BTO) and sale of
balance
flat
(SBF)
exercise.
Online
applications for this months BTO and SBF
will cease on June 2. Market experts believe
that Clementi Crest will draw high interest due
to its prime location, and close proximity to
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SINGAPORE PROPERTY WEEKLY Issue 210

retail amenities and the MRT Station. Also,
market experts believe that Northshore
Residences I & II will be a hot favourite
among buyers as it is reasonably priced and
will feature the use of smart technology.
Eugene Lim from ERA Realty believes that
the BTO prices for Clementi Crest may be
perceived as high. This is because four-room
flats at Clementi Crest have been priced from
$478,000, and five-room flats have been
priced from $576,000. According to Lim, 99year leasehold condo units in the West Coast
are priced below $1 million for two-bedroom
units and $1 million for three-bedroom units,
as such, buyers may perceive the BTO prices
for Clementi Crest as high. Also, the record
number of units released this month is
expected to affect resale demand in May and
June, said Lim.

Prices of completed non-landed private

homes fell by 0.1% in April
According to flash estimates by NUS, prices
of completed non-landed private homes have
fallen by 0.1% in April from the previous
month. The sub-index for central region has
also fallen by 0.1% in April from March.
However, the sub-index for the non-central
region remained the same. Ong Kah Seng
believes buyers are cautious about being
completed properties in April as more new
projects are expected to be completed in the
coming months. However, since the fall in
prices has been subtle, market experts
believe that buyers are still interested in the
resale market, despite competition from
developer projects. Ong added that the profile
of buyers for resale properties differ from
buyers for developer sales.

(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 210

Typically, buyers for resale properties require
a unit immediately while buyers for developer
sales can afford to wait, said Ong. As such,
the market for developer sales may not be a
direct competitor of the resale market.
(Source: Business Times)
OrangeTee: proximity to MRT station may
not impact rental yields

According to a study by OrangeTee, projects

that are located near to MRT stations may not
result in higher rental yields. Of the 34
projects in the study, 20 which were identified
to have high rental yields were not within 400
meters of the MRT station. Particularly, 56%
of the projects that were identified to have
high rental yield were located outside the
central region. Of the projects that were
identified to have high rental yield, 12 percent
of them were located in the core central
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region while 32 per cent were located in the

rest of central region. According to the study,
rental yields in the outside central region may
be higher due to lower prices. The study also
showed that leasehold properties were the
most attractive in the rental market as a 99year leasehold property usually has lower
relative psf upon purchase compared to a
freehold property.

(Source: Business Times)

Overall rents expected to fall by 5% to 7%
in 2015
According to CBRE, the overall rent is
expected to fall by 5% to 7% this year. Not
only so, the total leasing volume is also
expected to fall by 5% to 10% for the rest of
the year. This is due to a surge in the number
of new homes completed in 2015. According
to the Business Times, 10.4% more homes
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SINGAPORE PROPERTY WEEKLY Issue 210

will be completed this year, up from the
19,921 homes completed in 2014. CBRE
added that in the central region, the leasing
climate will be competitive. In Q1 this year,
there was a 3.1% quarter-on-quarter increase
in lease commencements to 15,229 units.
This is 13.5% higher than the lease volume in
Q1 last year. The average rent for luxury
homes remained at $4.95 psf per month in
Q1 this year according to CBRE. However,
the average rent for homes in the rest of the
prime districts has fallen by 1.1% quarter-onquarter to $4.55 psf per month in Q1 this
year. Also, the average rents for the rest of
the island fell by 1.6% quarter-on-quarter to
$3.15 psf per month in the same period of
time.
(Source: Business Times)

Freehold site at Ridout Rd expected to be

sold for more than $90m
A 73,277 sq ft freehold site at Ridout Road is
expected to be sold for more than $90 million,
or $1,288 psf. According to the Business
Times, this would be the biggest transaction
in a Good Class Bungalow Area, as the price
is higher than the previous record of $87.5
million that was set in 2001. Currently, the
freehold site consists of a two-storey
bungalow that has a two single-storey
outhouse and an open field. However, the site
may be redeveloped into as many as four
smaller plots of land that are at least 1,400
sqm. Only Singaporeans are allowed to
purchase landed homes in Good Class
Bungalow Areas following a change in policy
in 2012.
(Source: Business Times)

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SINGAPORE PROPERTY WEEKLY Issue 210

Non-Landed Residential Resale Property Transactions for the Week of May 13 May 19
Postal
District
3
3
4
5
5
5
5
5
5
8
8
9
9
9
9
10
10
10
10
10
10
10
10
11

Project Name
DOMAIN 21
PEARL BANK APARTMENT
CARIBBEAN AT KEPPEL BAY
HERITAGE VIEW
HERITAGE VIEW
VARSITY PARK CONDOMINIUM
BOTANNIA
HERITAGE VIEW
VISTA PARK
CITY LOFT
LOFT @ RANGOON
MARTIN NO 38
MARTIN PLACE RESIDENCES
RIVERGATE
8 @ MOUNT SOPHIA
ARDMORE PARK
GOODWOOD RESIDENCE
GOODWOOD RESIDENCE
GRANGE RESIDENCES
ONE TREE HILL RESIDENCE
MONTVIEW
NATHAN PLACE
GLENTREES
THE LINC

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Area Transacted Price

Tenure
(sqft) Price ($) ($ psf)
1281 1730000
1351
99
1755 1300000
741
99
1281 1900000
1483
99
969
1155000
1192
99
1195 1385000
1159
99
1453 1680000
1156
99
1270 1448000
1140
956
2616 2880000
1101
99
947
835000
882
99
366
630000
1721
FH
420
632000
1505
FH
969
2500000
2581
FH
1722 3310000
1922
FH
1798 3380000
1880
FH
1378 2010000
1459
103
2885 8450000
2929
FH
2486 6400000
2574
FH
2486 6280000
2526
FH
2583 6200000
2400
FH
1227 2455000
2001
FH
1475 2100000
1424
FH
1798 2420000
1346
FH
1345 1600000
1189
999
1281 2060000
1608
FH

Postal
District
11
11
11
11
11
11
12
13
14
14
15
15
15
15
15
15
15
15
16
16
16
16
18
18

Project Name
STRATA
NINETEEN SHELFORD ROAD
THOMSON EURO-ASIA
ADAM PARK CONDOMINIUM
NOVENA COURT
WATTEN ESTATE CONDOMINIUM
PRESTIGE HEIGHTS
CLYDESWOOD
ASTORIA PARK
THE HELICONIA
AALTO
COTE D'AZUR
COSTA RHU
THE WATERSIDE
ROXY SQUARE
COSTA RHU
NEPTUNE COURT
CASTLE LOFT
OPTIMA @ TANAH MERAH
COSTA DEL SOL
BAYSHORE PARK
BEDOK COURT
EASTPOINT GREEN
THE TROPICA

Area Transacted Price

Tenure
(sqft) Price ($) ($ psf)
1066 1650000
1548
FH
861
1320000
1533
FH
1130 1725000
1526
FH
1163 1580000
1359
FH
861
1100000
1277
FH
2594 3050000
1176
FH
344
550000
1597
FH
1173
970000
827
FH
1195 1250000
1046
99
1302 1238000
951
FH
1959 2988000
1525
FH
1313 1820000
1386
99
2217 3050000
1375
99
2411 3050000
1265
FH
603
761000
1262 9999
1399 1412990
1010
99
1636 1160000
709
99
1173
792000
675
FH
1055 1250000
1185
99
1324 1519952
1148
99
2239 1700000
759
99
2271 1570000
691
99
1130
900000
796
99
1238
981888
793
99

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SINGAPORE PROPERTY WEEKLY Issue 210

Postal
District
19
20
20
20
21
21
21
22
22
22
23
23
23
23
26

Project Name
CASA RIVIERA
THE GARDENS AT BISHAN
RAFFLESIA CONDOMINIUM
THOMSON VIEW CONDOMINIUM
THE CASCADIA
THE HILLSIDE
PANDAN VALLEY
THE LAKEFRONT RESIDENCES
THE LAKESHORE
THE CENTRIS
HILLVIEW PARK
REGENT HEIGHTS
REGENT HEIGHTS
NORTHVALE
BULLION PARK

Area Transacted Price

Tenure
(sqft) Price ($) ($ psf)
1206 1160000
962
FH
1152 1328000
1153
99
1324 1430000
1080
99
2024 1480000
731
99
1292 1900000
1471
FH
1302 1388000
1066
FH
2024 1900000
939
FH
1216 1600000
1315
99
926
1010000
1091
99
1302 1290000
990
99
807
880000
1090
FH
1163
921000
792
99
1023
800000
782
99
1087
830000
763
99
1238 1250000
1010
FH

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.

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