Owning an island is likely to be something that few people would ever seriously consider. While it is exciting to imagine what living on an island would be like - palm trees, sunsets, gentle breezes - most people could never afford to own a piece of paradise. Or could they?

With an increase in the number of island properties on the market today, coupled with the many motivated sellers (even island owners have to cover their losses from the stock market freefall), purchasing this exclusive property type may be more affordable than many of us think. For those looking for a different lifestyle and a little adventure, maybe it’s time to forget a house - and buy an island.

How to shop for an island

The internet is a convenient place to look for island properties. Websites such as www.privateislandsonline.com maintain current real estate listings of islands that are searchable by location, price and type. The type of island is an important factor, since it will determine if the island is virgin (with no development), what type of access it has (bridge, landing strip or boat only) or if any improvements have been made. It is also critical to determine what type of development, if any, will be permitted on the island.

Because of differing laws between countries regarding ownership and type of leasehold, it will be especially important to perform due diligence when considering an island purchase - with the assistance of a qualified lawyer.

Island shopping is not as convenient as driving around a neighbourhood with a real estate agent; it pays to thoroughly research and ask all the questions you can think of prior to making the trip to check out the property.

Location, location, location

Where an island is located has a significant effect on its value. Islands that are private, yet still close to civilisation and amenities like shopping, airports and hospitals, are more convenient, and therefore, tend to be more expensive.

A beautiful island in the middle of the ocean, far from any facilities and services, will probably be less expensive. People do put a price on convenience, and while island dwellers typically enjoy the privacy and remoteness that an island offers, they also want to be able to buy food and go to the doctor if necessary.

An island’s climate is an important consideration when looking for real estate, and it is a factor in the property’s value. Islands located in more desirable climactic regions, such as the tropics, may be more expensive to purchase and are generally more costly to maintain due to excessive heat, rainfall and the potential for damaging storms.

While many of us visualise palm trees and white sandy beaches when we think of an island paradise, it should be noted that many of the properties are located on lakes – rather than the ocean. Again, depending on location, these lake islands can be quite exclusive and expensive, or lesser known and more affordable.

Challenges of development

Islands that have no improvements will require additional time and money before they become habitable. Finding well water, generating power, creating telephone access and building roads will have to be addressed. So will finding the manpower to undertake all of these projects.

Local contractors can assist with determining the feasibility of these projects, and they can provide a time/cost estimate for the work. Generally, the more remote an island, the more creative the process will be in terms of both infrastructure development and home building.

Islands on the market

A quick look at one of the island property websites reveals that a buyer could spend as little as AU$33,000 or as much as several hundred million dollars. Usually the properties with immense price tags are for island resorts - places that will be used as a commercial investment rather than as a personal getaway. The smaller islands intended for personal use, however, are often priced similarly to inland properties in desirable locations.

Hog Island, for example, is a 20-acre undeveloped island in Nova Scotia that is on the market for $183,000 - not the millions of dollars many would expect for a sizable island. The most lavish properties are multi-thousand acre paradises slated for golf courses, exotic spas and upscale vacation resorts.

Come sail away

While most of us would assume island ownership to be something completely unattainable, a little research reveals that it may not be as impossible as we think.

Inland property values often exceed $11,000-$22,000 per acre, and many of the islands are priced well below that. Certainly, additional costs must be anticipated for infrastructure and building development, but even when all expenses are accounted for, an island nirvana might be more realistic than we imagine.

If you have ever thought about island life, it might be worth your while to at least take a look at what is available. You might decide to forget a house, and buy an island.

So what are some of the changes? To summarise, the latest round of anti-speculation measures for private properties are as follows:

Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current one year to three years.
Increase the minimum cash payment from 5 percent to 10 percent of the valuation limit and decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by the MAS to these buyers from the current 80 percent to 70 percent for property buyers who already have one or more oustanding house loans at the time of the new housing purchase.

The changes for HDB flats are as follows:

Increase the Minimum Occupation Period (MOP) for non-subsidised flats to 5 years.
Disallow concurrent ownership of both HDB flats and private residential properties within the MOP.

I have only extracted the relevant portions, however if you are interested to read up on the complete list of changes, they can be found at www.mnd.gov.sg and www.hdb.gov.sg.

The Market IS Cyclical

The property market is cyclical by nature. While it is hard to predict the duration of each upswing or downturn, at some point the market will certainly change direction. To illustrate, Figure 1 shows the URA Private Property Price Index (PPPI) from the first quarter of 1975 to the second quarter of 2010 and the areas in red show phases of market contraction. Thus it is quite clear that growth will not carry on indefinitely and the question is not if prices will start to drop but when.

Figure 1: URA Private Property Price Index (PPPI) from Q1 1975 to Q2 2010

With the latest round of anti-speculation measures, we think the real estate market will start to drop. So what does this mean to property buyers?

If I was thinking of buying an investment property, I would sit out until the dust settles. However, if I have ample cash to spare and am looking for a property for my own stay, the next few months may present an opportunity to look for good deals as owners attempt to comply with new monetary and ownership guidelines.

What about property sellers? If I was set on selling my property, I will not hold out for a higher offer and proceed with the sale when I get my asking price. Although all of us hope to milk our property for all its worth, it may not be realistic to expect significantly higher offer prices in the near term, given the tightened lending conditions and increased property supply.

When will we see the effects?

Presently, there is still some sense of cautious optimism. After all, the property market continued to grow rapidly despite the last two doses of anti-speculation measures. So will the market remain unscathed? I think not.

A good analogy to describe the property market would be an ocean-liner. Unlike a car that can start and stop almost instantaneously, an ocean liner responds much slower due to its massive size and momentum. To stop an ocean-liner, the propellers would have to go in the reverse direction to gradually bring the vessel to a stop.

Similarly, the propellers of the property market are already in the reverse gear. Although the market’s momentum could still carry property prices upwards for a while longer, the effects of the cooling measures will eventually kick in.

On the other hand, even if this round of measures are not able to break the proverbial camel’s back, you can bet that the Singapore government has other straws to do the trick. Ultimately, we should not doubt the government’s will to bring property price appreciation in line with “economic fundamentals”. However, what the magic figure is (for economic fundamentals) is anybody’s guess.

According to property consultancy firm CB Richard Ellis (CBRE), about 4,000 new home units were sold in Q2, down from 4,380 units sold in Q1.

CBRE also estimated that about 3,400 to 3,600 resale home units were sold in the resale market in Q2, 15-percent to 20-percent lower than the 4,261 resale homes sold in Q1.

As the market became less bullish, sub-sales declined from 806 in Q1 to around 500 in Q2. Sellers were also aware of the stamp duty payable if they sold their unit within the year of acquisition.

The number of HDB upgraders who purchased private homes also dropped. Almost 33.7 percent of new home buyers in Q2 2010 had HDB addresses, which is lower than the 37.9 percent of HDB upgraders who made up the new home buyers in the previous quarter.

The reduction could be due to a smaller supply of mass-market type projects being released in Q2, said CBRE.

Nevertheless, the property consultant forecasted that almost 8,300 new home units were sold in the first half of 2010. This is almost 56.5 percent of the 14,688 new homes sold last year.

Many small-sized property developers are seeing themselves priced out by foreign companies and big players, as tender bids for government and private land reach record highs in the country. This has made it more difficult for smaller developers to acquire land for development.

In the latest tender results for state land, the number of bidders and offered bid prices escalated to all-time highs, creating a bleak gap between the bids of smaller firms and big players.

For instance, Invest-Ho Properties, a boutique property developer, had submitted a bid of $9.1 million for a site at Tampines Road but lost out to the highest bid of $16.25 million by Fragrance Properties.

According to Mr. Edwin Ho, manager of Invest-Ho Properties Group, it was the group’s first time to bid for a site under the Government Land Sales (GLS) Programme, as buying private land and freehold land has become more expensive.

Small property developers are also affected by the entry of overseas developers planning to expand in the country – driving land prices even higher.

“With the current Chinese tightening measures, some Chinese developers are moving to familiar overseas markets to capitalise on their reserves of cash,” said Mr. Colin Tan, research and consultancy director of Chesterton Suntec International.

Analysts said that the industry could see a major shake-up, which could force small developers to look elsewhere for business opportunities if this trend continues.

Mr. Nicholas Mak, a property developer from Ngee Ann Polytechnic, said: “It’s a little difficult for them to go for en bloc (sales) because some of the prices are very high. As a result, they will turn to land sales – and if the Government does not sell enough of such land, it will affect their businesses.”

Owner expectations from en bloc sales also pose a challenge for small developers, said Mr. Joseph Tan, executive director of real estate consultancy firm CBRE. “The gestation period is longer and by the time the land is available, the market and pricing may have changed,” he said.

However, while small and medium developers may find options with GLS land parcels, the supply of such lands that may be “palatable” to them are limited, said Mr. Mak.

Besides forging joint ventures, several small property developers are considering acquiring land overseas, as market watchers say that the situation could go even grim for them.

“But the road will hardly be a smooth one even with such alternatives as joint ventures requiring competitors to work together will be difficult for smaller companies run by families or centered on personalities,” said Mr. Colin Tan.

As for foreign markets, he said that smaller developers face the risks of inexperience and unfamiliarity.

For some, they would opt to wait on the sidelines and rely on other means to generate business.

Mr. Teo Tiow Guan, director of Vigcon Construction, which lost its bid of about $9.9 million for a site in Tampines Road site, said that as property development is not its core business, the firm can afford to wait for plots that could be available and are within their means.

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Two adjacent bungalows in Margate Road off Meyer Road were sold for $38 million.
The buyer is said to be a low-profile boutique property investor that plans to build a block of apartment units on the 24,002-sq-ft combined freehold site. The plot can yield a 24-storey project of up to 55 to 60 units with an average size of 850 sq ft.

This translates to a land price of $1,023 psf of potential gross area, including a $13.6 million development charge (DC). This was nearly close to $1,047 psf ppr, inclusive of DC, which was paid for neighbouring 10, Margate Road in 2007.

Soilbuild Group Holdings, which purchased the property, later combined it with the adjacent Margate Mansions to form a bigger plot, which is now being redeveloped to Meier Suites. The land cost for the entire plot is said to be around $987 psf ppr.

Several market watchers said that the $1,023-psf-ppr land price for the latest deal, which involves 6 and 8 Margate Road, is close to the $1,000 psf ppr that Chip Eng Seng paid for 16 freehold terrace houses in Fort Road.

However, the latest property deal is still subject to acquiring outline planning permission for a new development and approval from the authorities to buy some state land for amalgamation with the property.

The sale of 6 and 8 Margate Road was brokered by Cushman & Wakefield through an expression-of-interest exercise, which attracted more than five bids.

The bungalow at 6 Margate Road was sold by the Estate of Tan Lai Choon, while the 8 Margate Road was sold by Bian Guan Realty. The two properties were zoned for residential use with a plot ratio of 2.1.

According to some analysts, assuming that the new owners use the balcony allowance of the additional ten percent gross floor area, the unit land price will be lowered to $954 psf ppr. With this, the new breakeven cost for the project could be $1,500 psf.

Meanwhile, according to URA’s monthly developer sales stats, Soilbuild sold some units in its Meier Suites project, which comprises three- and four-room apartments in February and March at prices ranging from $1,200 psf to $1,549 psf.

In a separate transaction, a consortium, which includes Soilbuild, recently signed a deal to purchase a freehold site at 23 New Industrial Road, which houses an industrial building that is being planned to be redeveloped.

Mainboard-listed property developer Ying Li International Real Estate has issued a profit warning for its performance for the first half of the year ending June 30.

The firm said that it expects an increase on its expenses after issuing convertible bonds worth S$200 million.

The residential and commercial developer expects to record lower sales from the San Ya Wan phase one development largely due to market timing factors.

Ying Li believes it will generate a net loss for the first quarter of 2010, compared to the RMB14,000 or S$2,812.73 net profit in the same period last year.

The company also expects to record a net loss in H2 ending June 30.

However, it remains optimistic and said it expects to record an overall profitable result in this financial year.

SINGAPORE: HDB resale prices have hit a fresh record in the first quarter of this year rising by 2.8 per cent compared with the previous quarter. But the latest figures show signs of a market that’s finally stabilising after months of runaway prices.

Some analysts expect demand to continue to rise in the next few months but said cash premiums are unlikely to go much higher than the current median of S$25,000.

The official figures confirm estimates released earlier this month.

Resale transactions have dipped by about five per cent while median cash premiums, or COVs, have risen at a much slower pace than in previous quarters.

They went up S$1,000 in the last three months compared to the jump of S$12,000 between the third and fourth quarters last year.

They now stand at S$25,000, with flats in Bishan fetching the highest COVs, of about S$32,000.

Strong demand for newer estates has also translated into high premiums.

Towns like Punggol and Sengkang are seeing premiums of about S$30,000.

Eugene Lim, associate director, ERA Asia Pacific, said: “If you compare Punggol, Sengkang prices vis—a—vis mature HDB estates, they are still cheaper. Even though with high COVs of around S$30,000, you find that S$30,000 actually is the average COV nowadays for most flats. So, if you’re paying thereabouts, why not get something newer versus something older?

Analysts said measures to cool the market have worked including the launch of more HDB projects.

Other measures include restricting the cash portion of the second concessionary home loan, channeling the loan through the buyer’s CPF account.

Moving forward, ERA’a Eugene Lim said the government may consider further measures to ease demand.

And while some observers say possible interest rate increases later this year will hit buyers’ pockets, others disagree.

Jeffrey Hong, executive director, HSR International Realtors, said: In general they don’t look at, At the end of 30 years of loan, how much do I actually pay for my flat? The first—time buyers are more concerned about how much they pay on a monthly basis. So if the increase in the interest is not much, the increment of the monthly payment is probably S$20 to S$50 a month more.”

In the rental market, demand between January and March increased sharply, with transactions up 69 per cent over the previous quarter.

The HDB said subletting transactions went up from 3,902 in the last three months of 2009, to 6,606 cases.

Analysts said this is partly driven by foreigners returning to Singapore to work as the economy improves.

However, rents remain relatively stable, with median prices for four— and five—room flats hovering just under S$2,000 a month.

Analysts said this is partly driven by foreigners returning to Singapore to work as the economy improves while the HDB said the spike is also due to an increase in renewals of rental flats.

In the last three months, 2,323 flatowners applied to continue renting their flats, 19 per cent more than the previous quarter.

The HDB added that more homeowners are also aware that they have to apply to the HDB for approval which could add to the increase.

However, rents remain relatively stable with median prices for four— and five—room flats hovering just under S$2,000 a month.

ERA’s Eugene Lim said strong demand will not likely translate into escalating rents because the supply of flats that can be subletted is high.

Under HDB rules, flats can be sublet after a minimum of three years.

But analysts said there is no similar jump in demand in the private rental market, suggesting that rental budgets remain low.

In the private residential market, prices were up 5.6 per cent, marginally higher than the 5.1 percent hike initially estimated.

SINGAPORE: Private home sales kept up their momentum in March, with 1,761 units changing hands, according to figures from the Urban Redevelopment Authority (URA).

This was up 47 per cent on—month and also the fourth highest monthly sales recorded since the start of URA’s monthly series in June 2007.

Analysts said demand for new homes remains strong, despite more government measures to cool the market in February.

The prime and outlying areas showed the highest level of market activities. New homes in the prime districts accounted for 720 units of total sales. Projects in the outlying areas accounted for 776 units transacted, while city fringe areas accounted for 265 units sold.

The top two best selling developments were both in the suburbs. The Vision saw 236 units sold, while The Estuary had 212 units transacted. The third and fourth best sellers were 76 Shenton in the downtown area, which saw 202 units sold, and The Laurels, which moved 115 units.

Of the top five best selling projects in March, only the Coralis was in the city fringe area.

According to Colliers International, 44 per cent of sales in March were to HDB flat owners, up from 34 per cent in January and 33 per cent in February.

Colliers said this may be due to HDB upgraders rushing to lock in their private property purchases for fear of being caught in a double whammy situation, where private property prices rise beyond their means and HDB resale flat prices fall after the government stepped in to curb speculative activity in the HDB resale flat market in early March.

Going ahead, analysts said the sales volume and prices in the residential market are expected to continue to expand, fuelled by the expected growth in the regional economies and investment confidence.

The expected gradual appreciation of the Singapore dollar may also result in higher demand for Singapore assets by foreign investors which would include real estate here.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said in the absence of any market shock such as the introduction of a property capital gains tax, the number of private homes sold by developers could reach 13,000 to 15,000 units in 2010.

He also expects the robust buying demand of private suburban homes to lead to more land sales by the government. He said that in the short term, such land sales would sustain the market activities and even contribute to the growth in property prices.

Colliers expects the improved economic environment to give property market sentiment and confidence a further boost.

It expects April’s launch and sales volume to stay robust at above the 1,000—unit level, but it said price—resistance — particularly at the mass—market level — may moderate sales from the strong performance in March.

Colliers also expects the strong buying momentum to continue at least into the second quarter. —

The government has released four more residential sites for sale, which can accommodate more than 1,200 private home units.

The Urban Redevelopment Authority (URA) said yesterday that the potential land supply from the government’s land sales programme, as well as the supply from projects in the pipeline will be “more than sufficient to meet the demand for private housing”.

“The government will continue to monitor the property market closely,” it said. “If necessary, more supply can be injected via the second half 2010 government land sales programme to ensure that property prices are in line with economic fundamentals.”

Private home prices increased 7.4 percent in Q4 2009, following the 15.8 percent growth in the third quarter. Prices of private residential properties for the whole of 2009 rose by 1.8 percent.

Many analysts have said that the URA price index, which will be released in April, will likely show an increase in the Q1 2010 result, as more higher-value projects were sold in the current quarter of the year.

URA said that it is releasing three residential sites for sale located in Simei Street 3, Stirling Road and Boon Lay Way. URA last released three land sites for sale at one go in January 2000.

In addition to this, the Housing & Development Board (HDB) also plans to put a residential site in Tampines Road up for sale in the next two weeks. HDB is releasing the site as it was triggered by a bid from unknown developer.

Analysts said that the government’s “very rare” move of releasing four sites simultaneously was designed to emphasize its often-repeated point that the supply of land and homes in the country is more than enough to meet the demands.

The upcoming releases from the four land sites could also help reduce prices of private homes.

Colin Tan, research and consultancy director of Chesterton Suntec International, said that HDB and URA are coordinating their efforts and pushing out development sites quickly.

“This should stem the overly aggressive bids we have seen in recent weeks and also stem future price escalations from the supply side. Because if developers pay too much for their sites, their initial selling prices may be higher to recover the land cost,” said Mr. Tan.

URA’s three land sites can accommodate up to 1,180 private home units. The sites are “well-distributed across the island, namely in the west, east and central regions, to provide developers and home-buyers with more choice,” the agency said.

Two of the three land sites released by the URA yesterday, the one in Simei Street 3 and Boon Lay, were being offered through a confirmed list. The third site at Stirling Road was put into a reserved list, meaning it has to be triggered for sale before it will be launched.

Chua Chor Hoon, head of DTZ’s South-east Asia research team, said that the two sites on the confirmed list were both attractive. She estimates that the site in Boon Lay Way could fetch a price of $330-$390 psf of potential gross floor area, while the site at Simei could go for about $360-$410 psf of potential gross floor area.

HDB’s Tampines site could also receive strong interest. The land parcel will be put up for tender after a developer bid at least $6.5 million.

Updates from URA shows that the government has already sold four residential sites since January this year. These sites can potentially accommodate a total of 1,710 housing units.

Two more private residential sites – one in Upper Serangoon Road and another in Sembawang Road – will be put on sale next month through the confirmed list.