As the covid situation continues from 2020 to 2021,
what is good to invest in the real estate market of today?
On 12 January 2021, we appointed ex-CEO of UBS Capital management, Michael Chin as our Senior Adviser (1) to bring SA into the mainstream. Within the same month, 2 different care home projects in the UK were successfully launched in the platform. Coming close to a year from the start of SA, we’ve finally acquired a local Singapore project and will launch it on 8 February, in time for Chinese New Year.
When considering a care home project in the UK, SA focuses on the owners and operators in terms of their standard, cash flow and years of experience. While it is a niche sector for overseas investors like Singapore, care home is considered a very matured sector in the UK. In general, student housing is a more common sector as it is easier to understand and purchase. In contrast, the care home sector is not as common due to the fact that traditional individual or family offices want more control without having the buy back options that are generally tied to these offerings. For SA, these conditions are advantageous as the buy back options offered by the operators fits well for most of our investors as it provides certain assurance. So when SA evaluates suitable care home projects for our investor we focus heavily on the Care Quality Commission survey reports provided by an independent regulator of health and social care of England. As for owners/operators, we conduct due diligence by reviewing the financials and filings on the Companies House provided by GOV.UK, which is a regulator for registered companies, similar to the Accounting and Corporate Regulatory Authority (ACRA) on the shareholders, company information, annual returns and more. KYC/AML are conducted in-house by our Compliance team on Asset Owners/Operators, to ensure that they are not associated with money laundering or financing terrorism. These are just some of the fundamentals which are paramount checks where we dive further into conducting our due diligence.
Real estate investment, especially into physical actual assets, is considered a mid to long term holding period as it does not usually have big fluctuation in valuation. In the report on December 2020 by Cushman Wakefield (2), these key findings below summarizes quite a bit on the demand and growth in the care home sector.
Based on the 2020 UK care home trading performance review by Knight Frank (3), below is the summary by the Head of Healthcare, Mr Julian Evans FRICS of Knight Frank UK.
Back to project sourcing in Singapore, we are looking at various assets ranging from shophouses to hbd retail shops to industrial food factories. These asset classes have shown great resilience in times of covid and especially hbd retail, it serves the needs of the community. Yield in Singapore is generally lower but it is one of the top stable choices to own among the world.
Many investors in Singapore especially are very familiar with REITS where in recent years it evolved towards REITS ETF and REITS+. They all provide great liquidity, averaging on overall yield with experienced REITS managers but yet Shareable Asset platform is getting more attention due to the unique capability of its infrastructure.
In summary, SA is not making the real estate investment into a fund but actually a fintech blockchain platform to source actual assets and break it down into very small bite sizes. This allows investors to own fractional ownership of the physical assets and let as many investors experience the chance to be an actual owner alongside with all other investors. This will bring the affordability down as anyone who has successfully signed up and KYC verified on our platforms can buy fractional shares of the asset.
Let me provide a quick overview summary comparing do it yourself via REITS ETF, REITS + and SA
Just 1 months into 2021, Straits Times news reported that 13 HDB residential units transacted over S$1M (4) and even though SA do not touch Singapore residential aspects due to ABSD, this report showed that the market for real estate in Singapore is still in demand.
With more than 1 million HDB flats spread across 24 towns and 3 estates, the Singapore brand of public housing is uniquely different. The flats spell home for over 80% of Singapore's resident population. This is a very huge percentage of the population and therefore, HDB shops are getting more and more popular in demand. The strong flow of human footprint, lower rental compared to shopping malls and despite most businesses being affected by the convid19 pandemic, HDB has proven stronger resilience in times of covid19.
On 1 february, Straits Times (5) reported a news about HDB to conduct study on value of heartland shops in Singapore and it was quoted;
“Experts welcomed the study, saying that heartland shops have proven to be of great value during the pandemic, particularly during the two-month circuit breaker last April when Singaporeans were confined to their homes.
Ms Ling Mengzhi, a PhD candidate studying urban planning and urban life at the National University of Singapore (NUS), said the pandemic has created an opportunity for residents to re-explore such stores and forge stronger bonds with people and communities within their neighbourhoods.
Heartland shops can become "social glues for the community", added Ms Ling.
Associate Professor Lawrence Loh from the NUS Business School said the intrinsic value of HDB heartland shops has been underappreciated, especially in newer estates with a younger population.”
Based on the research, there are only about 8500 private sales hdb retail open in the market, out of which, in the matured estate, more than 60% comes with residential components and have lease remaining less than 50 years. To find a HDB shophouse on pure retail without a residential component and lease over 50 years with a decent yield of above 4% is very difficult.
Lastly, according to the most recent market outlook by Propertyguru (6) on consumer sentiment study H1 stated that “While there is an overall optimism, more than half of Singaporeans are still uncertain of future property prices and concerns over housing affordability have been raised.”
This brings back to one of the many great reasons why Shareable Asset comes in place to allow fractional ownership by breaking down the whole asset into bite size from as low as S$5000 for Singapore property. With the joint force of everyone, it enables the community to have an experience and responsibility to the society.