Property Hotspots All Over Singapore
Over the past five years, dozens of articles published in mainstream media and property portals have variously labelled neighbourhoods all over Singapore as “hotspots” for investors to focus on. If we believed all the articles, we would consider almost the entire Singapore as a giant investment hotspot.
For an investor who has sufficient funds to place only one single bet, which is The Hottest Hotspot? Should we buy what these articles say and plunge in? Or should we do more homework and seek better advice from trustworthy agents?
Beyond the media articles, property portals and social media hype about investment hotspots are likewise plentiful and frequent. It just depends on the location of properties being marketed and how much online advertising budget marketers have.
What are the common justifications for these locations to be considered hotspots?
1. Proximity to MRT Stations and Bus Interchanges
Several plots of land next to Pasir Ris MRT station will probably be home to more than 2,000 families within the next 10 years.
In the context of residential properties, proximity to main transportation modes is a key criterion for most buyers. Thus, being located near to Mass Rapid Transit (MRT) stations is a big selling point and property sellers will demand a premium if their properties are within minutes’ walk to MRT stations.
Let us take a step back and reflect on this: does being close to an MRT station automatically make that residential neighbourhood an investment hotspot? Considering that one of the primary goals of the government is to make public transport the main mode of transportation and that the Land Transport Authority (LTA) has stated their objective that by 2030, 8 in 10 households will be living within 500 metres from an MRT station, will there still be a “MRT premium” by then?
There are also price maps comparing the average value of private properties around MRT stations across Singapore. A quick glance reveals that private residences within a few hundred meters of MRT stations in locations such as Pasir Ris and Choa Chu Kang can only achieve average prices below $900 per square foot (psf) while properties located within the same radius of MRT stations in the prime districts command average prices above $2,000 psf.
Wow, what a surprise! The real hotspots for investors are still the prime districts.
By the year 2025, when another 50 MRT stations are added to the network, we believe that the premium of condominiums which are located near to MRT stations will almost disappear. However, the premium of a freehold property located in the prime districts will hold.
You may ask, what about the hype around Integrated Transport Hubs (ITH)? Apparently, being close to an ITH gives a residential property an added premium to those that are merely close to an MRT station or close to a bus interchange. We believe the same arguments apply:
1. As more and more ITH’s are built, the premium of condominiums around ITH’s will be reduced.
2. The perceived premium of ITH’s may add pressure to the locations that are merely served by MRT stations only.
3. The prime districts in Singapore will continue to hold a premium over mass market locations regardless of the proximity to MRT stations. In other words, a private apartment 1km away from the MRT in District 9 will have a higher value than a private apartment 100m away from the MRT in District 17.
2. Amenities and “Potential Redevelopment”
Photo 2: Probably the most recognisable street junction in Hougang, the junction of Simon Road and Upper Serangoon Road is in the Kovan neighbourhood, otherwise known as the “Lak Gor Jiok” or “6th milestone area of Serangoon Road”.
The classification of hotspots also includes “perks” in the neighbourhood, such as in the case of Hougang where an article touted it as “one of the best places to call home”. The article highlighted that “nature lovers can easily escape to the rustic charms of Coney Island and Pulau Ubin”. Hougang is not exactly within a five-minute bus ride to Pulau Ubin and it is only relatively nearer to Coney Island when compared to say, Jurong. In fact, you would have to drive through the towns of Sengkang and Punggol, change modes of transport at Punggol Point Jetty and loop back around the Punggol Promenade Nature Walk before you can reach the entrance of Coney Island. Sadly, the article leaves us with one conclusion: that it is scraping the bottom of the barrel in trying to glorify and elevate the Hougang precinct so that investors may pay attention to properties there.
There are other platforms that promote neighbourhood hotspots before any residential launch advertisements appear for that particular area. Property portals and discussion forums created by marketing agents frequently try to highlight the next gem to be unearthed. We urge investors to be careful and to distinguish whether the articles are written based on well-balanced research, or are hype-pieces written for marketing and promotional purposes.
In the Urban Redevelopment Authority (URA) Master Plan 2008, Paya Lebar Central was touted in the media as a regional commercial hub that will be an attractive, alternative location for businesses, bridging the distance between workplaces and homes. Riding on the promises of the Master Plan, the launch of Paya Lebar Square in 2012 was a success and the strata office units were snapped up in no time, supported by property investors who dived into the non-residential market to avoid the cooling measures imposed on residential investments.
At that time, marketing agents estimated that rentals could fetch $7 psf per month, which would give investors gross rental yields of up to 4.5% against their purchase prices of as high as $2,000 psf. Construction of Paya Lebar Square was completed in late 2014. As quoted in the Straits Times in April 2015, occupancy rates of the office units stood at 10%. About a year later in March 2016, Straits Times followed up on their story and found that only 50% of the office units are occupied. Half of Paya Lebar Square was vacant despite rents being adjusted lower, from the expected $7 psf per month to $4 psf per month, to attract more tenants. Investors were left with a lemony taste when market reality dashed the rosy forecasts made during the property launch.
Similarly, Geylang was introduced in an article in 2012 as a growing “hotspot for savvy property investors chasing high capital gains and rental yields” due to new residential launches, the Sports Hub in Kallang and the Paya Lebar regional financial centre. In January 2015, URA held a public consultation on their proposal to rezone parts of Geylang from residential-cum-institution use to a new commercial-cum-institution use.
Property experts immediately highlighted that reducing the space for homes will boost values for existing residences. They forecast that value will rise due to potential en bloc redevelopments as higher plot ratios may be assigned with the re-zoning. With attention focused on the redevelopment potential, instead of the usual attractions in Geylang such as food, amenities and proximity to the CBD, market punters speculated that Geylang is a hidden hotspot, overlooked due to its seedy image.
In fact, neighbourhood redevelopments, new master plans and dreams of increased plot ratios are common factors employed to hype up various locations as investment hotspots.
3. Master Plan and “Future Promises”
Jurong is touted by most people as a hotspot given that the Jurong Lake District has been designated to be Singapore’s second CBD since the 2008 Master Plan. Adding to the euphoria of the High Speed Rail (HSR) terminus that will be built next to Jurong East MRT-cum-bus interchange are the big plans for Jurong Lake District, the grand designs for Jurong Innovation District and a brand new Tengah Forest Town that can house over 100,000 residents. Jurong is expected to be the hottest hotspot since Orchard Road.
Not that we are skeptical about the impressive makeover of Jurong, but here is the issue: are expectations running a decade ahead of reality? The announcement about the HSR has spawned many articles expressing the great potential value of residential properties in Jurong. In 2013 the authorities proclaimed an aggressive deadline: the HSR will be built by 2020. Investors, developers, property agents and their friends on social media all responded with a resounding “Invest now!”
Then in 2015, the year of completion was pushed back to 2022, and now, it is projected to be ready only in 2026. If investors had committed their money in residential properties in 2014 hoping for the game-changing element of the HSR to boost property values by 2020, would they feel a sense of regret today? Will there be further delays to the completion of the HSR? And why are property agents, analysts and the media still hyping up and speculating about the rise in property prices?
In fact, given the massive expectations about the certainty of rising property values in Jurong, we would caution investors to be extra careful about the “pent-up demand” there.
Most readers find it difficult to differentiate between genuine news articles and advertorials. Both online and in print, the layout of advertorials looks similar to those of news articles. Worse, some online advertorials have web addresses that resemble those from mainstream media.
It is critical for investors to discern between well-balanced media articles and hype-articles that are sometimes masked as news. The end result of these articles is to give the impression that the entire Singapore private residential landscape is a giant hotspot. And ironically, the more hotspots there are, the longer the authorities will keep the cooling measures intact.
Images credits: HugProperty, Pixabay, Ken Koh