Friday, June 8, 2012

Suburban-urban price gap narrows because of MRT, amenities

Business Times: Thu, Jun 07
SINGAPORE'S MRT network, along with a lethargic high-end market, has led to a narrowing price gap between suburban condos near MRT stations and those in the CBD/prime districts.

One way for the authorities to cool the mass segment of the private housing market would be to release more sites further away from MRT stations, reckons Wing Tai chairman Cheng Wai Keung.

He also notes that the network of MRT stations around the island has also reduced price differentiation between various suburban locations.

"The MRT transport network is so good that what is important now is not how far a property is from the centre or CBD; it (the price) is now more defined by how close you are to the MRT station.

"Two MRT stations, three stations, although you may think that it's far but in actual travelling time, it's not so much difference."

Besides MRT stations, the government has done a good job providing amenities.

"Today, living in a place like Sengkang is not so unbearable. There's an MRT station, a mall, library, everything." In some locations, there are also office buildings "so you don't have to come to town to work".

In short, shopping malls and other amenities that were in the past offered only in urban locations are now duplicated in suburban areas.

"This convenience has narrowed the price difference between urban and suburban areas, and also between the different suburban centres," Mr Cheng says.

SLP International managing director Peter Ow estimates that average launch prices for new suburban condos near MRT stations, excluding small units, are around $1,000 per square foot (psf).

Some market watchers have also commented that there was hardly a price gap between Sky Habitat in Bishan, which sold at a median price of $1,583 psf in April, and d'Leedon in the Farrer Road location, with a median price of $1,603 psf in April based on developer sales data lodged with the Urban Redevelopment Authority. Both are 99-year leasehold condos.

Mr Cheng, however, does not believe that the price gap will continue to narrow between suburban and prime locations such as Orchard because of the "perceived prestige . . . snob value".

"High-end locations still have a certain brand value."

One solution for the government to tackle the rise in property prices in the suburbs would be to release more land that is not next to MRT stations.

Land and property values for such sites are lower than those next to MRT stations.

While Mr Cheng acknowledges the motivation for government to tender out plots closer to MRT stations, to intensify land use near major transport nodes, he highlights some of the benefits of selling more land further away from MRT stations.

"You bring down the price . . . psychologically (when) you don't see at every tender, prices continuing to move up, with 15 developers going in to fight for a choice site. This will reduce the anxiety of people . . . and help to moderate the urge to quickly want to buy (a property) before price goes up."

Secondly, by selling land that is further from an MRT station, "you allow people a choice to have cheaper housing".

In exchange for this, they may be willing to give up the convenience of living closer to the MRT station. "They can walk (longer), take a transfer bus to the MRT station."

From the state's perspective too, it makes economic sense to release not-so-conveniently located sites in a hot market rather than in a dull market.

"At the end of the day, you have to release that site anyway, but if you release it in a dull market, the price will be even more depressed . . . or nobody may want it."

In the current market, there will still be some takers for such plots.

"So you also safeguard a certain value of the land. It's a good time to release more of not-so-choice sites in a hot market," Mr Cheng says...
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Martin Koh/ Sherry Tang
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