WITH the completion of The Sail @ Marina Bay in 2008 and its subsequent success in leasing activity, city living in Singapore finally took off. With further completions of apartments in the area, such as One Shenton followed by The Cliff, the area is proving to be a magnet for expatriates who work around the vicinity wishing for convenience to and from the office. These initial successes will amplify the attraction of city living among these upcoming projects.
Those vested with foresight who bought these early offerings could potentially reap handsome rewards. Take The Sail, for example. Launch prices in 2005 were in the mid-$900 psf (per square foot) range. Today, prices range from $1,750 to 2,150 psf, representing an 84-126 per cent gain. For those who bought One Shenton at the launch price of $1,850 psf in January 2007, current prices at $2,150 psf would still return 16 per cent.
Not a bad return, considering the fact that one still has a rental yield of 2.6 per cent based on current prices or 3 per cent based on entry-level prices.
Almost all developments launched around the Shenton Way vicinity since Q1 2010 (see table) are yielding handsome marked-to-market returns. Returns ranged from 13.3 per cent to 26.7 per cent. In contrast, the URA (Urban Redevelopment Authority) property price index for the Core Central area rose by 13.1 per cent in the same period. So what's so special about city living that leads to generally outperformed returns in the prime districts?
Chief among reasons is that we believe luxury residential developments in the city centre would find a wide audience for rentals. We offer some reasons as to why the rental market in the district is active.
The changing profile of expatriates with an increasing number of singles who do not mind renting small-format housing.
Proximity to Grade A offices in the financial district that has greater latitude with rental budgets.
Easy access to highly rated food and beverage haunts in and around the district.
Shenton Way living therefore has this distinguishing feature of working and playing within your doorstep. Some may say that it is fun-filled work. Over the weekends, the district bathes in serenity as city traffic withdraws to the suburbs.
For those who enjoy sports, Shenton Way sits right in the middle of our network of jogging and cycling paths to and from the East and West Coast. Every year, the Formula 1 race enlivens the entire downtown district and Shenton Way is just within walking distance from the circuit.
For many years, the concept of city living did not quite take off until the completion of the first high-end residential apartments in the late 2000s. Ever since then, bit by bit, like growing shoots, city life is taking root. Jumping on the bandwagon, United Industrial Corp is launching Five on Shenton in this area (previously known as the UIC building).
With only a few years of price evidence, it is shown that the Shenton Way district has seen prices outperform luxury properties.
This may continue as supply is relatively constrained and it may very well be possible that investing in this part of the island may insulate one from the vicissitudes of the rest of the property market. This will add stronger arguments to the investment case as investors to look at diversifying their holdings from the more mainstream districts.
For those keen on investments, one thing to look out for is rental return. Gross rental yields for luxury apartments here are about 4 per cent per annum. This is considered a healthy rate because borrowing costs are below 1.5 per cent per annum. Interest rates in Singapore are relatively low because it does not have an interest rate policy, using instead productivity gains and exchange rate to combat imported inflation.
As a comparison with world cities, price-wise, Singapore is ranked up there with Hong Kong and ahead of other global gateway cities such as London and Tokyo. That Singapore is expensive is not unexpected. That is a price to pay for safe-haven status. After all, good things don't come cheap.
Source: Business Times