Meraprime, City Square Residences and Compass Heights have something in common — a one-stop shopping mall and an MRT station right at their doorsteps. As home prices and rents continue on their southbound trajectory, these properties are expected to outperform those in less accessible locations. However, the latest study by The Edge Property shows that rents at these properties buckled at similar rates as those at projects that are less well located.
Meraprime condominium, which is located right next to Tiong Bahru Plaza and the Tiong Bahru MRT station, saw its two-bedroom monthly rents fall 9%, from $4,967 at 3Q2013’s peak to $4,543 in 2Q2015. On the other hand, Domain 21, which is located some 670m from the Tiong Bahru MRT station, saw rents for its two-bedroom units fall 7%, from $4,733 to $4,425 over the same period (see Table 1 on Page EP6). Meraprime was completed in 2006 and Domain 21 in 2007, hence the age of the property is not part of the equation.
Table 1
In yet another example, City Square Residences, located next to City Square Mall, saw its two-bedroom rents fall 13%, from $4,180 in 3Q2013 to $3,640 in 2Q2015. City Square Mall is home to about 200 tenants and is directly connected to the Farrer Park MRT station. Meanwhile, at Kerrisdale, some 574m from the Farrer Park MRT station, rents for two-bedroom units fell by a smaller 11%, from $4,150 to $3,680, over the same period. Kerrisdale and City Square Residences were completed in 2005 and 2008 respectively.
The trend extends to suburban locations. Compass Heights offers the convenience of the Compass Point shopping mall and Sengkang MRT station and bus interchange at its doorstep. However, rents of its three-bedroom units fell 10%, from $3,767 in 3Q2013 to $3,388 in 2Q2015, similar to Rivervale Crest, which is nearly 1km away from the Sengkang MRT station. Three-bedroom rents were used for comparison, as there was insufficient data for two-bedroom units. Both Compass Heights and Rivervale Crest were completed in 2002.
Some likely explanations for the counter-intuitive finding include a slash in expatriate budgets, the quality of finishes and a nice, tranquil environment. Alan Cheong, head of research at Savills Singapore, comments: “This latest downturn coincided with cutbacks in housing allowance. If rental budgets are cut, the first to suffer will be the higher-priced units. Consequently, as overseas nationals start to migrate to lower-cost accommodation — usually those farther away from MRT stations and commercial facilities — developments located near these services may be affected.”
Norris Low, Knight Frank’s associate director and head for residential leasing, says: “Many prospects would list proximity to an MRT station as their top home-search criteria, but they might eventually settle for properties that offer quality finishes and a nice setting upon visiting the site.” Having an international school nearby is also an attractive factor among prospects with children, he notes.
Just the beginning
The vacancy rate of non-landed homes hit a decade’s high of 9.2% in 2Q2015, while rents dipped 6% below 3Q2013’s peak. Even so, this is just the beginning of the rental down cycle. According to URA, a total of 21,328 private homes are set to enter the market this year and another 21,043 will come on stream in 2016. They are more than double the past decade’s average supply of 8,700 units annually.
Savills’ Cheong warns that the bulk of these new completions will be located away from MRT stations and commercial facilities. Hence, while well-located projects may seem to be equally susceptible to market ill winds at this juncture, rents could hold better in the future.
Fundamentally, good locations are considered a rare commodity. Projects in less accessible locations, therefore, are likely to see longer down time in between leases, which would significantly increase the pressure on rents. However, the accessibility factor could be mitigated by other positive attributes such as a waterfront location, tranquil surroundings and proximity to popular schools. The study was unable to ascertain the vacancy rate in each development as well as the time taken to market the properties, owing to limited data.
Rental yield still respectable
From the glass-half-full perspective, rental yields were still in a respectable range as resale prices hit attractive levels. Based on the past six months’ caveat records, gross rental yields among the 10 selected projects ranged from 3.5% to 4.3% (see Table 2). Overall leasing fundamentals are still strong, if not for the looming supply ahead. As at December 2014, the number of employment pass holders stood at 178,900, up from 175,100 in December 2013.
Table 2
The ranking of the 10 projects was generated quickly using the “Compare” feature on theedgeproperty.com^. Users can select up to 10 projects to compare and rank by price, rent, rental yield, capital gain, sales volume and rental volume. A check using the valuation method to account for unit sizes yielded similar results.
^The "Compare" feature is available for registered users. Please write in to propertyeditor.sg@bizedge.com for more information.
This article appeared in The Edge Property Pullout of Issue 690 (August 17) of The Edge Singapore.