What does that new luxury condo in your neighbourhood mean for your home’s value?
By Fiona Ho
/ EdgeProp |
In some cases, property prices can be expected to adjust to changes in amenity and local services arising from new developments, as well as simply to the number of dwellings within the same neighbourhood or locality.
But do new developments always have an uplifting effect on the value of existing, surrounding properties? Using 2017 property launches as examples, we looked at the value of sales transactions at nearby properties that took place before and after these launches to assess their possible impact. We also factored in a typical premium of 0.3% to 0.5% per floor level when comparing the price differences.
D3 – Bukit Merah, Central Region
New Launch: Artra
Launched in April 2017
Average price: $1,640 psf
Artra, a mixed-use development comprise of a single 44-storey tower with a mix of two-, three- and five-bedroom apartments from 786 sq ft to 2,583 sq ft, is linked to the Redhill MRT station and is close to Ascentia Sky (114m away) and The Metropolitan Condominium (136m away).
Ascentia Sky, a 373-unit leasehold development that was completed in 2013, may have benefitted from Artra’s launch. For example, a 1,851 sq ft unit on the 29th floor changed hands for $2.3 million ($1,242 psf) in November 2016. Fast forward to June 2017, a similarly-sized unit on the 39th floor sold for $2.65 million ($1,431 psf).
If a comparable transaction in the same development is $2.3 million for a unit on the 29th floor, an appraiser might add a typical premium of 0.3% per floor. Going by this equation, the value of a unit on the 39th floor would then come up to roughly $2.37 million or $1,280 psf. From this comparison, it can be deduced that the sales transaction in June 2017 showed a 12% increase from the transaction that took place in November 2016.
Artra’s launch however, appears to have had little to no impact on sales transactions at The Metropolitan Condominium, which was completed in 2009 and comprises 382 units. In May 2017, a 1,733 sq ft unit on the 13th floor fetched $2.1 million ($1,212 psf) – about 5% lower than a July 2016 transaction, whereby a similarly-sized unit on the same floor sold for $2.2 million ($1,269 psf).
D9 – River Valley, Central Region
New Launch: Martin Modern
Launched in July 2017
Average price: $2,270 psf
Martin Modern is the latest luxury residential development in the posh Robertson Quay neighbourhood. It will be the home within a botanic garden in District 9 with an arboretum of native trees and vegetation, occupying 80% of the land area.
The leasehold development comprises 450 units and is five minutes’ walk away from the upcoming Great World MRT station.
It is located close to residential developments such as Martin No. 38 (118m away) and The Inspira (187m away). Incidentally, there was an increase in the value of sales transactions of individual units at both developments in July 2017, the month Martin Modern was launched.
Martin No. 38 is an 88-unit freehold development was completed in 2011. In January 2017, a 969 sq ft unit on the fourth floor at Martin No. 38 sold for $2.18 million ($2,250 psf). Just six months later, a similarly-sized unit on the eighth floor changed hands for approximately $2.54 million (2,626 psf) in July 2017.
If a comparable transaction at Martin No. 38 is $2.18 million ($2,250 psf) for a unit on the fourth floor, then a similarly-sized unit on the eight floor would be valued at approximately $2.2 million ($2,277 psf) after factoring in a premium of 0.3% per floor. Going by this comparison, the sale of the eighth-floor unit in July 2017 showed a price increase of over 15% compared to the sales transaction of a similarly-sized unit in January 2017.
Meanwhile, a 939 sq ft unit on the 10th floor of the 120-unit, The Inspira sold for roughly 4% more in July 2017, at a price of $1.71 million ($1,826 psf), compared to a fifth floor unit of similar size that changed hands for $1.63 million ($1,735 psf) in August 2016. This is after factoring in a typical 0.3% premium per floor. The Inspira is a freehold development that was completed in 2009.
D15 – Bedok, East Region
New Launch: Seaside Residences
Launched in April 2017
Average price: $1,589 psf
Located on Siglap Road, Seaside Residences comprises 843 units across four 27-storey towers. Most units come with unobstructed views of the sea. The leasehold development is about three minutes’ walk to the future Siglap MRT station, and is close to Villa Marina (442m away) and Fernwood Towers (363m away).
There were no significant changes in both the value and volume of sales transactions taking place at Villa Marina in the months leading to and after the launch of Seaside Residences. Completed in 1999, Villa Marina is a leasehold development comprising 432 units. In May 2017, a 1,281 sq ft unit on the third floor sold for approximately $1.15 million ($902 psf) – about 4% lower than a sales transaction in April 2016, whereby a similar-sized unit on the same floor sold for $1.2 million ($936 psf).
On the other hand, some units at Fernwood Towers, a freehold development that was completed in 1994, did see an increase in sales value following the launch of Seaside Residences. Fernwood Towers comprises 215 condo units and 28 landed units. In July 2016, a 1,647 sq ft unit on the second floor changed hands for $1.5 million ($911 psf). Fast forward to May 2017, a similar-sized unit on the 19th floor changed hands for $1.9 million ($1,154 psf) – this is a 20% increment from the projected price of $1.58 million ($958.60) after factoring in a 0.3% premium per floor for a similar-sized unit at the same development in 2016.
Possible uplifting effects
The above examples show that the advent of newer and more luxurious developments can have an uplifting effect on the overall value of surrounding properties, but this correlation is not always present or clear. New launches also appear to have greater impact on newer developments, and on developments of lower-to-medium densities.
In most cases, aspiring home owners would do well to look at not just the present state of local amenities but also the future prospects for commercial and governmental development in the area. Government plans concerning schools and public infrastructure such as a new MRT station for instance, will have as much influence on home values as present and future developments of residential and commercial amenities in a particular locale.
Ultimately, home prices are still largely determined by the forces of demand and supply, although factors such as real interest rates, a growing population, rising incomes and governmental measures continue to be important influencers on the demand-side.
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