Affordable city fringe homes

By Feily Sofian / The Edge Property | June 22, 2015 9:00 AM SGT
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More affordable than you think
If a home in central locations costs the same as one in the mass-market, which would you pick? Past studies have harped on the narrowing price gap between high-end and mass-market homes. Notwithstanding, the absolute quantum for high-end homes may remain beyond the reach of a typical buyer.
City fringe homes, on the other hand, are far more affordable. Prices of non-landed private homes in the city fringe have come off from the peak by the same magnitude of 7% as high-end homes. And with a median price of just $1.2 million, significantly below high-end homes’ $2.2 million, city fringe homes certainly deserve our attention.
Based on new sale caveats over the past one year, the top 25% transacted price for 99-year leasehold homes between 701 and 900 sq ft in the mass-market ranged from $971,000 to $1.32 million. Can buyers find comparable alternatives in the city fringe for this price range?
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In the past one year, there were 223 new sale caveats for 701 to 900 sq ft units in the city fringe that fell within the $971,000 and $1.32 million price range. Of these, 59 were from Eight Riversuites in Whampoa with prices starting at $1 million. Separately, City Gate at Beach Road and Commonwealth Towers clocked in 32 and 28 caveats in that price range respectively.
The list went on to include Bartley Ridge, Highline Residences, Sims Urban Oasis, Sky Habitat, The Crest and The Venue Residences, all within walking distance from MRT stations (See Table 1). The average size for the top 25% transacted prices in the mass-market (for the 701 to 900 sq ft category) was 812 sq ft. For the same price range, the average size in the city fringe was 753 sq ft.
Table 1: 701 to 900 sq ft units in city fringe priced between $971,000 and $1.32 million

Source: URA, The Edge Property

Apart from Geylang, were there new city fringe units between 701 and 900 sq ft that sold for less than $971,000? There were 26 such caveats. Five from Riverbay, a 999-year leasehold condominium at Mar Thoma Road and three from The Venue Residences, a stone’s throw away from Potong Pasir MRT station.
In the 901 to 1,100 sq ft size category, the top 25% new sale prices for 99-year leasehold homes in the mass-market ranged from $1.25 million to $1.57 million. For this price range, there were 127 new sale caveats lodged for city fringe homes.
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The bulk 37 of the 127 caveats for similar size units were from Eight Riversuites, followed by 36 caveats from Thomson Three on Bright Hill Drive. Transacted prices in Eight Riversuites started from $1.26 million while those in Thomson Three from $1.30 million. Another 13 caveats were lodged for Alex Residences at Alexandra View starting from $1.43 million. The list includes other high-profile developments such as City Gate, Highline Residences, Sims Urban Oasis and Sky Habitat (See Table 2).
Table 2: 901 to 1,100 sq ft units in city fringe priced between $1.25 million and $1.57 million

Source: URA, The Edge Property

The study defined high-end homes as those located in the Core Central Region. City fringe homes referred to projects in Rest of Central Region while mass-market homes were located in Outside Central Region.
Are city fringe homes under-priced or are mass-market homes overpriced? Perhaps the more relevant question would be which segment offers better value proposition. Rental wise, both segments posted similar gross rental yield of 3.2% in 1Q2015.
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The prospect for capital upside is more compelling for city fringe homes given that prices have fallen from the latest peak by 7%, compared to 4% witnessed in the mass-market. Relative to high-end homes, city fringe prices are also more palatable to local buyers while its central location remain the biggest draw for both local and foreign buyers alike.
Revisiting the price gap trends
The price gap for new non-landed homes in the city fringe and mass-market has continued to narrow from 34%-35% in as at end of 2011 and 2012 to 28%-29% as at end of 2013 and 2014. Although the shrinking price gap was more pronounced in the high-end segment, the median price in the segment was still nearly 80% higher relative to mass-market homes (See Figure 1).
As at 1Q2015, the median price for new sale caveats in the city fringe stood at $1,432 psf, about 21% higher than the mass-market’s $1,188 psf. Based on median prices, mass-market homes are way more affordable than city fringe homes. However, within the top 25% of mass-market transactions, prospective buyers might just uncover value-for-money alternatives in the city fringe.
Figure 1: Price premium of high-end and city fringe homes over mass-market*

*Based on median new sale price for private non-landed homes

Source: URA, The Edge Property

This article appeared in The Edge Property Pullout of Issue 682 (June 22) of The Edge Singapore.

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