Unit price at Horizon Towers falls below $1,000 psf

By Tan Chee Yuen / The Edge Property | May 9, 2016 10:00 AM SGT
At Horizon Towers on Leonie Hill Road, a 2,616 sq ft unit on the fourth floor was sold for $2.5 million, according to a caveat lodged on April 19. The price translates to $956 psf, making it the lowest price psf since 2009.
The last time a unit at Horizon Towers was sold below $1,000 psf was in September 2014, when a unit on the third floor of a neighbouring block changed hands for $2.475 million ($995 psf).
A 2,616 sq ft unit on the fourth floor of one of the blocks at Horizon Towers was
sold for $2.5 million ($956 psf)
The 99-year leasehold Horizon Towers comprises two 19-storey blocks with a total of 210 units.
At the height of the en bloc fever in 2007, Horizon Towers was on the verge of being sold for $500 million (just below $850 psf per plot ratio) to a consortium led by Hotel Properties. However, some minority owners opposed the sale and a long-drawn-out court battle ensued over 3½ years. The Court of Appeal overturned the sale in 2009.
Completed in 1984, Horizon Towers is showing its age compared with newer condominiums in its vicinity, such as the 462-unit OUE Twin Peaks. Completed in February 2015, OUE Twin Peaks is a redevelopment of the former 99-year leasehold Grangeford, which OUE purchased for $1,810 psf ppr in June 2007. Opposite Horizon Towers is New Futura, which sits on the site of the former freehold Futura that City Developments purchased en bloc for $1,179 psf ppr in October 2006. The condo has yet to be launched.
Horizon Towers’ lease starts from 1979, which means it has another 62 years remaining on its 99-year lease. Based on the latest transaction price and assuming a linear depreciation over the next 62 years, that represents a rental rate of $1.28 psf a month (excluding stamp duty, financing and Central Provident Fund interests, maintenance fees and sinking fund), says Ku Swee Yong, CEO of Century 21.
This translates to a monthly rental rate of $3,350 for a 2,616 sq ft four-bedroom unit and “represents good value even in today’s market when rental rates are declining”, says Ku.
For 99-year leasehold properties with less than 60 years remaining on their lease, there will be additional restrictions in financing, which will limit the pool of buyers and hence, result in lower prices, warns Ku. While the buyers of units at Horizon Towers will not be affected today, the buyers five to 10 years later will face restrictions, he adds.
Like most ageing condos past 30 years old, maintenance costs at Horizon Towers are likely to be creeping up. According to Ku, units with poorer attributes — for instance, those that are unrenovated, do not have a view or have a dated layout — are likely to suffer a bigger price drop.
On the other hand, paying less than $1,000 psf for a condo in prime District 9 just off Grange Road and River Valley Road represents “an attractive buying opportunity”, he says. The spaciousness, practical layout and prices at a discount to other newer neighbouring condos will be attractive to buyers who are owner-occupiers.
However, Ku cautions that the downside risks at this stage outweigh the potential upside. “Buyers who are looking for investment opportunity will have to be prepared to accept another 10% to 20% price decline, especially if a unit last renovated 20 years ago sells for $800 psf.”
At the 99-year leasehold OUE Twin Peaks, the developer is offering a deferred payment scheme. Under the scheme, a 549 sq ft one-bedroom unit was sold for $1.48 million ($2,694 psf), while a 570 sq ft unit fetched $1.59 million ($2,784 psf), according to caveats lodged on April 20 and 21 respectively.
This article appeared in the City & Country, Issue 727 (May 9, 2016) of The Edge Singapore.