The MRT Effect

The below article was first published in The Straits Times on 9 October 2011. It came to mind again recently as I’ve been contemplating the perceived versus actual benefit of MRT proximity. Many list “must be close to MRT” as a house hunting criteria, but I believe this blanket rule sometimes means missing out on some great accommodation options. Freehold homes in River Valley have transacted at lower prices than leasehold homes in Bishan recently, perhaps partly due to the false perception that you’ve got to be near an MRT to enjoy good accessibility.

Published on Oct 9, 2011

By Joyce Teo

Residents living along the newest stretch of the Circle Line can finally rejoice now that the trains have started running but property owners have already reaped the benefits of the so-called MRT effect.

Put simply, being near an MRT station can make a clear difference to real estate values.

But while there is no denying the convenience an MRT line brings, the problem is in quantifying the effect as many factors affect home prices.

Mr Joseph Tan, executive director for residential services at CBRE, says properties near MRT stations usually carry at least a 10 per cent price premium.

‘It’s about the level of convenience that the line brings to the neighbourhood. When it comes to pricing a property, accessibility and amenities are always an advantage,’ he adds.

Ms Chia Siew Chuin, director of research and advisory at Colliers International, agrees: ‘Without a doubt, an MRT line will improve accessibility and that will make a location more attractive.’

The extent of the premium, however, would depend on how close to the station the property is, say consultants. The nearer it is, the higher the premium.

But it could also be hit by other factors. Mr Alan Cheong, Savills Singapore’s associate director for research and consultancy, points out two key factors in the newest stretch of the Circle Line: its proximity to town and its route.

It goes through some fairly prime locations like the Botanic Gardens area, and residents may not necessarily save a lot of time by travelling by train as they can also take the bus or drive to work, he says.

‘The Circle line is snaking through the middle- to upper-income bracket areas where public transport is not likely viewed as a necessity,’ adds Mr Cheong.

That suggests the MRT effect will be stronger in places where accessibility to stations is a big plus, particularly if these areas are farther away from town, says Ms Chua Chor Hoon, DTZ’s head of South-east Asia research.

‘Hence, the price increase is likely to be higher in public housing areas where more residents depend on public transport,’ she says.

The MRT premium would also depend on whether the line brings commuters directly to a major zone of employment like Raffles Place, as the Circle Line does not, says Mr Nicholas Mak, research head of property consultancy SLP International.

Mr Cheong says the benefits of an MRT line may immediately accrue more to the retail units around the Telok Blangah, Labrador Park and Pasir Panjang stations than to private homes.

Resale prices of HDB flats around these stations, as well as those around Holland Village, may continue to rise, he says.

Now that the line is in operation…

Buyer interest could rise but individual sellers cannot expect huge immediate price rises just because the line is running, consultants say.

The MRT effect would have been felt most keenly when the station locations were first determined so any price rise after that would likely be minor as general market conditions would then play a bigger part, says Mr Mak.

New launches may still set price benchmarks in those areas, but prices of older developments would be affected by their age and design, says Mr Cheong.

‘Now that the MRT line is operational, sellers will naturally ask for an even higher price. But whether they can achieve them will depend on current market conditions,’ says CBRE’s Mr Tan.

‘There is uncertainty now, with indications of prices stabilising. But whether there will be a price slide will depend on external factors, on how bad things can get outside of Singapore.’

Putting aside current market conditions, MRT stations could still work their magic some time down the road.

Knight Frank chairman Tan Tiong Cheng says: ‘The MRT effect would have been priced in but not fully so because of the disruption, noise and traffic disruptions during the construction stage.

‘The convenience will be felt when the station is completed and rental increases may then kick in.’

Mr Mak says the next stage of possible price adjustment, albeit a possibly gradual one, can happen some time down the track when people discover how convenient the MRT line is.

Mr Tan says: ‘How high prices can go will depend on the amenities around the project at that certain point in time.’

Apart from the amenities, prices would also depend on whether there are any developments in the area, though those hoping to see major commercial projects spring up around MRT stations and, hence, huge price increases, should keep in mind that it may not happen soon, says Mr Mak.

For example, the vacant plots around Woodlands MRT station have remained in the same state for more than a decade, he says.

Nevertheless, the good thing about a property near an MRT station is its price resilience.

‘Over the long term, a property that is near an MRT station vis-a-vis one that is farther away will generally hold its value better during a downturn and see better price appreciation during an upturn,’ says Ms Chua.

New research by consultancy Colliers International shows that average property prices in the areas within a 10min walk or 1km radius of most of the 12 new stations have risen substantially since 2009.

Ms Chia says the price rise is due to a combination of factors, including the market upswing and the MRT effect.

Caldecott

This station is on Toa Payoh Rise which leads to Thomson Road and its many plant nurseries. It is also near the Singapore Association of the Visually Handicapped.

Since the first quarter of 2009 until the second quarter this year, average landed home prices have risen by about 70 per cent.

Non-landed homes saw a bigger surge of nearly 84 per cent from the first quarter of 2009 to the third quarter this year.

At nearby Thomson 800, prices have risen 50.6 per cent since the third quarter of 2009, faster than the 36.6 per cent rise in the government price index for non-landed homes in city fringe areas, Mr Cheong points out.

Botanic Gardens

This station sits at one corner of Botanic Gardens and is near Cluny Court, the French embassy and Serene Centre.

Average prices of landed homes around Botanic Gardens station gained 107.5 per cent from the second quarter of 2009 to the second quarter this year.

But average non-landed homes increased by only 30 per cent from the second quarter of 2009 to about $1,440 psf in the third quarter this year. For instance, prices at Adam Park Condominium and The Shelford have risen by 37.5 per cent and 34.5 per cent respectively in the same period.

A project called 10 Shelford was launched in April this year at between $1,221 psf and $1,912 psf.

Farrer Road

This station is very near two old food haunts, Empress Road Market and Food Centre and Westlake Eating House.

Average prices of landed properties climbed about 23 per cent from the third quarter of 2009 to the second quarter this year. And non-landed homes have advanced 25 per cent from two years ago to $1,615 per sq ft as of the third quarter this year.

Prices at Sommerville Park have increased 73 per cent since 2009, according to Colliers International.

D’Leedon was launched in November last year at between $1,063 psf and $2,055 psf.

Holland Village

The station is in a hip enclave with ample food and beverage establishments and shops that appeal to expatriates and locals alike.

From the first quarter of 2009 to the second quarter this year, average prices of landed homes are up by nearly 40 per cent while non-landed home prices are up 40.3 per cent to $1,513 psf.

In the same period, The Merasaga in Jalan Merah Saga saw the fastest increase in average prices in the area of about 43 per cent to $1,584 psf. At Leedon 2, prices rose 34 per cent.

Recent launches in the area include the sold-out 41-unit Loft@Holland, which was launched in January at between $1,630 and $2,167 per sq ft.

‘The addition of a new station will further enhance the accessibility and hence, attractiveness of the locality and in turn, support potential upsides in demand and prices of residential homes there,’ says Ms Chia.

Buona Vista

This station is linked to the existing Buona Vista station, which is near the Ministry of Education.

one-north

This station takes you to the research hub one-north. Fusionopolis lies on one side and the Insead campus on the other.

Average non-landed home prices have risen by 68.3 per cent from the first quarter of 2009 to an average of $1,295 psf in the third quarter. Average prices at One-North Residences have soared 71.6 per cent in the same period.

Ms Chia says demand for homes in the area is expected to be healthy as employees are expected to look to reside near their workplaces in the one-north areas.

‘This is expected to provide positive support for home prices in the locality.’

Kent Ridge

This station is near the National University Hospital, National University of Singapore and Science Park 1. There are few residential projects within a 10min walk.

Haw Par Villa

As the name suggests, this is your destination if you want to visit Haw Par Villa.

From the second quarter of 2009 to the third quarter this year, average non-landed home prices rose 58.7 per cent to $1,398 psf while prices at The Peak@Balmeg have risen by about 30.6 per cent.

The most recent project launch in the area was Horizon Residences, which went on sale in the second quarter of last year at between $1,271 and $1,688 per sq ft.

Pasir Panjang

This is near Pasir Panjang Food Centre and Pasir Panjang Distripark.

From the second quarter of 2009 to the third quarter this year, prices of non-landed homes rose about 64 per cent to $1,129 psf.

Average transacted prices rose the fastest in Flynn Park, where units were sold at an average of $1,306 psf in the third quarter, up about 36 per cent from $960 psf in the second quarter of last year.

The latest project launch in the area is Viva Vista in South Buona Vista Road and Pasir Panjang Hill. It hit the market in August last year and was sold for between $1,128 and $1,641 psf.

Labrador Park

This is where you stop if you are looking for the Labrador Nature Reserve, PSA Building or the Alexandra Distripark. Like Kent Ridge station, there are few residential projects within a 1km radius.

Telok Blangah

This is next to the golf course at Keppel Club.

Non-landed homes registered a rise of 92 per cent since the first quarter of 2009 to about $1,890 psf as of the third quarter.

This could be partly due to the two new projects launches this year, says Ms Chia of Colliers International.

The Foresta@Mount Faber was launched in May from $1,600 and $2,067 psf while Skyline Residences was released in July. The highest price achieved was $2,436 psf, she says.

Among the old developments, prices at Harbour View Towers rose by nearly 90 per cent from $708 psf in the first quarter of 2009 to $1,343 psf as of the third quarter.

HarbourFront

This station is linked to the existing HarbourFront station.

joyceteo@sph.com.sg

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