Singapore Residential Property Market Is Coming Down The Next Three Years!
I've mentioned since 2011 that the inflexion point for Singapore properties is either 2013 or 2014. I was right. Now believe me when I tell you that there is no light at the end of the tunnel until 2016 / 2017. The price to income for Singapore private residential property should fall to 10x to have any chance of a multi year rally. It is now 23x. The year 1997 was the last time it was anywhere near 10x. It was around 13x then. Prices have to drop by 20 - 30% before we can see any significant capital appreciation.
OCR is now going for around 1300 psf. It has to drop around 40%, to around 800 psf before it reaches near fair value.
RCR is going for around 1400 psf. It has to drop around 20% to around 1100 psf before it reaches near fair value.
CCR is at around 1600 psf. It has to drop by around 15% to around 1400 psf to be near fair value.
Where to Buy If You MUST BUY
The valuation at which you purchase is paramount. If you can buy a property for 20% below 800 psf in OCR, which is around 640 psf, great. Do go ahead but have holding power. Get a high rental yield because you need to sustain through a recession in 2016 / 17.
If you can buy a property for 900 psf or less in RCR, or 1150 psf or less in CCR, go ahead!
What if your house in OCR is right next to the Jurong East Industrial Park, or Changi Biz Park? I'll say add 20% to the valuation. So if your OCR house is within 1km walking distance to a biz park, I'll pay no more than 770 psf. For RCR, if you live within 1km from Paya Lebar Biz Park, maybe 1080 psf. For CCR, if you live in Marina Bay Residence, The Sail, or Riverwalk, I'd say you pay no more than 1380 psf.
The Riverside Piazza
I mentioned back in end 2010 that at 972 psf, The Riverside Piazza was the cheapest CCR property around. Today, the last transacted price is at 1265 psf. While River Place has fallen to 1091 psf for 2840 sf, the smaller unit of 786 sf maintained its price at around 1527 psf. The TDSR law has made financing for larger properties a big challenge.
For Riverwalk, a 1259 sf apartment is going for 1191 psf.
Both Riverwalk and River Place were going for around 1600 psf and 1450 psf respectively back in early 2011, while The Riverside Piazza was going for 1050 psf. Since then, Riverside Piazza has gone up while the other two has come down!
Nevertheless, All three are very attractive right now!
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| Transacted prices for projects surrounding The Riverside Piazza |
Riverwalk is the closest to the work place. It is also very near the Raffles and Clark Quay MRT, approximately within 10 mins' walk. It is a mixed development with good restaurants along Circular Road, albeit it does get touristy at times. For certain aspects, you get breath taking views of the Singapore River.
River Place is about 500m further north of Riverwalk. It is currently served by Clark Quay MRT, which is around 600m away, and Chinatown MRT, about 600m away too. But it is not a mixed development and has complete condo facilities (swimming pool, reading room and gym). It is also just opposite the Robertson Quay, across the Singapore River so you can enjoy great restaurants nearby without the noise.
The Riverside Piazza is served by Clark Quay MRT which is 200m away, and Chinatown MRT which is 400m away. It is a mixed development and a small project. There are some pubs operating in the project but no music is allowed since URA has never permitted live entertainment in the project and will not renew pub licenses there, going forward.
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| Transport Infrastructure around The Riverside Piazza
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Redevelopment Potential
If you work out the numbers, both Riverwalk and The Riverside Piazza have redevelopment potential. Mixed development projects in Tg Pagar like the Altez is going for around 2400 psf. If you work backwards, price of 1700 - 1800 psf ppr is possible if a developer decides to acquire. If you factor in development charges and topping up of leases to 99, then Riverwalk will end up with around 1500 - 1600 psf ppr, while The Riverside Piazza at around 1500 - 1600 psf ppr too. I'm referring only to the residential portion of it. The commercial part will be another kettle of fish altogether. The lease top up for Riverwalk will be much higher than Riverside Piazza because the former was completed in 1980 while the latter in 1992.
Riverwalk is a much bigger project, with 94 residential units and an unknown number of commercial units. The budget and risk of taking over the project is much higher than The Riverside Piazza, which has 44 residential units and around 40 commercial units.
River Place was completed in 1995 and has 502 units so it is unlikely to have a collective sale unless the property market is crazy hot, like in 2006 - 20007, 2009 - 2011. I do not see a red hot Singapore property market until earliest 2018 or 2019!
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| Central Mall |
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| Liang Court |
A two bedroom unit in Riverside Piazza is around 4k per month. This means the yield pegged to market price is around 3.8%.
A similar unit in Riverwalk will fetch around 4.2k pm, and the price 1.365m (1365 psf) around 3.7%.
In River Place, the rent will be around 4.3k pm, and the price around 1.4m (1400 psf), making the yield around 3.7%.
The yields are considered extremely high for CCR projects!
Amenities Nearby
A project must theoretically tick all the boxes for a buy: 1) near public transport, 2) near amenities, 3) near good schools, 4) no new supply around the area, 5) near work place, 6) below market value.
All three projects tick almost all boxes.
1) they are served by at least two MRT stations within 1 km. There will be a new MRT to be completed in 2017 near Liang Court, which will be nearest River Place, but also serve residents from Riverside Piazza.
2) All three projects are within walking distance from the Central Mall, Liang Court, Robertson Quay and Clark Quay.
3) Within 1km from River Valley Primary School and Outram Secondary School. There is an infant care centre called Columbia within The Riverside Piazza. There is also a day care centre in the current MOM building.
4) Definitely no empty land to build huge projects, no risk of a glut.
5) Riverwalk is within 500m from Raffles Place. The Riverside Piazza is within 1km, or a 15 mins walk. River Place is a little further, probably 1.5km away, or a 25 min walk.
6) On a psf basis, Riverwalk is the cheapest for units above 1200 sf. But for smaller units of around 1000 sf, The Riverside Piazza is cheapest.
Conclusion
The Riverside Piazza has a marginally higher chance of redevelopment, because of its smaller size and attractive price. River Walk is the next prime candidate but the size of the project is double that of Riverside Piazza so it presents a bigger risk to developer.
Location wise, River Place is probably the furthest and least convenient, but it's facilities is the most complete, making it the most suitable for families with children. But it has 502 units. As a rule, I'll never go for projects with over 100 units as every stack will be similar and competition for rental and resale will be fierce.
For investment purposes, I'd go for The Riverside Piazza or Riverwalk, because of redevelopment potential and cheapest price psf. I'd marginally prefer Riverside Piazza still if I purely go for the yield (better cashflow), a smaller project creating more scarcity and redevelopment potential!
More information on The Riverside Piazza
https://www.squarefoot.com.sg/trends-and-analysis/residential?p=the-riverside-piazza
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