Benefits of living on the fringe

AS HOME prices in the city centre surge, property values in the surrounding fringe areas are rising in tandem.

Since January, prices of non-landed homes in the core central region - covering Districts 9 to 11, downtown and Sentosa - have shot up 23.3 per cent.

The fringe areas are trailing closely, with prices up 21 per cent in districts such as Novena, Toa Payoh, Marine Parade, Chinatown and Queenstown.

Clearly, the boom in the high-end prime districts has pulled up prices in neighbouring mid-tier areas. Has the spillover effect, however, come to an end or are prices set to rise even more?

Property experts think there is still room for prices to rise because of a large gap between prices in the centre of town and those in the surrounding districts.

Ms Tay Huey Ying of consultancy Colliers International noted that as at September, prices of apartments and condominiums in the fringe areas still lagged behind those in the city centre by about 65 per cent.

In terms of top prices, she said, the gap was even wider. The record price in the prime districts is $5,500 per sq ft (psf) for The Orchard Residences - almost double that of the $2,714 psf benchmark price for a unit at Reflections at Keppel Bay.

This discrepancy is why Ms Tay believes the fringe areas will continue to benefit from spillover demand from the prime districts.

"As prices of properties in the core central region are expected to rise further, more buyers will be priced out of this segment," said Ms Tay.

"Because of this, there will still be room for properties in the fringe areas to see further price increases."

Savills Singapore's director of business development and marketing, Mr Ku Swee Yong, said demand for mid-tier homes will be supported by the economy's strength and the growing number of high net-worth individuals that private banks bring in.

He added that displaced home owners who have sold their prime properties en bloc also tend to relocate to the fringe areas, pushing up rentals and prices there.

Another consultancy, Knight Frank, thinks that while prices will rise in these areas, the increase will be "moderate".

"The core central region started pulling up prices in the fringe regions only at the end of last year," said Mr Nicholas Mak, the firm's director of research and consultancy. "There is still opportunity for moderate price increases, thanks to upcoming launches."

Consultants warn, however, that the recent removal of the deferred payment scheme, which allowed homebuyers to postpone the bulk of their payments, may affect price growth in the segment.

The recent slowdown in the collective sale market may also have an impact, added Mr Mak.

While all the fringe areas have gone up in prices, they have not done equally well.

Just outside the Central Business District, Chinatown and Tanjong Pagar have seen prices quadruple since hitting their bottoms in 2005, said Ms Tay of Colliers.

This is due partly to the collective sale premiums that have been charged for properties going en bloc in the area, including Pearl Bank Apartments, she explained.

In stark contrast, prices in areas like Balestier and Toa Payoh have inched up less than 30 per cent since 2004, according to Knight Frank.

It said prices of homes in District 12, which covers these areas, have gone up by only 13 per cent for freehold units and 25 per cent for 99-year leasehold ones.

Other areas that have done well include Upper Bukit Timah, Ulu Pandan, Harbourfront and Pasir Panjang, said Ms Tay. Median prices of non-landed homes in these areas have surged by 145 per cent to 160 per cent since end-2004.

Buona Vista and Dover Road in District 5 also turned in good performances, said Knight Frank. Prices of 99-year leasehold non-landed homes in this district have gone up by 132 per cent since 2004.

Close behind is District 8, which includes Little India, Farrer Park and Serangoon Road, it added. Here, freehold non-landed prices have climbed 112 per cent.

Looking at this year alone, homes in District 21 have enjoyed the biggest price rises, said Dr Chua Yang Liang, the head of Singapore research at Jones Lang LaSalle.

This covers areas such as Clementi and Upper Bukit Timah. Prices there have grown 84 per cent since January, to reach $1,191 psf as at September, he said.

Districts that have not performed as well include 13 and 14, which together cover Eunos, Geylang, Kembangan and Paya Lebar.

Prices in these areas have grown more slowly, rising an average of only 5 per cent to 15 per cent, said Dr Chua.

This could be due to "weaker development concepts and branding" of projects in these areas, as well as "overall locational disadvantages", as these are less popular residential districts.

Source : Sunday Times - 18 Nov 2007