Suburban condos can continue to outperform prime ones
Suburban condos can continue to outperform prime ones. MANY people wish to own a condominium unit near the Orchard Road shopping belt, in the established private residential enclave of Bukit Timah, or in Marina Bay’s new downtown area.
However, buying a home in the suburbs may be preferable, as a flat in Jurong, Tampines, or Punggol is likely to have experienced greater price appreciation.
Suburban condos. Prices of private non-landed homes in the outside central region (OCR) or suburbs increased by 14.7 percent in Q1 2022 compared to Q4 2019, prior to the start of the Covid-19 pandemic, according to the Urban Redevelopment Authority. Prices for private non-landed homes increased by 3.4 percent in the core central region (CCR) or prime areas and 18.4 percent in the rest of the central region (RCR) or city outskirts during the same time period.
Suburban condos. Prices of private non-landed homes in CCR, OCR, and RCR increased by 13.2 percent, 62.4 percent, and 358 percent, respectively, between Q1 2010 and Q1 2022.
Better connectivity and amenities in the suburbs, along with regulations, are likely factors in OCR outperforming CCR. These factors driving OCR’s outperformance appear to be stable in the future.
Transport and amenities
For starters, the suburbs will benefit greatly from the expansion of the MRT network in terms of connectivity. The construction of new MRT lines and stations has reduced travel time from Jurong, Punggol, and Woodlands to a variety of destinations.
The rail network will be expanded further, with the goal of reaching 360 km by 2030. This means that 8 out of 10 households will be within 10 minutes of a train station, and Singapore’s total rail length will be longer than that of major cities such as Tokyo or Hong Kong today.
Aside from better transportation, suburban residents have benefited from additional amenities such as park connectors and cycling paths to meet fitness needs, as well as childcare and eldercare facilities.
Many suburban malls have been built, and large suburban malls such as Waterway Point in Punggol, Jurong Point, and Tampines Mall offer a diverse range of food and beverage, retail, and leisure options.
Sports and recreation facilities in the suburbs have been upgraded, as have libraries and community clubs.
Better healthcare facilities can be found in the suburbs, with Khoo Teck Puat Hospital in Yishun opening in 2010 and Ng Teng Fong General Hospital in Jurong opening in 2015. Around 2030, a new integrated hospital near the Bedok North MRT station will open.
New institutes of higher learning have opened in the suburbs over the last decade, such as the Singapore University of Technology and Design, which is located off Upper Changi Road.
Decentralized office hubs have sprouted up in the suburbs, and urban transformation plans, such as those of the Punggol Digital District and Woodlands Regional Centre, have been developed to spur economic growth and bring jobs and amenities closer to residents.
In short, suburban living is becoming more popular, with more improvements on the way.
ABSD and property taxes
Second, OCR regulations may favor homes more than CCR regulations.
Foreigners who are not permanent residents (PRs) have seen the Additional Buyer’s Stamp Duty for home purchases increase from 15% to 20% on July 6, 2018, and to 30% on December 16, 2021.
In comparison, the ABSD rate for Singaporeans and PRs buying their first home is 0% and 5%, respectively.
Foreigners are generally more active home buyers in CCR than in OCR. In 2021, non-PR foreigners accounted for nearly 10% and slightly more than 1% of new sales of private non-landed homes in CCR and OCR, respectively. As a result, the negative impact of high ABSD rates on foreign demand for homes in the country may be felt more in CCR than in OCR.
The upcoming increases in property tax rates on homes will be especially harsh on more expensive homes in prime areas. The annual property tax on a non-owner occupied suburban condominium unit with an AV of S$30,000 will rise by S$600, or 20%, to S$3,600 in 2024. In 2024, the annual property tax payable for a non-owner occupied prime condominium unit with an AV of S$45,000 rises by S$1,800, or 38%, to S$6,600.
Prime locations do have distinct selling points. The numerous popular primary schools in the Bukit Timah area attract some home buyers. Lifestyle enclaves such as Orchard Road, Holland Village, and Dempsey Hill are easily accessible to residents in some prime areas.
Furthermore, some CCR residents have easy access to premier social clubs such as Tanglin Club or American Club, as well as the Singapore Botanic Gardens, a Unesco World Heritage Site.
A new leasehold condominium unit in OCR may currently cost around S$1,700 per square foot (psf), compared to S$2,700 psf in CCR. While home prices in prime areas should continue to command a premium over those in the suburbs, a price premium of around 60% is expected to decline over time.
Continuous suburban living environment improvements, combined with a private home market heavily reliant on locals buying for owner occupation, may support OCR’s continued outperformance over CCR.
Nonetheless, foreign buyer transactions increased in April compared to March as Singapore relaxed pandemic-related measures such as border controls. As a result, despite high ABSD rates, homes in CCR may see some foreign support.
As long as good jobs are created, decent profits can be made from selling built-to-order HDB flats, and locals aspire to condominium living, demand and pricing for suburban condominiums should remain strong.
Rising interest rates on home loans, on the other hand, may make suburban condominiums less affordable.
Developers who bring their A-game to suburban condominiums will likely be rewarded if they offer well-thought-out developments that are strong on design, sustainability, functionality, and greenery, and are complemented by high-end fittings and classy touches.
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