Suburban condos can continue to outperform prime ones
Suburban condos can continue to outperform prime ones. MANY PEOPLE WISH TO OWN A CONDO UNIT NEAR ORCHARD ROAD, IN THE ESTABLISHED PRIVATE RESIDENTIAL ENCLAVE OF BUKIT TIMAH, OR IN THE NEW DOWNTOWN AREA OF MARINA BAY.
Buying a home in the suburbs, on the other hand, may be preferable, as a flat in Jurong, Tampines, or Punggol is likely to have experienced greater price appreciation.
According to the Urban Redevelopment Authority, prices of private non-landed homes in the outside central region (OCR) or suburbs increased by 14.7% in Q1 2022 compared to Q4 2019, prior to the start of the Covid-19 pandemic. During the same time period, prices for private non-landed homes increased by 3.4% in the core central region (CCR) or prime areas and 18.4% in the rest of the central region (RCR) or city outskirts.
Between Q1 2010 and Q1 2022, the prices of private non-landed homes in the CCR, OCR, and RCR increased by 13.2 percent, 62.4 percent, and 358 percent, respectively.
Better suburban connectivity and amenities, as well as regulations, are likely factors in OCR outperforming CCR. These factors that contribute to OCR’s outperformance appear to be stable in the future.
Transport and amenities
To begin, the suburbs will greatly benefit from the expansion of the MRT network in terms of connectivity. New MRT lines and stations have shortened travel time from Jurong, Punggol, and Woodlands to a variety of destinations.
The rail network will be expanded even further, with a goal of reaching 360 kilometers by 2030. This means that 8 out of 10 Singapore households will be within 10 minutes of a train station, and Singapore’s total rail length will exceed that of major cities such as Tokyo or Hong Kong today.
Suburban condos. Aside from improved transportation, residents in the suburbs have benefited from additional amenities such as park connectors and cycling paths to meet fitness needs, as well as childcare and eldercare facilities.
Many malls have been built in the suburbs, and large suburban malls like 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, as well as libraries and community clubs, have been improved.
The suburbs have better healthcare facilities, with Khoo Teck Puat Hospital in Yishun opening in 2010 and Ng Teng Fong General Hospital in Jurong opening in 2015. A new integrated hospital near the Bedok North MRT station will open around 2030.
Over the last decade, new institutes of higher learning have opened in the suburbs, such as the Singapore University of Technology and Design, which is located off Upper Changi Road.
Decentralized office hubs have emerged in the suburbs, and urban transformation plans, such as those of the Punggol Digital District and Woodlands Regional Centre, have been developed to encourage economic growth and bring jobs and amenities closer to residents.
In short, suburban living has seen an increase in popularity, with more improvements on the way.
ABSD and property taxes
Second, OCR regulations may be more favorable to homes 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% effective July 6, 2018, and to 30% effective December 16, 2021.
In comparison, the ABSD rate for Singapore citizens and PRs purchasing their first home is 0% and 5%, respectively.
In general, foreigners are more active home buyers in CCR than in OCR. 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, in 2021. As a result, the adverse effect 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 particularly harsh on more expensive homes, which are typically located in prime areas. In 2024, the annual property tax on a non-owner occupied suburban condominium unit with an annual value (AV) of S$30,000 will rise by S$600, or 20%, to S$3,600. 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 in 2024.
There are distinct selling points for prime locations. Some home buyers are drawn to the Bukit Timah area because of the numerous popular primary schools. Residents in some prime areas have easy access to lifestyle enclaves such as Orchard Road, Holland Village, and Dempsey Hill.
Furthermore, some CCR residents have easy access to premier social clubs such as Tanglin Club or American Club, as well as the Unesco World Heritage Site Singapore Botanic Gardens.
As it stands, a new leasehold condominium unit in OCR may cost around S$1,700 per square foot (psf) versus S$2,700 psf in CCR. While home prices in prime areas should continue to command a premium over those in the suburbs, an estimated price premium of around 60% may shrink over time.
Continuous improvements in the suburban living environment, combined with a private home market that is 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 restrictions. As a result, despite high ABSD rates, homes in CCR may receive some support from foreigners.
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 for and pricing of suburban condominiums should be stable.
Rising home loan interest rates, 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-conceived developments that are strong on design, sustainability, functionality, and greenery, and are supplemented by high-end fittings and classy touches.
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