Opportunities near new line
Investing in properties near MRT stations
Singapore's property environment is abuzz with excitement.
Recently, the Land Transport Authority announced the merger of two new MRT lines to create the Thomson-East Coast Line (TEL).
The first TEL trains will be operational in 2019, but the entire line will be completed only by 2024.
So why are Singapore property investors and developers practically dancing in the streets?
Because they see the dollar signs. They understand the MRT Rule for Investing in Singapore Property which states that, in general, homes increase in value the closer they are to an MRT station.
Property investors and developers see huge opportunities in the TEL.
According to the MRT Rule, prices of houses near the TEL should get an automatic increase in value.
Furthermore, commercial enterprises near the new line should benefit and this increases the overall value of houses.
At srx.com.sg/mrt-home-prices, SRX Property displays prices for resale, non-landed homes within 1km of MRT stations and, for the first time, we have calculated the prices near the TEL.
The line is L-shaped and extends from Woodlands North to Sungei Bedok, therefore covering a large swath of Singapore.
The most expensive residential area is in Marina Bay, which has an interchange station on the North-South Line.
When I look at the diagram of TEL, my eyes immediately gravitate towards stations which are new.
First, I can expect to see properties near these stations start to increase in value.
Second, I am looking for arbitrage opportunities or price mismatches that give me an advantage as an investor.
One station that sticks out is Orchard Boulevard, which is due for completion in 2019.
Note that its residential area is sandwiched between two more expensive ones: Napier and Orchard.
When I use SRX's location-based property search engine, I discover that there are some well-established luxury projects near the Orchard Boulevard station site, including The Grange, which is only about 120m away.
The MRT Rule says that places like The Grange should see a bump in price over time as sellers and buyers factor in the fact that it is within walking distance of a new station and that prices in the area are less expensive than that of the neighbouring areas of Napier and Orchard.
There may or may not be a buying opportunity near Boulevard station, but it is worth investigating.
Another TEL station of interest is Tanjong Rhu. Its two neighbours to the east on the TEL are about 10 per cent more expensive.
Prices in Katong Park and Amber are $1,377 and $1,372 psf respectively, while Tanjong Rhu comes in at $1,247 psf.
Condominiums near Tanjong Rhu station are located in a very convenient area. They are closer to downtown than their eastern neighbours and a short distance from amenities such as the Singapore Sports Hub.
As people learn that Tanjong Rhu will have an MRT station, do not be surprised to see Katong Park and Amber's higher prices send some buyers over in search of better valuation.
This should cause prices in the three areas to equalise among similar homes.
A third station to look at is Outram. This is an interchange, so be extra careful in your analysis.
Its neighbourhood is used to having a station in its backyard; as such, home prices have already accounted for the station's presence.
However, a third line at the interchange should bring more people to that area, either for business or entertainment.
As the area becomes more vibrant, commercial property prices should increase and this could lift residential prices.
One caveat about my analysis - it is just a starting point and you would never want to base your investment decision solely on the MRT Rule.
For that matter, you should never apply a single rule in isolation.
Instead, you should consider all rules for investing in Singapore property and then factor in your personal and financial circumstances.
Last week, I highlighted the Urban Planning Rule.
In future columns, I will discuss how to apply other rules, including the Radial and PSF rules in evaluating homes near the new TEL.
By the end of the discussion, you should have a constructive framework for investing in Singapore property.
Sam Baker is CEO and co-founder of Singapore Real Estate Exchange (SRX), a digital information platform that provides the Singapore property market with pricing information, comprehensive listings, and mobile applications to buy, sell or rent property.