Based on URA’s flash estimates for 3Q2016, prices for private homes in Singapore have fallen 11% from the recent peak in 3Q2013 to 3Q2016. The pace of decline has accelerated in 3Q2016 as evidenced by the 1.5% fall in prices compared with the 0.4% dip in 2Q2016. All three market segments saw price declines in 3Q2016, with a 1.8% fall in Core Central Region (CCR) versus a 0.3% increase in 2Q2016; a 1.3% fall in Rest of Central Region (RCR) versus a 0.2% uptick in the previous quarter; and a 1.2% decline in Outside Central Region (OCR) versus a 0.5% dip in 2Q2016.
Against the backdrop of a market downturn, investors looking for defensive assets might consider properties in areas that have shown resilience in past down cycles. The Edge Property conducted a study onthis and found the Geylang planning area to be among the top 10 most resilient planning areas over the past three down cycles and the current downturn, which started in 3Q2013. Other planning areas of interest are Bukit Timah, Clementi and Hougang, which have been among the most resilient in three downturns, and Ang Mo Kio, Bedok, Jurong East, Marine Parade, River Valley and Serangoon, which have been resilient in two downturns. It would come as no surprise to seasoned investors that these planning areas are all mature estates that have well-developed facilities and amenities (see table).
Top 10 most resilient planning areas in each property down cycle
The price resilience was determined by comparing the change in median psf resale price of transactions for private non-landed homes in each planning area from the price peak to the trough in each down cycle. Only planning areas with at least 10 resale transactions for private non-landed homes in each reference quarter were included in the comparison.
The study by The Edge Property further analysed the price performance of homes near the 26 MRT stations in these resilient planning areas by matching resale transactions from URA caveat data and comparing the purchase and subsequent resale prices of private non-landed homes. Not surprisingly, homes located within 500m of an MRT station are more likely to be resold at a profit compared with those not served by an MRT station. The difference in their price performance is not significant, though.
The marginal difference in price performance could be owing to the availability of other transport options for homes not served by an MRT station, such as buses. In addition, mature towns often offer well-developed facilities and amenities that make up for the lesser transport convenience.
For example, 95%, or 194, of a total of 204 private non-landed homes located within 500m of an MRT station and bought since 2000 and subsequently resold in 2015 resulted in a profit for their owners. In comparison, a marginally lower proportion of 92%, or 634, of a total of 689 homes not located near an MRT station were sold profitably last year. The homes located near an MRT station also fetched a slightly higher annualised profit averaging 6% compared with the 5% for homes not located near an MRT station.
Comparing the individual MRT stations that are within 500m of the homes in the resilient areas that were bought since 2000 and subsequently resold in 2015, it was found that the homes around Beauty World MRT station saw the highest average annualised profit at 9%, followed by those near Chinese Garden MRT station at 8%, Aljunied MRT station and Kovan MRT station at 7%, and Kembangan MRT station at 6%. The comparison excludes MRT stations around where there were less than five homes whose caveats could be traced over the intervening period.
Over the past five years, for non-landed homes in the resilient planning areas bought in 2010 and resold in 2015, 98%, or 59, of a total of 60 homes located near an MRT station were resold at a profit. In comparison, a marginally smaller percentage of 96%, or 154, of a total of 160 homes not located near an MRT station resulted in profits for their sellers. The annualised profit was also slightly higher for the homes located within 500m of an MRT station at an average of 23%, compared with 22% for homes located away from MRT stations.
For homes near MRT stations that were bought in 2010 and resold in 2015, in the resilient planning areas, those located near Aljunied MRT station fetched the highest average annualised profit of 7% for their sellers, followed by a 5% average annualised profit for the homes near Tanah Merah MRT station, and a 4% average annualised profit for those near Lorong Chuan MRT station, King Albert Park MRT station and Dakota MRT station. The comparison excludes MRT stations around where there were less than five homes whose caveats could be traced over the intervening period.
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This article appeared in The EdgeProp Pullout Issue 751 (Oct 24, 2016) of The Edge Singapore.