How Do MRT Stations Affect Property Prices And Rent?

Conventional wisdom suggests that prices of properties near MRT stations command a premium. We explore just how much of a premium that might be, how it could affect rental prices, as well as how the upcoming Thomson-East Coast Line may affect property prices.

How much more do you pay for properties near MRT stations?

Using the EdgeProp property search and Heatmap tools to obtain price data, we compared advertised prices for private apartments and condominiums within 0.5km, 1km, 1.5km and 2km of 15 MRT stations against average asking prices of the same types of properties in surrounding or neighbouring locations:

Data source: EdgeProp

A few observations from the table above:

Properties closer to MRT stations were almost always significantly more expensive than the prices of properties in the surrounding or neighbouring location. Overall, properties within 0.5km of an MRT asked for a 15% premium over those in the general surrounding or neighbouring location.
It is generally more expensive to buy properties within 0.5km of an MRT station compared those within 1km, but only marginally so for most areas.
Properties near the Orchard MRT station demand the highest price premiums. Properties within 0.5km of the station have a 43% premium over those within 1km.

What do the experts say?

Based on a study that looked at non-landed private housing transactions near the Circle Line for the period of January 2009 to May 2013, researchers at the National University of Singapore found that:

The Circle Line increased housing prices by 1.6% on average
Properties within 400 metres from the Circle Line MRT stations sold for 4.2% higher than comparable properties outside the 400-metre zone
After the Circle Line opened, housing price increases in the 400-metre zone were 13.2% more than those outside the zone

Is rental costlier the closer you live to an MRT station?

Data source: EdgeProp

In the properties we looked at above, there doesn’t seem to be a clear relationship between rental rates and proximity to an MRT station. Properties within 1km of almost half the stations we looked at had higher rental rates than properties within walking distance (less than 0.5km) of the stations.

However, this doesn’t mean that properties near MRT stations don’t command high rental yields. EdgeProp found the majority of properties with high rental yields of 4% and above from January 2017 and January 2018 were located within 0.5km of an MRT station. By comparison, overall gross rental yields for non-landed private homes in the same time period studied hovered around 3.2%.

Has the Thomson-East Coast Line already pushed up property prices?

The Thomson-East Coast Line, which will be completed in five stages from 2019 to 2024, is expected to push property prices up in the surrounding area, although owners of properties near the new stations may not see any real increase in home prices until after the stations have been completed.

In the table below, we looked at the average prices of 12 private condominiums within 0.5km of Thomson-East Coast MRT stations over the past few years:

Data sources: EdgeProp, Data.gov.sg

With the exception of Faber Green Condominium, Four Seasons Park and Camelot, these properties didn’t see any meaningful gain in the past few years. A possible reason for this could be due to the construction work going on in the surrounding areas. Construction of new stations means having to bear with air and noise pollution, disruptions in traffic and road diversions.

However, once the line is completed, it is expected to push up property prices nearby.

Back in 2012, analysts suggested that properties hit badly by construction work would see a temporary dip in prices. It was also forecasted that once the line is ready, nearby properties could enjoy a premium of 10% to 30%, depending on proximity and market conditions.

What other factors do you need to consider?

So does this mean that buying a property near an MRT station automatically means better home appreciation over the years? Well, not necessarily.

It depends on the MRT station. If a station is located far from the city centre, requiring residents to change lines or wait through many stations to get to their destinations, then it may not greatly push home prices up. The presence (or lack of) amenities like nearby shopping malls or schools would also affect demand for properties near the station.

Will MRT stations continue pushing up prices in the long term? By 2030, 80% of Singaporean households will be within a 10-minute walk of a train station. This could mean that properties near a station may no longer command big price premiums, and that newer stations may not push prices up as much as they have in the past.

Finally, keep in mind that property prices can be influenced by lots of other factors, including supply and demand forces, economic growth and government cooling measures.

This article was first published on iMoney.sg, a financial comparison website for personal finance products.