REC Insights Part 2 of 3: This undervalued property cluster may be the next gem (4 Jul 2019)
- Original Post from ERNEST LIM'S INVESTING BLOG

This write-up was reproduced with permission from Ray’s Estate Clinic, written by Founder, Raymond Chng. Please refer to the below for more information on Raymond.


After much hesitation in publishing this article, I was persuaded by clients to share my views about the next big location to buy real estate. So much hype has been in locations like Marine Parade and Jurong. For those who are familiar with the investment logic –“be fearful when others are greedy”, I am cautious over buying properties in areas with hype. Buying a property is easy but selecting the right property is not.


When large real estate funds like blackstone and GIC Real estate decide on an investment, they spend a rather substantial period of time to research and analyse the deal. Of course, some of you might say, such research may not be required to buy a residential property in Singapore. However, my view is because we are in a different investment environment compared to 10 or even 20 years ago. Asset prices have risen a great amount and Singapore has experienced tremendous growth into a cosmopolitan city it is today. Property selection is crucial for property buyers who want their property value to be able to hold well in the long term, even for home buyers. Now that I have gotten this out of the way, let’s proceed to the main topic, which property cluster am I referring to.


This property cluster is Tanjong Rhu.



Source: Raymond Chng / Image: Tanjong Rhu Aerial View


Tanjong Rhu is now undergoing regeneration with the upcoming Tanjong Rhu MRT, part of Kampong Bugis growth area as well as the future commercial developments under the URA masterplan.


1.Upcoming Thomson-East Coast Line (TEL)


As seen in the below image, Tanjong Rhu MRT that will be completed by 2023/2024 will benefit the private residential developments within the the area. By being only 4 MRT stops from Marina Bay, the added convinience for residents in the area will increase tremendously. Currently, residents of this part of Tanjong Rhu have to take either a bus or take a 12 min walk to Stadium MRT. The TEL will also be linked to Changi Airport MRT and Woodlands where the future RTS to Malaysia will eventually be built. This will likely increase tenant base due to the increase connectivity.



Source: Streetdirectory / Image 1 – Tanjong Rhu MRT Location



Source: LTA / Image 2: Thomson East Coast Line Stations


2.Kampong Bugis Growth Plan


In the 2013 URA Masterplan, it was announced that Kampong Bugis is a growth area, and a car-lite district will be developed. This includes exploring the use of water taxi as a transport option. While Kampong Bugis is not Tanjong Rhu, it will subsequently be closely linked via water taxi if the government proceeds with their plans. Tanjong Rhu has access to the Kallang Basin which would enable residents to benefit from the alternate transporation into the CBD.


While there has been no concrete plans for water taxi yet, the development of Kampong Bugis will alter the skyline across the kallang basin from Tanjong Rhu and will change the views, feel and environment for residents of Tanjong Rhu



Source: Straitstimes / Image 3: URA Masterplan for Kampong Bugis


3.Future Commercial Developments in Tanjong Rhu


The URA Masterplan can provide clues to future developments, what is interesting is that there are 3 commercial sites in Tanjong Rhu that is not built yet. 2 of which are along the kallang basin waterfront. This is interesting as there will potentially be waterfront dining, retail and perhaps water sport amenities added to this side of the kallang basin. Future water taxi services can also be part of these commercial sites, if the government proceeds with such transport alternatives as highlighted in the 2013 URA Masterplan. Such commercial developments will benefit residents of Tanjong Rhu and potentially the demand for housing here.



Source: URA Masteplan / Image 4: Masterplan for Tanjong Rhu


4.Future Developments and moving of MBGC


The lease for Marina Bay Golf Course (MBGC) will expire in July 2024 and will not be renewed. This would free up huge amounts of space for future development. While waiting for MBGC lease to expire, the government has been preparing the surrounding land. When travelling at Fort Road, which is close proximity to Tanjong Rhu, huge cement trucks or trucks carrying sand can be seen on a daily basis. One can only wonder what kind of works are being carried out there. My best guess would be the government is preparing the land, piling, and strengthening the land for future developments. This would be the next growth phase after the Tanjong Rhu MRT is completed in 2024, and residents can look forward to another phase of regeneration of this area.



Photo by: RaysEstateClinic / Image 5: Aeriel view of MBGC area


5.Undervalued


One of the most important factor of an investment would be the price. In the Tanjong Rhu condo cluster, prices currently average around S$1,350psf +/-. Properties are mainly 99 year leasehold.


One MRT stop away at Katong Park or Meyer Road vicinity, prices currently are at the $2,000 to $2,400psf range. While properties at Amber Road vicinity are priced at $1,800 to $2,000psf, with the latest launch of Amber Park selling for $2,500psf range. Most of the properties at Katong Park and Amber Road are freehold. However, even with a premium on freehold properties, the price gap for properties in those areas are currently too wide. My personal opinion is that the price gap will close. Below in Image 6, you can see what are the price zones in the areas surrouding Tanjong Rhu.



Source: URA / Image 6: Tanjong Rhu Surrouding Price Zone


Given that there is a huge price gap between those surrouding areas, the first question that comes to mind is why is Tanjong Rhu prices so low? A simple but yet true reason is that currently, there is a lack of amenities in terms of transport and eateries nearby. This will eventually change.


Another means of valuation that can easily be used to look at the price level of Tanjong Rhu being very attractive is that, Tanjong Rhu will be 4 mrt stops from Marina Bay. If we draw a circle of 4 MRT stops from Marina Bay, the average prices of the properties are at least $1600psf. Tanjong Rhu’s price currently is attractive.



Our Views


There are always opportunities if we look hard enough. Tanjong Rhu is one location that home buyers and investors can both consider looking at. This is one area that has very little risk due to the vast pipeline of growth potential. A real gem waiting for its true value to be awaken.


There are various types of units in Tanjong Rhu that investors and home owners can buy, not all units may perform well in the area. Depending on individual’s needs and situation, some unit types may be better.


Do note that this report is purely my personal view of the potential of Tanjong Rhu. For property buyers who are interested to explore more, the next step will be to look at unit selection. Unit selection is a key differentiating factor that can increase rentability and sellability of your property and is something that I facilitate property buyers who engage my services exclusively.



About the Author


Ray’s Estate Clinic (REC), founded by Raymond Chng, is a platform for Investors’ and homeowners to have a Property Portfolio Health Check by utilizing data analytics, ensuring that their portfolio remains healthy providing optimized returns.


“Health is Wealth” is what Raymond believes in, and it is not related only to your own body’s health, but it also refers to one’s financial health. Having a Property Portfolio that is not performing does not help improve an investor’s wealth. Hence, converting non-performing assets into optimized performing assets is essential to portfolio’s health improvement.


Raymond can be reached at raysestateclinic@gmail.com. Do visit his blog HERE for more information.



Disclaimers


Please refer to Raymond’s blog for the disclaimer HERE


Also, please refer to my disclaimerHERE

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lynlynnakamori

thank you for the sharing

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