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Greater Southern Waterfront: Large residential property supply may dampen 'lottery effect'

Among the plans for the Greater Southern Waterfront (GSW) is the revitalisation of Sentosa’s beach areas and expansion of its nature and heritage trails, and the linking of the GSW with all the surrounding green areas from West Coast Park to East Coast Park. PHOTO: Ministry of Communications and Information

By Abdul Hadhi

SINGAPORE — Residential property in Singapore has historically delivered good returns, but beyond the initial “lottery effect”, the sheer number of new residential units proposed for the Greater Southern Waterfront (GSW) area may reduce its current air of exclusivity, property experts told Yahoo Finance Singapore.

An estimated 9,000 private and public flats are expected to be built in the initial phase of the area’s development, on the site of the Keppel Golf Club, whose lease expires in two years.

The rejuvenation of the GSW was among the long-term projects unveiled by Prime Minister Lee Hsien Loong in his 2019 National Day Rally speech. The waterfront comprises 2,000 ha of prime waterfront land stretching some 30km from Gardens by the Bay East to the Pasir Panjang terminal.

Some property experts estimate that a 4-room HDB flat in GSW could be priced at least $200,000 above a similar flat in Sengkang, drawing comparisons with the “lottery effect” at Pinnacle@Duxton where those who had bought flats at $450,000 each resold them at more than $1 million in 2015.

But others are not so sure as the Keppel club site is a “mere fraction” of the entire GSW and ultimately, the land to be developed will be twice as big as Punggol or six times the size of Marina Bay.

With Punggol slated for some 100,000 flats, the GSW - to be developed over 30 to 50 years - could eventually see up to 150,000 homes built, which is “a lot of supply”, Ku Swee Yong, CEO of International Property Advisor, said in a media podcast.

The influx of such a large number of new homes could create competition for tenants and utilities, and create traffic jams, he added.

And by more than matching demand, the large supply may also keep unit prices in check.

Slowing population growth would hurt demand

An oversupply could be compounded by Singapore’s changing demographics as tighter immigration policies and falling birth rates take their toll. Population growth has more than halved to 0.9 per cent per annum from 2.2 per cent over the 2013-2018 period, according to an RHB report.

Slowing population growth is negative for housing demand over the longer term and hence would also curb prices.

Sharp fluctuations in price could be avoided if the land is released in phases, and the development period comprises two to four property cycles, said Nicholas Mak, ERA Realty’s Head of Research and Consultancy.

He believes that private property prices in the GSW are likely to remain broadly in line with those of other properties on the city fringe, like Tanjong Pagar and the Dakota area. Recent transactions for condominiums in the Keppel Bay area were around $1,600-$2,000 psf, according to URA and ERA Realty data.

If necessary, the government could step in, lengthening the compulsory occupation period or reducing the length of the property’s lease, some property experts believe. Selling GSW units on 60-year or 30-year leases, for example, would limit the upside potential of such units.

Mapletree REIT: Big commercial winner?

Beyond residential properties, the government plans to develop more office space in the GSW, bringing more jobs to an area already home to Google, Cisco and Unilever.

Commercial developments are likely to spring up near the existing Mapletree Business City, and listed Mapletree Commercial Trust (MCT) should benefit, DBS analysts Derek Tan and Ho Pei Hwa said in a report.

MCT’s commercial properties in the area include Mapletree Business City Phase 1, PSA Building, and VivoCity, which over time will benefit from a wider pool of tenants as the live-in population of the GSW increases.

Another property trust that may benefit is Frasers Commercial Trust, which owns Alexandra Point and Alexandra Technopark.

With additional plans to redevelop of two Pasir Panjang power stations into recreational facilities and create a Downtown South resort, long-term prospects for the area are positive.

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