The MRT effect: How it will affect your property's value

MRT-Map

Fast forward to 2030 and Singapore would have become more interconnected with two new MRTlines; the Thomson Line and Downtown Line and three extensions (Tuas West, North-South and North East Line). Some would argue that when all the new lines and extensions are completed, one can hardly find a residential area in Singapore, regardless of whether it is in the CCR, RCR or OCR, not accessible by MRT. Would buying and holding on to aproperty near a MRT station therefore stillbe a profitable choice?

Distance to train station

The nearer a property is to a MRT station, the more it can command a premium price. On average, properties near MRT stations can be worth at least 10 15 percent more than those which are further away. This is because MRT lines improve accessibility and add a level of convenience for residents around a neighbourhood. In fact, properties near an MRT will generally be able to hold its value better during a downturn and see better price appreciation during a property boom.

For example, average property prices in the areas within a 10min walk or 1km radius of most of the Circle Line stations have risen substantially since 2009.

In general, properties which are near MRT lines are already attractive. Property buyers who are more forward looking will begin to look at newly launched properties where upcoming MRT stations will be built. These locations are typically less expensive before the MRT stations will be completed, and will see a gradual rise in value over time, explained Eugene Lim, Key Executive Officer for ERA Realty.

However, while there is no denying the convenience an MRT line brings, there is also a danger of put too much emphasis on distance to an MRT station in property valuation. Quantifying the effect of distance from MRT stations is only one aspect, in a host of other factors, which affect home prices.

How high prices can go will depend on the amenities around the project at that certain point in time. Aside from current supply and demand of properties in the vicinity,property seekers should also examine the future plans for an area (based on the URA development plan) as well asdemographic trends anticipation of the type of residents who might be attached to the area (eg. young couples, expats) - to determine the investment potential. Other factors to keep in mind are tenure, age, condition and surroundingfacilities, mentioned Kevin Seah, Senior Marketing Director of Huttons Asia.

In addition, closeness to a station might mean that there can be side effects of noise pollution; track noises from above ground stations, particularly those along the North-South and East-West lines, can adversely affect the desirability of the property. The ease of transit to the nearest MRT is also an important factor to take into account. For instance, owners of properties within 1km away from the nearest MRT can stand to benefit more if they are located near bus networks as well. Certainly, having five buses ply the same 1km distance from said property to the MRT station will be favoured more as compared to a property that has only one feeder bus service.

As more MRT stations are constructed, there is a belief that the MRT effect may decrease. On the other hand, there is also a possibility that developments in estates where there are more than two or more MRT stations nearby will encounter greater demand. Equidistance from two MRT lines increases the transportation choices for the property buyer, hence will likely drive up the price of these developments.

Location

As a rule of thumb, the nearer a property is to the Core Central Region (CCR), the less likely a new MRT line will impact its value. This is because the property has most likely already been priced by virtue of its prime location. Also, properties close to the CCR tend to be better connected via a high density of MRT and bus networks which travel towards the city centre. An addition of new MRT lines along these routes might mean little if there are other travel routes available to travel to other parts of the island.

Moreover, it also boils down to the buyers demographic. The CCR typically is favoured by the wealthy who have a preference to stay in high-end private housing and will most probably own one car (or more) in the household. Hence, properties in these areas might not see a significant appreciation from a MRT station nearby.

Conversely, the further a property is from the city centre, the more valuable the presence of a MRT station becomes. As the MRT is often viewed as one of the main and fastest mode of transportation to other parts of the island and the CBD, it is vital for the transportation needs of residents in these areas and hence proximity to a station becomes more sought after.

To read more about the property outlook for 2015, download the PropertyGuru Property Outlook Report 2015 eBookhere

Adam Rahman, Senior Content Marketing Executive at PropertyGuru, edited this story. To contact him about this or other stories, email adam@propertyguru.com.sg

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