Are Condos in Integrated Developments Good Investments?
There’s a growing trend toward integrated developments. From the early successes of The Centris to the iconic Orchard Residences, we continue to see more rolling out, such as Sengkang Grand Residences, Midtown Bay, South Beach Residences, Marina One Residences and Woodleigh Residences.
British billionaire, James Dyson, made the news when he paid a record price of $73.8m for a penthouse on Wallich Residences, atop the Tanjong Pagar MRT.
Why are the integrated developments gaining popularity?
What are the pros and cons?
First, What is an “Integrated Development”?
Sometimes, we think mixed-use development, integrated development and integrated transport hub are referring to the same thing, but they are not.
A mixed-use development often means a small number of commercial units in the condo – for example, the inclusion of a café and minimart, or a childcare centre.
Integrated development is usually larger in scale than a mixed-use development because it has direct access to a bus interchange and/or MRT station. Besides, it may be next to other communal amenities such as hawker centres, and community clubs.
Park Place Residences, Marina One Residences, and Woodleigh Residences, for instance, have large malls that are a part of the overall project. Woodleigh Residences even incorporates the local police station.
The retail or office component of integrated developments is truly massive. For example, North Park Residences has a mall that’s over 1.3 million square feet (the largest of any integrated development to date).
Integrated Transport Hubs (ITHs), on the other hand, as defined by Land Transport Authority (LTA) as fully air-conditioned bus interchanges that are seamlessly linked to MRT stations and adjoining commercial developments such as shopping malls. To note, an ITH may or may not have residences.
As of 2018, there are nine ITHs: Ang Mo Kio, Bedok, Boon Lay, Clementi, Joo Koon, Sengkang, Serangoon, Toa Payoh, and Bukit Panjang (Source: LTA).
Another upcoming ITH will be at Beauty World. The announcement of this new ITH has already helped boost the sales of nearby Daintree Residence, Forrett and Verdale. Another potential hot seller is the Linq.
We can see why integrated developments are so alluring. Convenience is the key. For typical busy Singaporeans, a one-stop hub where living, transportation, entertainment, and daily necessities all converged, it means a significant saving on time. In a fast-paced society, time is the essence.
How Have Integrated Developments Performed?
Let us take a look at four examples.
TOP in 2002, Compass Heights is the first integrated development with a condo connected to a shopping mall (Compass One), MRT (Sengkang NEL), LRT and bus interchange. It comes with 269,098sf of shopping space and 536 condo units.
How does it fare since its launch?
To date, Compass Heights has made a gain of 77.28%. It peaked in 2013 before it begins to decline.
On the hand, the newer Luxurie (2015) and La Fiesta (2016) nearby, have appreciated 10.26% and 18.67% respectively.
Why has caused Compass Heights to decline as compared to the newer condos? The answer could be age. It is almost 20 years old now and has past its prime. Based on my observation, 15 years is about the critical point for a leasehold condo despite all its other positive attributes.
On the rental front, Compass Heights currently averages about $2.28psf, compared to Luxurie ($2.92psf) and la Fiesta ($3.08psf). It does go to prove that tenants ultimately still prefer newer condos.
Based on Edgeprop, the respective implied rental yields are:
- Compass Heights: 3.1%
- Luxurie: 3%
- La Fiesta: 3%
The 610-unit Centris, right by Boon Lay MRT, was TOP in 2009. It sits on top of the Jurong Point Mall, which is the biggest and busiest mall in the west. It has a 750,000sf of shopping spaces.
How has The Centis performed over the years?
From the time of launch in 2006, The Centris has made a gain of 119.25%. It outperforms the nearby Lakeholmz (93.04%), Lakeshore (89.85%) and Caspian (82.37%).
In terms of rental, The Centris fares the best at $3.03psf, compares to Lakeholmz ($2.38psf) and Lakeshore ($2.78psf). Even the newer Caspian (TOP 2012) falls behind at $2.84psf.
The respective implied rental yields work out to (source: Edgeprop):
- The Centris: 3.3%
- Lakeholmz: 3.3%
- Lakeshore: 3.3%
- Caspian: 3.1%
The main reason why The Centris still has not lost its shines is that there are no other condos which are within a short walking distance to Jurong Point Mall and Boon Lay MRT.
Bedok Residences, connected to the Bedok MRT, comes with 583 residential units and 222,463sf of shopping size. It was one of the hottest launches in 2011 when many queued overnight to secure a unit. It still enjoys a lack of competition with no nearby condos.
How has it fared since then?
The overall gain of Bedok Residences is 10.93%, which is not as spectacular as The Centris. It still outperforms the rest of the condos in the same district because there is no competition in the vicinity.
The rental rate of Bedok Residences at $3.93psf (3.2% rental yield) is far above the $2.90psf average of district 16.
Hillion Residences, connected to Bukit Panjang MRT, has 546 residential units and 174,730sf of shopping spaces. It is one of the newer integrated developments that was opened in 2017.
When the project was launched in March 2013, the take-up rate was slow because it was almost right after the government announced the cooling measures.
Hillion Residences so far has made a gain of just over 5%, whereas the nearby The Tennery and Maysprings depreciated.
The current rental of Hillion Residences is $3.85psf, compared to The Tennery $2.96psf and Maysprings $2.18psf.
The implied rental yields are (source: Edgeprop):
- Hillion Residences: 3.3%
- The Tennery: 3.3%
- Maysprings: 3%
It is interesting to see how the Hillion Residences integrated development, particularly the Bukit Panjang MRT has helped to boost the prices of the much older Maysprings.
Maysprings was launched in April 1996. Between 1996 to 2006, it depreciated by 46.07%. It recovered briefly after the 1997 Asian Financial Crisis, only to become a victim again in the year 2000 when the dot.com bubble burst.
Its fortune, however, made a drastic turn-a-round in 2007 when the property market picked up. Likely, the main push factor that catapulted Maysprings was the announcement of the Bukit Panjang MRT in July 2008, as part of the Downtown Line.
Between 2006 to 2020, Maysprings makes a spectacular gain of almost 172%!
The prices dipped from 2013, in line with the national trend, after the government announced rounds of cooling measures. However, the prices went back up again in 2018 when the integrated development was open.
Good Track Records of Integrated Developments
Looking at the history of some of these integrated developments, we can see that they do present an investment potential that differs significantly from conventional condos.
No wonder the current newly launched integrated development at Woodleigh Residences is one of the top-sellers. With the Bidadari new town and the 10 hectares of park, including a lake and underground reservoir, Woodleigh Residences is a hotspot that attracts many home buyers. It comes with 161,640sf of shopping space and 667 condo units.
When Woodleigh Residences was launched in November 2018 at more than $2,000psf, it didn’t take off very well on the back of the new cooling measure introduced in July 2018. Also, Park Colonial just across the road was selling at a lower price. The developers then took the project off the shelf for about six months before it was relaunched at a more attractive price level of $1,800+psf.
It is interesting to note that Park Colonial has now caught up with the prices of Woodleigh Residences. This makes Woodleigh Residences a very attractive proposition.
A Disclaimer on Integrated Developments
Recently British billionaire, James Dyson, was once again in the news when he sold his 3-level penthouse at Wallich Residence at $62m. He bought it for $72.8m about a year ago. (Wallich Residence is an integrated development on top of the Tanjong Pagar MRT). That translates to a staggering 14.8% loss, excluding all the stamp duties he had to pay.
While this may be an exceptional case, given his financial status, I must also reiterate that not all integrated developments are equal. While I have pointed out some of the worthy integrated developments that have performed well in terms of capital appreciation and rental yields, not all of them are as good as these.
You will still need to do your due diligence when picking the right project. Like all other projects, you will have to consider the entry prices, nearby competing condos (as in the case of Woodleigh Residences versus Park Colonial), location, right choice of units and so forth.
Differences Between Integrated Developments and Regular Condos
Some of the differences to note are:
- The distribution of maintenance costs
- Congestion and noise issues
- Overall cost of the property
- Convenience and savings on transport
- Rentability concerns
1. The Distribution of Maintenance Costs
In integrated developments, generally the retail and office components bear more of the maintenance costs, compared to residential.
One example of this is Guoco Midtown. The residential component (Midtown Bay) has only 219 units, which is considered small. This would usually result in higher maintenance fees, sometimes in the range of $600 per month ($400 per month is typical for most condos).
And yet, monthly maintenance fees range from about $360 per month (single bedder) to just $505 per month for even the largest three-bedders.
2. Congestion and noise issues
There are some trade-offs you can expect for the convenience of staying in an integrated development.
When you live on top of a huge shopping mall, you’ll have to accept that noise levels are higher, roads around your home see more traffic, and some of your expected amenities will be crowded out by the public (the “convenient” restaurant downstairs might still entail a 90-minute wait).
3. Overall Cost Of The Property
Generally, we can expect integrated developments to cost more than regular condos because people are willing to pay for the extra convenience, seamless connectivity with public transportation and the location.
More importantly, as we have seen historically, integrated developments have performed well both in terms of capital appreciation and rental yields.
Integrated developments also don’t come by every day. They are usually part of the URA Master Plan for major developments in the area. The government earmarked these integrated developments based on their strategic locations to serve as sort of a business hub.
4. Convenience and Savings on Transport
Convenience is the biggest plus point of integrated developments, as you can just ride the lift down and shop for groceries, get a haircut, put your child in a childcare centre, etc.
There will also be considerable savings on transport, as you don’t need to use food delivery or travel for your shopping and dining. Likewise, if your office is in the same development, you can save quite a sum on going to and from work over the years.
It’s also nice to know your bedroom is just three minutes’ walk from the office if you’ve had a long day.
5. Rentability Concerns
The general consensus is that integrated units have higher rentability. It’s especially attractive to tenants who work in the same office as the development.
However, rentability is not an easy concept to gauge. I would venture that a regular condo, which is close to the MRT station and major amenities, is as rentable as most integrated developments.
For example, a condo right across the road from an integrated development may be just as rentable (the tenant just needs to cross the street to access the same amenities) but may come at a much lower price. This is why Park Colonial was selling very well as compared to Woodleigh Residences which was launched at a higher price. Due to competition, Woodleigh Residences has to reposition its pricing.
On the other hand, integrated developments like The Centris and Bedok Residences can enjoy not only higher rentability but also rental yields, namely because they have no competitions from other condos.
In light of these differences, are regular condos or integrated developments better for you?
If you’re the sort who likes a high degree of privacy or exclusivity, then integrated developments are probably out of the picture. If you loathe the concept of thousands of shoppers crowding into your development after work / on weekends, then start looking for a peaceful, regular condo instead.
On the other hand, if you like convenience and city living, integrated developments might appeal to you. The same is true if you happen to work within the integrated development – then it’s both convenient, and a huge cost savings, to note have to travel to and from work.
If you are considering from an investment perspective, do bear in mind not all integrated developments have the same investment value and potential. There are various factors that should be taken into consideration.
Feel free to contact me and we can look at some of these factors.
Make a virtual appointment with via the calendar below for a further non-obligatory discussion.
Danny Han has been a licensed real estate agent since 2005. He also had five years of experience as a financial consultant. The insights and knowledge he shares in his blogs are the results of years of experience in helping many of his clients in their Property Wealth Planning.
Prior to becoming a real estate agent, Danny was a full-time church pastor (don’t be shocked!) for 23 years. Even now, he is still actively involved in church work and preaches regularly. He has also made six mission trips to Myanmar to-date.
Danny is a foodie, so during his spare time he would go with his kakis to try different “CNG” (cheap and good) food. (Be sure to check out his Holland food blog in this site).
Do feel free to drop him a Whatsapp message for a non-obligatory discussion if you are planning to grow your property wealth.
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