Change in Property Prices Along the North-East Line Explained
If the Singapore property market is a living, breathing, dynamic, flowing, and ever-changing organism, the MRT lines are its arteries.
The property market is in a state of flux with new homes being built and sold, old homes being resold, and new rental contracts being negotiated. Each of these transactions changes the different price equilibriums established in the various neighborhoods around the country.
Many forces influence these transactions. For example, an increase in supply of similar homes, either from built-to-orders coming online or a burst in owners putting their homes up for sale, wants to push prices down.
An increase in demand wants to push prices up. Urban development of a particular area might stimulate demand. Low interest rates make it cheaper to finance mortgages and can lead to an increase in demand.
External forces, like the Asia Financial Crisis or the Global Financial Crisis, push prices down.
Government policy can stimulate demand with subsidies or push down demand with stamp duty taxes or constraints on borrowing.
In the last year, one of the country’s major arteries, the North-East MRT Line, saw its fair share of price changes.
As the accompanying SRX Property graph illustrates, home prices within one kilometer of each MRT station, as measured on a per-square-foot (PSF) basis, have changed as dramatically as an increase in PSF of 33.2% in the case of Outram Park and a decrease of 8.5% in Sengkang.
What’s behind these numbers?
If we investigate each station, plausible explanations for the increase or decrease in PSF of nearby homes become immediately clear. What’s even more interesting is that each explanation is unique to that area, underscoring the need to analyze each neighborhood and project before buying, selling, renting, or investing in property.
For example, new projects that opened for occupancy (also known as TOP’d or Temporary Occupancy Permit) drove up median prices big time in Outram Park and Hougang.
Specifically, Parc Vera apartments increased the median PSF in the Hougang station neighborhood from $742 in 2014 to $897 in 2015. That’s a jump of 20.9%.
The introduction of new projects, including Altez, Spottiwoode Residences and Skysuites@Anson, into the Outram Park area makes the overall neighborhood more expensive. In this case, the median PSF jumped from $1,295 to $1,725.
So, despite the downward pressure on prices from the Cooling Measures, Outram Park and Hougang homeowners saw their neighborhoods increase in value thanks to the introduction of relatively more expensive new projects.
The neighborhoods of Harbourfront and Sengkang weren’t so lucky. They didn’t receive an influx of relatively expensive projects to prop up their prices. Instead, their neighborhoods experienced a decline in value as their existing projects absorbed the impact of Cooling Measures.
At SRX.com.sg/research, I have posted our analysts’ explanation for the price changes at each of the stations along the North-East MRT line. It is interesting to note how the introduction of new projects can impact the median PSF of a neighborhood in either direction, sometimes bringing prices up, sometimes bringing them down.