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Published March 9, 2012

IRs had limited impact on home prices: report

Spike immediately before their opening has tapered off

By MINDY TAN


DESPITE the hype, the integrated resorts (IRs) have done little in terms of long-term capital value appreciation of private residential properties in its vicinity, said DTZ in a report issued yesterday.

Specifically, capital values of private residential properties are found to register a slower pace of growth, after the initial excitement of having an IR in the vicinity died down.

Following the opening of the IRs - Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) - housing prices in Marina Bay and Sentosa grew at a slower rate from Q2 2010 to Q4 2011, at 3.7 per cent and 1.5 per cent respectively, versus the URA CCR index, which rose 8.0 per cent.

The lead-up to the opening of the IRs, however, told a different story, noted DTZ. The most significant impact for surrounding private residential prices was found to be in the one year following the award of the sites in 2006; and the one and a half years before the IRs opened.

In 2007, prices of non-landed homes on Marina Bay and Sentosa rose 30.6 per cent and 41.7 per cent respectively. This was higher than the 25.7 per cent growth in the URA Core Central Region (CCR) index - comprising districts 9, 10, 11, Downtown Core (which includes Marina Bay) and Sentosa - during the same period.

In the one and a half years leading to the opening of the IRs, capital values of private non-landed homes in Marina Bay and Sentosa rose 65.3 per cent and 38.5 per cent respectively, probably due to the excitement of having an IR in the neighbourhood, and the economic recovery, said DTZ. The URA CCR index registered a 28.9 per cent increase in the same period.

'The greater volatility in the capital values of non-landed private homes in Marina Bay and Sentosa could have been due to higher investor interest which include some speculative element,' said DTZ.

Correspondingly, median rents in Marina Bay increased at a faster pace compared to the rest of the CCR in the one and a half years before MBS opened - median rents there rose by 35 per cent while median rents in the CCR grew 15 per cent.

In Sentosa, median rents were bolstered by the initial attraction of a new waterfront living lifestyle, resulting in median rents of non-landed private homes (proxied by median rentals in Southern Islands) hitting a high of $7.28 psf per month in Q4 2007 versus median rents in the CCR of $3.87 psf per month.

Median rents in Sentosa have been falling and were almost on a par with the CCR median rents in end-2009 and in 2011. They rose temporarily in 2010 when RWS opened.

DTZ expects housing prices and rents in Marina Bay and Sentosa Cove to move more in tandem with the rest of the CCR in future.