JLL sees D9-11's price premium disappearing in 2 years

By ARTHUR SIM, from today's Business Times

THE increasing number of investment-grade residential properties in the central districts is slowly making Districts 1-4 the alternative destinations for investors who traditionally shop in Districts 9-11.

According to Jones Lang LaSalle head of research (Southeast Asia) Chua Yang Liang, the number of subsales in the central districts increased to 114 in 2005, or 9 per cent of the 1,266 transactions done there, up 7 per cent from 2004.

In the prime districts, subsales accounted for only 3 per cent of 3,845 transactions done there - 115, a one per cent increase over the previous year.

Subsales are transactions made before the completion of a property sale is finalised (usually for a quick profit) suggesting that people are buying for investment rather than owner-occupation. And for Dr Chua, 'the increased number of subsales in the central districts suggests that more people are buying for investment'.

He cites certain well-known 'niche' developments like The Sail @ Marina Bay, The Azure and The Berth at Sentosa as being particularly popular with investors, but notes that developments like Pearl @ Mount Faber and The Caribbean at Keppel Bay are also drawing some investor interest.

'An analysis of the caveats lodged for apartments and condominiums over the past 10 years reflects a narrowing of prices between prime apartments and condominiums and those located in Districts 1-4 from the period of 2003 to 2005,' he added.

With land prices at Sentosa Cove rising, Dr Chua believes future launches of apartments and condominiums there are likely to hit $1,000-1,300 per square foot (psf), while office building conversions in the CBD could be in the range of $850-1,000 psf.

In comparison, he said, average prices of newer projects in Cairnhill, Scotts Road and Paterson are hovering around $1,200-1,500 psf.

And with demand for waterfront and city-living on the increase, Dr Chua expects the premium that investors will pay for properties in District 9-11 over niche developments in District 1-4 could even disappear in two years, when prices converge.

'Properties in Districts 1-4 could become the alternative to Districts 9-11,' he said.

Some of the areas Dr Chua thinks have future 'alternative prime' potential are Shenton Way, Tanjong Pagar, Tiong Bahru, Keppel Bay and Sentosa Cove. 'In the next one to two years, we foresee the price premium of apartments and condominiums located in the prime districts over those in Districts 1-4 to hover between -$50 to $50 psf.'