http://www.straitstimes.com/archive/...stors-20120929
Geylang a growing hot spot for investors
They are drawn to small units, lower capital outlay, strong rental demand
Published on Sep 29, 2012
By Amanda Tan
MENTION Geylang and an unappetising image of shabby shophouses, street girls and sleazy budget hotels springs to mind.
But the much-maligned area is a growing hot spot for savvy property investors chasing high capital gains and rental yields.
Property consultant Lee Sze Teck said that since the second quarter of 2009, median prices of newly launched units there have shot up from $545 per sq ft (psf) in the second quarter of 2009 to $1,255 psf this quarter. Ness in Lorong 32, for example, launched early this year, drew average prices of $1,302 psf in June.
Mr Lee, Dennis Wee Group's senior manager of training, research and consultancy, said the interest in the area is growing partly because of the slew of new launches.
There are at least 40 projects, comprising 2,190 units, that will be launched or completed in the next five years or so.
This will bring the total number of homes in the area to more than 5,500.
There have been 22 launches since 2010 - putting a total of 1,438 units on the market - with 18 to come. About 93 per cent of the flats already launched have been sold, Mr Lee noted.
The 78-unit Casa Aerata at Lorong 26 and the 62-unit Centra Suites at Lorong 25A are the latest projects to be completed.
Knight Frank research head Png Poh Soon noted that most new projects in the area are small, with fewer than 100 units of 818 sq ft on average. The small size and the lower capital outlay make them investor-friendly, he said.
Resale flats are also thriving, with prices rising from $410 psf in the second quarter of 2009 to $888 psf this quarter, Mr Lee said.
But Mr Png pointed out that the rate of increase over the last three years has slowed, partly due to new launches in nearby estates like Mountbatten and Telok Kurau.
The buoyant market seems to fly in the face of conventional real estate wisdom, which demands good transport links and other key facilities to attract buyers.
Geylang, which is infamous for its red-light district and registered brothels, does not have an MRT station, although it is a short drive or bus ride from the city centre. But bad traffic conditions often plague drivers, a situation worsened by the quick pace of development in recent years.
Traffic has increased markedly, leading to parking space shortages along the narrow lanes, also known as "lorongs".
There are no big malls in the area and at night, it is a common to see prostitutes plying their trade along some of the even-numbered lanes.
Yet rental demand is strong, with yields of about 5 per cent, higher than those at suburban condos, Mr Lee said. For instance, a two-bedder at Casa Aerata that was bought for $600,000 has been rented out at $2,800 a month, a yield of 5.6 per cent.
Mr Png noted that Geylang's potential is set to rise as it benefits from the upcoming sports hub development at Kallang.
The Government's plan to develop the 64ha Kallang Riverside and Paya Lebar Central areas will also give Geylang, sandwiched between both spots, an extra boost.
But experts warned that potential buyers or investors could face a problem getting bank loans, given the area's reputation and plethora of shoebox units.
"Some buyers look at shoebox units for investment, hence banks get more cautious because they are concerned about loan recovery, like when buyers cut their losses in bad times and change their minds about the investment," Mr Png explained.
That could mean investors having to cough up as much as 50 per cent in cash, Mr Lee added.
OCBC Bank said it assesses all home loan applications on a case-by-case basis, regardless of the property's location.
Ms Phang Lah Hwa, OCBC Bank's head of consumer secured lending, said: "The quantum of financing is determined by our standard credit criteria, which include regulatory considerations, the customer's profile, capacity to service the commitment and property details."
Property investor Joey Chew, 36, bought a 549 sq ft two-bedder at Casa Aerata last year for $600,000. "The absolute purchase price is low, yet the rent is high and stable," he said, noting that the red-light area is "well-controlled".
"A lot of expats live here and the demand will get stronger with the Paya Lebar hub... I expect to rent out my unit for easily $2,700 a month," he said.
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