Gone are the days when location fundamentally mattered in most private residential purchases.
While the recent aggressive bids in Government land tenders for centrally- located suburban sites showed the importance of location and how location still underpins a property’s value, home buyers are now increasingly open to properties in more diverse places.
There are also many people who have ventured to buying homes in new locations, including some at the extreme corners of Singapore that had traditionally received limited buying interest.
If the location of a property has waned as an overriding factor, what prevails in the home buyers’ decision?
Several factors have now become more clearly noticeable than before in a home buyer’s decision – the product’s concept, the scarcity of the property and the opportunity to benefit from owning the property.
With so many factors to consider compared to only “location”, the overall home buying process is now more complicated. Home buyers are expected to critically evaluate properties based on various factors which they feel will justify their worth.
The criteria can rank differently between home buyers, resulting in some properties favoured even if they apparently have weaker underpinnings, for example, a less accessible location.
Why has the importance of location diminished?
With new MRT stations in more locations, the connectivity of many areas has been improved, especially those which were once considered remote.
Properties which have benefited from improved connectivity include those near North-East Line MRT stations which were completed less than a decade ago, those in the completed phases of the Circle Line and some new locations where the further phases of the Circle Line and Downtown Line will be completed.
With the improved transport infrastructure, residents will find it easier to travel across Singapore.
The common question asked by home buyers is no longer how expensive a property will be, for prices of suburban private residential properties are already at record highs. It is, instead, what opportunities there are that can lead to a property’s growth potential.
The easiest way is to look for properties that can benefit from neighbourhood or regional rejuvenation plans.
The more comprehensive and longer the plans are, the more the opportunities that may be realised from purchasing the property.
These include properties in the western corridor of Singapore, which may benefit from the Jurong Lake and Jurong Gateway master plans; those in the Seletar area, which may become more vibrant after the completion of the Seletar Aerospace Park; and the north-eastern corridor of Singapore, which is continually developing with more lifestyle choices and a variety of housing options.
Home buyers who are advanced in their assessment of future investment returns are seen to be higher risk-takers who buy into these “unpolished gems”.
Dwindling new choices in built-up areas
Home buyers are now looking beyond properties in well established towns. They are seeking potential, instead of favouring homes in central locations, which are in any case priced higher since the investment returns are seemingly absolute.
Additionally, a number of mature housing areas are fairly densely built, offering wider choices of resale properties than new properties. While new housing estates do not have as many amenities as mature ones, they have space to accommodate more exciting new amenities to cater to residents.
Product sophistication and innovation
With non-landed residential properties in the same locality often considered homogenous products, developers are now increasingly focused on product design to differentiate their offerings.
To stand out from the competition and ensure that newer products justify a price premium over existing products, the quality and design must be exclusive and significantly superior. Previously, exclusive lifestyle concepts were mainly seen in properties at higher price echelons but unique product design is becoming important for suburban private residential properties, partially to offset some developments’ weaker locations or to complement the project to achieve the best home buyers response.
Buying a private residential property is a major affair, involving a huge amount of capital and often requiring a lifetime to finance the purchase. It is especially so now, with the record prices of suburban condominiums. The decision also hinges on one’s objective in buying the property – for owner occupation, for resale in the longer horizon, or for medium-term investment.
The buying of properties in less popular districts probably calls for tougher decision-making, for it requires more confidence that the purchase will appreciate in view of opportunities such as new transit stations and upcoming malls and amenities.
Purchasers of private homes in estates with rejuvenation plans are buying into the success of such plans, as well as the benefits of such transformation for property values. Nevertheless, a buyer for owner occupation may be less affected should the rejuvenation not yield the desired result, as it may not necessarily cause a dent in his property venture and profit expectations.
Against the backdrop of the latest government property cooling measures, the home buyer has to consider many more factors in the decision process.
In addition to ascertaining the potential of a property, the home buyer will now have to determine an optimal time to purchase. He will also have to recognise possibilities which will affect his financing capability as he is unlikely to sell his property within the first few years of purchase if he wishes to avoid paying sellers’ stamp duty.
Recognising one’s financial capability is fundamental to one’s home buying decision and this has been underrated by prospective buyers before the recent cooling measures. While the typical home buyer will now have to go through a tougher decision process, the private home purchase is expected to be more sustainable.
By Ong Kah Seng – senior manager, Research, Asia Pacific at Cushman & Wakefield.