Thursday, November 17, 2011

North-South divide, Singapore style?

Property prices and rents of some Novena and Thomson properties along the construction route of the North-South Expressway (NSE) could be hurt by the project, but only during construction, say analysts.

On Tuesday, the Government announced that 21 private properties will have part of their land acquired to develop the 21.5km expressway. Aside from this, dozens more homes will be hit by noise, dust pollution and traffic diversions that typically plague large-scale projects.

These may deter prospective buyers and could lead to a 3% to 5% drop in property values, said some analysts. The impact would depend on the property’s location and whether the nearby portion of the expressway is above or below ground.

The construction could also derail an attempt by owners at Novena Ville to mount a collective sale.

Credo Real Estate, marketing agent for the sale, said less than 1% of the development’s land area is being acquired by the authorities and that this will not lessen the plot’s redevelopment potential.

However, industry watchers point out that developers are wary of buying this type of site as they do not like to launch a new project in the thick of construction chaos or at lower prices.

Newer projects will not be spared either. City Developments’ (CDL) Cube 8 project will have 89.6sqm shaved from its total land area while another 239.1sqm will be taken from its 368 Thomson project.

Responding to queries from The Straits Times, a CDL spokesman said it is too early to determine exactly how owners will be compensated for the loss of the common space, but more details will be released soon.

He added that the group does not anticipate any significant impact on the projects’ construction process. Both are slated to receive their temporary occupancy permit (TOP) in 2014, a year before major construction of the expressway begins.

While well-built homes can command higher prices after they have received their TOP, the expressway’s construction means that owners wishing to sell will have to adjust their pricing expectations, said Dennis Wee Group director Chris Koh.

Profits can still be made, but the inconvenience from the building works needs to be factored into the selling price, he said.

Resale properties may also be affected. Mr Ku Swee Yong, chief executive of International Property Advisor, believes properties along the construction route in Novena and Thomson area could under-perform the overall private housing market by perhaps 10%.

Rents will be hit as well, with potential tenants expected to shy away from homes located close to construction sites.

“In the case of Farrer Road, when road work was being done for the Circle Line, the entrances of development like Spanish Village and Gallop Gables were a mess. It creates a bad impression of the place even before the potential tenant has seen the room or the unit,” said Mr Ku.

More clarity will be needed before any firm forecasts on prices or rents can be made, said some market observers, with others already predicting that prices of properties along the expressway could jump after its completion as owners market it as an attractive feature of their properties.
Source: The Straits Times

So moral of the story is: People want the convenience of (and the possible capital appreciation of their estates that is associated with) an expressway being near their homes only if it miraculously appear out of thin air, i.e. do not inconvenient us with the construction phase please!

And for the folks who bought units at Cube 8 and 368 Thomson, there is good reason to feel aggravated by the "enforced shrinkage" of their estates even before the developments are completed. However, they probably shouldn't complain too much about the anticipated noise and dust pollution arising from the NSE construction...



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