Pulsating Marina Bay

Source : Business Times - 26 Sep 2008

This new prime area for living, working and playing will become even more vibrant once Marina Bay Sands is ready, writes HAN HUAN MEI

FOR a long time, when the question was asked, ‘where do wealthy Singaporeans live’? The answer would either be ‘the bungalows in Tanglin, Bukit Timah and Holland Road’ or ‘the luxurious apartments in Orchard, Cairnhill and Grange Road’. This is set to change.

While these prestigious addresses evolved through Singapore’s history over several decades, two new prime residential areas have emerged in recent times as a result of brilliant land use planning based on the government’s vision of lifestyles in the new millennium. These are the New Downtown and Sentosa Cove.

The properties in the traditional prime residential areas are largely freehold estates, but those in the New Downtown and Sentosa Cove are mainly 99-year leasehold estates. Not only are they among the most expensive leasehold properties, their price levels are almost on par with the new freehold projects in the Orchard area and 25-30 per cent below those of new luxury properties.

The evolution of these two new prime residential locations was partly fuelled by the sharp growth of local high net worth individuals (HNWIs) as a result of the global wealth effect in 2005-2007. Most of them would have invested in real estate in one way or another during this period.

In the past few years, not only have locals invested in property, but the Singapore property market boom has also attracted a lot of permanent residents (PRs) and foreigners as the government relaxed rules on foreign ownership. There is no restriction on the purchase of any non-landed property in Singapore but a foreigner or PR who wishes to purchase a restricted residential property still needs to obtain the approval from the Land Dealing (Approval) Unit. A restricted property refers to vacant residential land, landed property (such as a detached house, semi-detached house, terrace house and landed property in strata developments which are not approved condominium developments under the Planning Act).

However, PRs and foreigners who wish to purchase landed property on Sentosa island have been able to obtain fast track approval from the government since 2005.

Between the emerging prime areas of Sentosa and the New Downtown, the New Downtown possesses a dynamic multi-faceted character that makes it a more ‘happening’ place. This is because it is being developed into a place where living, working and playing will be blended together into an exciting mix of diverse activities. The Esplanade - Theatres By The Bay provides for the enjoyment of the arts. The Marina Bay Financial Centre (MBFC), the purpose-built financial district of the New Downtown, will offer nearly three million sq ft of prime Grade A office space and two residential towers comprising 649 upmarket apartments to complement the newly completed iconic skyscraper, The Sail @ Marina Bay. Both The Sail and MBFC will also provide some 20,000 sq ft and 105,000 sq ft of retail space respectively.

To top it all, the proposed Marina Bay Sands integrated resort will feature three hotel towers with 2,500 suites, over a million sq ft of space for conventions and meetings, the ArtScience Museum designed like ‘floating’ crystal pavilions, more than 800,000 sq ft of retail space known as Marina Bay Shoppes as well as a 160,000 sq ft casino. There is no doubt that Marina Bay will be a focal point of business, recreation and living for many years to come.

While the concept of in-city living has hogged the headlines in recent times, the number of residential units in the New Downtown is still rather limited. Around Marina Bay, only The Sail (1,111 units), Marina Bay Residences (428 units) and Marina Bay Suites (221 units) are available. The first two projects are fully sold while the third is not for sale yet. One Shenton (341 units) at One Shenton Way is 93 per cent sold to date while The Clift (312 units) at McCallum Street is 76 per cent sold. In the Tanjong Pagar area, Lumiere (168 units) is 58 per cent sold.

As for projects in the pipeline, 76 Shenton Way has obtained written permission to be converted into a 179-unit apartment block while the owners of 5 Shenton Way (UIC Building) are waiting for the lifting of the moratorium on the conversion of office buildings to residential use at end-2009 before they proceed. Two new projects at Enggor Street in Tanjong Pagar have also obtained written permission as at June this year.

Over at Icon in Tanjong Pagar, one-bedroom units (570-800 sq ft) were recently leased at $5-$7.50 psf while two-bedroom units (900-940 sq ft) were leased at $5.50-$7 psf. This works out to a gross yield of 4-5 per cent. Using these as a proxy for the possible rental range for the recently completed The Sail (Tower 2), it is likely that similar-sized units may be leased at $7-$8.50 psf. This would translate to a lower yield of 3-4 per cent due to their higher capital values.

For 2009, modest growth is expected as the US financial and housing slumps ripple through the rest of the world, affecting employment, business confidence, consumer spending and overall demand. The slowdown in the global economy and inflation woes are likely to curtail residential sales and cause overall home prices to dip by 10-15 per cent.

Despite the current tentative sentiment in the residential market, there are several fundamental merits for living in the new prime area of Marina Bay. And momentum should pick up again once the Marina Bay Sands commences operations at the end of next year. The lure of living, working and playing in an area that never sleeps would once again prove too attractive for home buyers to ignore.

The writer is by associate director of CBRE Research