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THE PERSPECTIVE - HOMES IN INTEGRATED DEVELOPMENTS IN SINGAPORE. Written October 2021

Introduction


Integrated developments are enjoying robust demand among home buyers and investors in the current property bull market. In this July, about 86% of the 487-unit Pasir Ris 8, a mixed-use development located next to the Pasir Ris MRT Station was sold in the first week of its launch.


But what exactly is an integrated development? It is not exactly an officially endorsed terminology.


According to the authorities, and Integrated Transport Hub (ITH) is a fully air-conditioned bus interchange that is seamlessly linked to a nearby MRT station and adjoining commercial developments such as a shopping mall. Hence, to qualify as an ITH, it must have an air-conditioned bus interchange, an MRT station, and a commercial development that is connected.


Integrated Transport Hub (ITH) Components



Source: Land Transport Authority, ERA Research and Consultancy


It is unnecessary to have any residential development linked to the bus interchange for it to qualify as an ITH. For example, the ITHs at Ang Mo Kio, Toa Payoh, and Serangoon bus interchanges and MRT stations are not seamlessly linked to any residential development, private or public.



Northpoint City


Among the Singapore real estate market participants, an integrated development would refer to a residential-cum-commercial development linked to an MRT station. The bus interchange is optional. In a residential-cum-commercial development, which is also commonly known as mixed-use development, the residential development is usually built on top of the shopping mall.



 List of Integrated Transport Hubs (ITH

Source: Land Transport Authority, ERA Research and Consultancy


Effects of The Pandemic on Integrated Developments


The current coronavirus pandemic led to the rapid spread of the work-from-home practice among white-collar workers and the occasional social distancing lock-downs, such as the Circuit Breaker last year and the two Phase 2 (Heightened Alert) this year. Hence, it is argued that if one were to live near a shopping mall, it would meet the retail and dining needs of the resident, especially during a COVID lock-down.


Furthermore, residential properties near MRT stations are always popular with residents, investors, and tenants. Hence, homes in integrated developments became more popular in the past year as they combine the retail premises and the MRT station with residential properties.


However, the counter-argument is that if a person were to work from home most of the time, he would have little need for the MRT station as he does not need to commute to the office daily.



Median Price of Residential Component in Integrated Transport Hubs (ITH)

Source: Urban Redevelopment Authority, ERA Research and Consultancy


Are Integrated Developments Always Popular?


Looking at the strong demand for the recently launched Pasir Ris 8, it is easy to forget that the apartment units in integrated developments were not always so popular in the past. When some of the earlier integrated developments were launched more than 15 years ago, some homebuyers preferred condominiums without the attached shopping malls.


This is because these buyers prefer more or larger recreational facilities such as tennis courts, jogging tracks, bigger swimming pools, and function rooms which can usually be found in larger condominium developments. In addition, these buyers may also feel that the condominiums provide more privacy as they are not situated on top of busy shopping malls. However, homebuyers’ preferences do change over time.


Price Premium


It is claimed that the apartments in the integrated developments always command a price premium over nearby condominiums. In this study, we will examine whether the prices of the residential units in integrated developments are always higher than the prices of comparable condominium units in the same neighborhood.


The results of the study show that the median prices of the residential units in the majority of the integrated developments in Singapore are usually higher than the prices of nearby comparable condominiums of the same land tenure and about the same age. In this study, the comparable condominiums are not linked to any retail mall or MRT stations.


The key factors that contribute to the price premium of apartments in the integrated developments are the accessibility to retail amenities and public transportation nodes, such as MRT stations.


The price premium of the residential units in the integrated development over the comparable condominiums can range from 4% to 30%. However, there are also a few integrated developments that has little to no price premium over the nearby comparable condominiums.


The price premium will be wider if there is a dearth of new residential launches for a number of years in that location before the launch of the apartments in the integrated development. The lack of supply of new private housing in that location would lead to pent-up demand, which could be capitalized by the developer of the new integrated development.


In addition, the apartments in the integrated development could also enjoy a bigger price premium if they are launched in a bullish property market that is fueled by robust demand and ample liquidity.


Ion Orchard &  The Orchard Residences

The Orchard Residences is the residential development above the Ion Orchard shopping mall and the Orchard MRT Station. The development is located in the busiest part of the Orchard shopping belt. It was one of the earlier integrated developments to be launched in 2007. At the time of this report, it is the only integrated development and the tallest building along Orchard Road.


As a result, The Orchard Residences commanded one of the highest price premiums among residential properties within integrated developments. In the 12 months after the launch of The Orchard Residences, its median transacted price of $3,064 psf was 25% above the median price of nearby comparable new 99-year leasehold condominiums transacted in the primary market. The median price of the 99-year leasehold Orchard Residences was even higher than the overall median transacted prices of a few of the new freehold condominiums in the Cairnhill area.



price premium of Orchard Residences

Source: Urban Redevelopment Authority, ERA Research and Consultancy


Threats to Integrated Developments


The latent threats to the apartments in integrated developments are not other condominiums, but new technological innovations that are embraced by consumers, such as online shopping and ride-hailing services.


Online shopping is already a serious competitor to traditional brick-and-mortar retail malls. As online shopping becomes more prevalent and the delivery time of customers’ orders shortens, it would erode the need to live on top of a shopping mall.


Similarly, as the public transportation network improves and there are more vehicular options, such as buses, LRT, taxis and ride-hailing services, to travel between one’s home and the nearest MRT station, it would erode the advantage that residential properties next to MRT stations would have over those that are located further away from the MRT stations.


In addition, retail malls near MRT stations typically enjoy high footfall. This can be both a boon and a bane during a pandemic as the high footfall increases the risk of the mall becoming a COVID-19 cluster. This would cause inconveniences to the residents living above the mall.


Conclusion


The popularity of residential properties in integrated developments started more than a decade ago and it continued unabated even during this pandemic. As the costs of car ownership continue to rise and the MRT network is a fundamental part of the transportation system in Singapore, residential properties within integrated developments will remain popular with both residents and investors in the years ahead.

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