Sustainability of Highline Residences’ demand uncertain

Given the popularity of Tiong Bahru as an estate, the positive response for 500-unit Highline Residences (pictured) by Keppel Land is not unexpected. According to media reports, about a quarter of the units at the condominium in Kim Tian Road were sold over the weekend.

Highline-Residences-Image-source-highline-residence.com_.sg_-e1410928934190

However, DBS Group Research believes investors may be squeezed from lower rental rates due to a high number of new supply completions. Additionally, as the project’s TOP expected to be from 2018 onwards, average mortgage rates are also expected to rise by then.

In a recent report, it said, “Despite the slight premium in pricing, we believe buyers are attracted to the project, given its new and probably the overall ‘lifestyle package’ that Keppel Land is offering buyers. We believe buyers are attracted to the smaller-sized units (and thus smaller total quantum), with the intention of renting them out eventually.”

Based on rentals of properties in the vicinity (about $5,000 to $5,500 per months for a 1,000-sq ft unit), this would work out to a new yield of 2.7 percent. Meanwhile, given expectations of high refinancing rates in the medium term, DBS Group Research foresees higher than current average loan financing costs of around 1.5 to 18 percent.

DBS Group Research will look out for more data points of sales take-up rates for subsequent phases of Highline Residences in the coming months to determine the sustainability of its demand. “Despite the good stats, we believe that this does not signal a turn in sentiments for Singapore property as we believe that demand remains selective – projects located near established amenities and/or MRT stations continue to see stronger demand than others,” it said.

The pricing of Highline Residences also puts the spotlight on prices of resale condos within the vicinity of Tiong Bahru MRT. According to the report, prices average between $1,400psf and $1,700 psf.

For example, the latest transactions at Meraprime at Jalan Bukit Ho Swee were at $1,400 psf while Twin Regency at Kim Tian Road saw its latest transactions at around $1,600 to $1,700 psf.

Image source: highline-residence.com.sg

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