For years, the prime districts (9, 10 and 11) in Singapore have been the most highly sought after locations by property buyers/investors. These are locations where you will find major malls carrying world renowned brands, schools which houses the elite students of Singapore and of course, properties owned by the affluent class.
With all the government cooling measures in place today for the property market, it’s definitely not easy to find a good buy, especially in the prime districts.
How much do you think you will need to have in order to own a property in these areas? A million dollars? Slightly more??
How about just S$860,000?
In my opinion, RV Residences is indeed a rare find in today’s real estate market. From as low as S$860,000, you are able to own a 1-bedroom unit in prime District 10, along River Valley Road.
If you are a seasoned investor or property buyer, this should be a no-brainer for you. However, for the benefit of those who are new or intensively looking for a good deal, you will probably want to read on.
Comparative Market Analysis (CMA)
These prices are retrieved based on current asking prices, from owners (for TOP projects) and developers (developments under construction).
The first level of the inner circle (in green) indicates the properties which are within the 500-metre radius of RV Residences. You can see that a 1-bedroom unit at RV Residences is slightly below market price when compared to its newer neighbours.
The next level (in amber) reflects more on the District 9 properties, still within the vicinity of River Valley. As you can see that a 1-bedroom in those locations has already crossed $1 million mark. Now, if you were to compare these projects with a 1-bedroom unit at 99-year leasehold Mon Jervois, you will likely choose one of the other properties listed within the same circle. However RV Residences will probably give you a better rental yield, upside potential and lower risk. We will touch on these 3 factors later on.
Let’s move on to District 11 properties. The outer most level (in red) will indicate some of the prominent developments in District 11. Shocking isn’t it? Even a 1-bedroom in Newton/Novena area is selling for above a million dollars, except for Cube 8, which is slightly further away from the central Newton area.
As we compared, you can clearly see that RV Residences is priced lowest among majority of the newer projects in prime districts. When it comes to investment, I always believe that one of the primary objectives is to grow your wealth. Now, let us look at some of the key elements to help investors determine if RV Residences is a worthy buy.
High rental yield
In order to give you the assurance that there is rental demand in this area and the amount which tenants are willing to pay, I have consolidated some of the rental data (Feb to Aug 2013) from surrounding projects in Figure B.
As you can see for yourself, for the last 6 months, the rental amount of a 1-bedroom unit within the vicinity was an average of $3300 to $3800, as high as $4900 for 2 particular units at Nathan Residences.
Lets assume that the unit is rented out at $3300 per month. If I were to take a 30 year-loan, based on at 2% interest rate, 80% loan for a purchase price of $860,000, my monthly repayment to the bank will be an estimated amount of $2550.
The maintenance works out to be about $285/month and property tax will be $112/month. This will result in a positive cashflow of $653.
Monthly cashflow = Rental - Bank Repayment - Maintenance - Property Tax
= $3300 - $2250 - $285 - $112
= $653
Capital gain and potential upside
Real estate investment has always been deemed as a long term investment. If you are looking for quick profits, then you may want to look at something else. Especially in today’s market, profits is no longer a main priority. You should probably be looking at something that is of LOW RISK and the CORRECT ENTRY PRICE.
Please refer to the following graph:
As you can see that on average, 1-bedroom units in District 10 have been transacting at $1.089m, as high as $1.2m from August 2012 to 2013.
Entering the market for a 1-bedroom at RV Residences is only $860,000. You will have a good cushion of $200,000 on the conservative side. By looking at Figure A earlier, neighbouring developments have been transacting around $1m on average. Don’t you agree that your risk will be lower than any others if you were to put your money on RV Residences?
You may be thinking, will prices continue to appreciate? Here’s something for reference:
With the upcoming Great World City MRT station (part of Thomson MRT Line) coming up by 2021, you will begin to see the pent up demand for the surrounding developments. A safe reference will be properties along the North-East MRT Line. Ever since it’s been operational, the demand surges for areas such as Potong Pasir, Upper Serangoon, Kovan, Sengkang and Punggol area.
RV Residences is only 6-7 minutes’ walk to Great World City. If this is still too far, then you will probably have to look for 99-year leasehold properties instead.
Cuts down on opportunity cost
Agree or not, when it comes to any form of investment - Time is the most important resource which money cannot buy. If you are cash-strapped or not ready to fork out large amount of repayments every month, a newly launched development with a longer progressive payment will probably suit you better.
However if you can work out something, RV Residences will save you on lots of time and opportunity cost because it’s due for TOP in about 9 months time. And that’s when you get your keys and start to rent out your unit.
As compared to a newly launched development, you have a waiting time of about 3 years due to construction. During this period, you will servicing your mortgage repayments using your own money. But for properties such as RV Residences, you will only need to service your loan for 9 months, and from then on, you will be using your tenant’s money to pay off your asset and collect positive cashflow.
The time difference from the above is about 27 months. If you chose to go ahead with newly launched developments, you will probably will losing out on 27 months of positive cashflow. Based on earlier example on calculation, you could potentially be losing out on $($653 x 27 months) = $17,631 of positive cashflow. Not only time is wasted, money has also been wasted as well.
Final Take
You may say that there are other areas which may enjoy a similar rental yield or potential upside. However, when today’s suburban developments selling at a price which is so close to the prime district, It makes more sense to give a little more to own something in premium city centre.
The community is a different class from the suburbs. RV Residences is situated in an area where most of the multi riches are. The address speaks a lot on how your fellow investors will look at you - owning a property in prime area River Valley. Makes you feel good, doesn’t it?
In today’s market, especially with all the cooling measures in place, “affordability” will be the key. Such rare opportunities are seriously hard to come by. Whether to go ahead or not, It’s your call.
