• Joshua Loo

Review: City Gate, Overlooked Residential Opportunity in D7?



The recent overnight success of The M (ave. sale PSF, $2,466.53) had got me thinking on a few points.


  1. A great location really sells.

  2. The icing on the cake, attractive PSF

  3. Why is there such a huge disparity in District 7 prices?


City Gate condo is a development that I feel has huge potential but was grossly overlooked by investors due to reasons which I will detail below. It is even priced far cheaper than The M!


Just to give you a quick overview of the prices.

What Happened?

Bad Timing Due to Cooling Measures

City Gate launched in July 2014, and it was met with average demand by property investors.


https://www.propertyguru.com.sg/property-management-news/2016/4/122564/99-of-citygate-condo-units-sold


If you were old enough to remember the wave of Additional Buyer Stamp Duties being implemented in 2013, you will have noticed that these have caused a minor correction in Singapore property prices.


Here is a quick rundown of the 2013 Singapore Cooling Measures



12 January 2013


General Measures


  • PRs 1st property to be charged 5% ABSD, 2nd property at 10% ABSD

  • SC 2nd property to be charged 7% ABSD, 3rd property at 10% ABSD

  • Foreigners and company 15% ABSD

  • 2nd housing loan, LTV at 50%; 3rd housing loan 40%

  • For stretched loan tenures past 30 years, 30% and 20% respectively

  • Minimum cash down-payment for individuals for 2nd and subsequent loans raised to 25% from 10%


HDB Measures

  • Mortgage Servicing Ratio (MSR) for HDB loans and refinancing

  • Private loans are capped to 30% of borrower’s gross monthly income

  • HDB loans lowered from 40% to 35%

  • PRs are not allowed to sublet their flats

  • PRs must sell their HDB flat six months after acquisition of a private property

29 June 2013


  • Total Debt Servicing Ration (TDSR) capped at 60% for housing loans

  • Income-Weighted Average Age (IWAA) introduced for joint borrowers, directly affects loan tenure and LTV

28 August 2013

  • Max HDB loan tenure reduced from 35 to 30 years

9 December 2013

  • Reduced cancellation fees for Executive Condos (ECs) from 20% to 5%

  • Resale levy for second-timer applicants (ECs) of grants

  • MSR for housing loans for ECs capped at 30%


Prior cooling measures can be considered minor wrist slaps! The main reason why the 2009 and 2011 cooling measures were largely ineffective is that;


  • Singaporeans are willing to wait to maximize their profits. The penalties from selling early do not affect them as we were in a bull run for the property market, and there was no point cashing out.

  • Singaporean homeowners/investors have the capacity to use cash if necessary to meet their investment goals.


Singaporeans were shocked by these sudden implementations which lead to more conservative purchases. These changes could easily bring most novice investors to their knees!

From 2013-2014, Core Central Region properties are affected the most by -61% in property transactions, followed by Outside Core Region properties at -52% and Rest of Central Region at -46%.


District 7 which sits in the CCR, had suffered greatly for the following reasons;

  • The area was unproven at that point in time to be a success.

  • Aging properties and lack of developer’s interest to rejuvenate the area.



D9, which is also in the CCR, had surprisingly shown to be more resilient. From the launch of City Gate in July 2014, it will take almost 3 years for average PSF to recover.


To sidetrack a little, Marina One Residences seems to have a similar trend presently to City Gate performance in 2014. It will take investors good foresight to realize this is a good investment opportunity too.



Why I Think It’s a Good Investment

Midst of rejuvenation


Between 2017 to 2019 however, URA vacant sites for tenders are released in Beach Road (Midtown Bay), Middle Road (The M, ave. sale PSF is $2,466.53) and Tan Quee Lan Street (Midtown Modern, ave. sale PSF is $2905.98) is released, which will set to break new price ceilings.


Other than URA tenders, there were also commercial en-bloc site Waterloo apartments, Min Yuan apartments, Selegie Centre.


Furthermore, current interest in collective sale 101 Beach Road and GSM building for private tenders are in the midst. Center sites are in the midst of collecting signatures too.


District 7 is an area that is incredibly ripe for rejuvenation and real estate investors in this area are well poised to look for investments in this area now.

Pricing vs Location


It’s a given that The M is ultimately the better location, as it is located closer within the city Centre, and walking distance to Suntec City and Bugis Junction/Bugis+. Ultimately, however, I think we are not giving enough credit to City Gate itself.


City Gate is a mixed development, which means that its land area is shared with commercial use properties like retail shops. This aids in the convenience of its occupiers. At present, most shops are not present though.


City Gate is 2 minutes’ walk away from Nicoll Highway MRT Station, while The M is 3 minutes’ walk away from Bugis MRT Station. It might seem that I am nitpicking, but that’s not all.


City Gate is within 5 minutes’ walk or less to the line of Arab Street shophouses, which tend to hold their value very well. Price appreciation of these freehold shophouses will no doubt have a positive impact on City Gate in the near future.


It is also located closer to Golden Mile Complex and Tower, which has been in the news for a commercial en-bloc. I do not wish to oversell this point as there is no successful collective sale yet. If it is successful, will be very favorable to City Gate prices.


Not to forget the commercial offices in the concourse, Golden Mile Tower, and The Gateway. Strong rentals in this area will help to defray your mortgage costs, and buying an underpriced property will allow you to price your rentals competitively and gain good rental yield!


To me, its simply a miracle to how this development is overlooked!



I’m not talking without evidence either. Have a look at the past few transactions for City Gate, and you will realize that 2 out of 9 transactions were in the fairly priced range, while the rest are either value buys or underpriced.


Mixed Development


An analysis done by OrangeTee & Tie showed that buyers are prepared to pay between 7% and 19% for integrated developments within the launch year.


The only integrated development in the area is South Beach Residences, which average price (PSF) is at a whopping $3,335!


Although technically not an integrated development, but a mixed development, these are still considered rare and still provide good convenience.

Summary


City Gate is an amazing buy but has grossly been overlooked as it was one of the first relatively new launches bearing the brunt of the 2013 implementation of cooling measures. City Gate as a real estate product was launched way ahead of its time, and will definitely benefit from strong capital appreciation in the near future.


With its low pricing (even more affordable than The M!), this will potentially bring in strong rental yield for investors.


If you are looking for a good investment in District 07, I personally feel that City Gate is an overlooked investment. If you are holding onto a unit now, congratulations! Be sure to ride the wave of capital appreciation, and not sell it yet!


If you are an interested investor, seriously consider purchasing one if there are available units for sale. You will not regret it.


Are you keen on finding out if City Gate is an ideal investment for your specific financial circumstance? Contact us at +65 96329840 or send your queries to estatemagnates@gmail.com!


The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee, or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.

 

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