Street Level

Australian-listed developer, LendLease, will soon be formally launching a new condominimum project, Park Place Residences (“PPR”) in District 14 (“D14”) of the Paya Lebar area. This 429-unit project, is part of the Paya Lebar Quarter, an integrated development project which includes three office towers and a shopping mall. The development is built on a “live-work-play” concept and positioned to be the significant landmark in the Paya Lebar area which is earmarked to be the next commercial hub outside of the Central Business District (“CBD”).

PPR, a 99-year leasehold condominium project, will have a mix of one to three bedroom apartments across three residential blocks, with one bedroom units ranging from approximately 500 to 600 square feet (“sqft”) in size, two bedroom units from 650 to 900 sqft, and three bedroom units from 1,050 to 1,350 sqft. Indicative price starts from S$780,000 for 1-bedders, S$1 million for 2-bedders and S$1.6 million for 3-bedders. Temporary Occupation Permit is expected to be obtained by second half of 2020.

^{Source: Park Place Residences, LendLease}

Pricing of Park Place Residences relative to other private residential apartments in the area

Based on the indicative prices, the unit price of PPR is approximately S$1,300 to S$1,450 per square feet (“psf”), depending on the type of unit. Prices of private residential apartments in D14¹ have generally transacted between S$1,200 to S$1,400 psf in the last 24 months. The pricing for PPR sits at the top end of this range, which we believe is the premium for being located in the centre of the Paya Lebar commercial hub.

^{Source: URA}

The closest condominum project based on proximity is Paya Lebar Residences, which is a 3 minute walk from PPR annd opposite Paya Lebar MRT station. Paya Lebar Residences is built on freehold land and was completed in 2003. The latest caveat lodged for this project was in December 2015 at a unit price of S$1,016 psf. Average unit price¹ in the last 36 months for Paya Lebar Residences is S$1,076 psf. Other condomium projects in the vicinity are D’Weave, Sims Dorado, Sims Residence, Sims Ville and Sunflower Grandeur which are located along Sims Avenue and Geylang Lorong 39 approximately 400 meters away. The average transacted unit price¹ for these condominiums range between S$822 psf to S$1,333 psf. The most recently completed project among these is D’Weave, which is completed in 2015 and is built on freehold land. D’Weave latest URA caveat was lodged in September 2016 for a 581 sqft apartment sold at S$800,000, which translates to a unit price of S$1,376 psf.

^{Source: URA}

Rental market for private residential apartments in the area

Rents in D14, have been declining since March 2014, with current monthly rents² ranging from S$2,221 to S$3,231 on average in the last 3 months, depending on the type of units.

^{Source: URA}

These rental level translates to approximately 2.4 to 3.4% gross yield, based on the indicative pricing of PPR.

Key investment highlights of the Park Place Residences

The Paya Lebar area is a popular district among investors and homeowners given its convenience and proximity to downtown. The project is approximately 10 minutes drive to the CBD and 15 minutes drive to Changi International Airport. It is a short walk / drive to the matured neighbourhoods of Joo Chia, Geylang, Katong and the popular East Coast Park. There are also existing amenities within walking distance from PPR such as renowned schools, One KM mall, and the upcoming Paya Lebar Quarters mall. One of the key selling points of PPR is also its accessibility to Paya Lebar MRT station - it is connected directly to the station which is on the Cirle and East-West MRT lines.

Investment consideration

Based on our analysis above, we think that the selling price of the project is fair but not compelling for investors. The location is attractive and no new projects had been launched in the area since 2015. However, falling rentals in the area plus the lack of fundamental changes to change our general view means that we believe capital appreciation is likely to be limited in the mid to near term. There is likely not much money left on the table for financial investors as the premium seems to be fully priced in. There are other developments in the area (and some are on freehold land), albeit they are older and is a little further away from Paya Lebar MRT station, that could be better off as an investment property. Nonetheless, we think this project is likely to be well received when launched, supported by an intense marketing campaign, the well-received response of other recent projects³ and the knee-jerk reaction against the perceived easing of cooling measures.

We would like to hear your thoughts. If there is a residential development project launch you hope that we can do a high-level analysis on, please drop us a note below.