The sub-town phenomenon: The renewed interest in Potong Pasir

In 2010-2013 when new growth corridors were actively conceptualized, there was a fair amount of speculation as developers and owners tried to sell the idea of “aspirational living” to buyers. We have however come to a point where reasonable pricing for all private residential properties receives higher priority.

This has given rise to sub-towns, where non-landed private leasehold homes generally would not exceed $1,100 psf if it is in a suburban location without an MRT station or major mall, and should not exceed $1,350 psf if it is in the city fringe.

(Read more about sub-towns here)

The sleeping tiger awakens

An example of a sub-town is Potong Pasir. The recent collective sale of the HUDC estate, Raintree Gardens, has definitely put the district in the spotlight yet again. This follows the news of HDB releasing a substantial number of flats in Bidadari from end 2015 (and in H1 2016) for BTO applications.

Although we cannot exactly term Potong Pasir as a quaint residential area, it is considered to be less crowded compared to typical mature housing estates. It is a predominantly residential area, with a mixture of private residential and public housing estates with few ancillary retail amenities.

The main attractiveness of the district is that it is close to the city centre, making it an area that affluent HDB upgraders can consider. Also, with the spate of new residential developments set to be constructed, together with supporting retail amenities, Potong Pasir is set to be rejuvenated.

Investors will find the rentability of homes here to be slightly higher due to its location. Tenants, especially expatriates who prefer to stay within the Rest of Central Region (RCR) to save housing costs, would prefer to live in such an area.

Comparing Potong Pasir with nearby localities

It is worth comparing Potong Pasir with Serangoon (mainly Serangoon Central, excluding Serangoon North and Serangoon Gardens), Woodleigh and the Bendemeer/Boon Keng area (where Eight Riversuites is).

• Potong Pasir vs Serangoon area

 Serangoon may be further from the city centre than Potong Pasir but it is very well developed with a high-traffic mall (NEX), public housing and supporting amenities. It has a following of HDB homeowners within the vicinity and these flat owners mostly are in the mid-income brackets who have seen substantial increases in their flat prices. This is the profile that is most likely to upgrade to a private residential unit around the vicinity. There is limited land for developing private homes in the well-developed Serangoon so these HDB upgraders might be open to consider properties further out – putting owners of private homes in Potong Pasir at an advantage.

• Potong Pasir vs Woodleigh

The Woodleigh area have seen new completions like Blossoms @ Woodleigh and 8@Woodleigh. It is expected to further develop on a massive scale from developments in Bidadari. Given that Woodleigh will continuously experience redevelopment till at least 2025, residents in Potong Pasir can also benefit from the spillover effects just from being adjacent to it.

• Potong Pasir vs Boon Keng area

Homes in Boon Keng can be are costlier than that of Potong Pasir, possibly going even higher than what mid-range investors and HDB upgraders can normally afford. As such, Potong Pasir is likely to be the better area that offers the best of both worlds in terms of location and price.

In term of rentals, Potong Pasir also fares equally well:

• Compared with Serangoon (excluding Serangoon North and Gardens), prices of non-landed homes in Potong Pasir at least 8 percent higher
• Compared with Woodleigh, prices of non-landed homes in Potong Pasir at least 6 percent higher
• Compared with Boon Keng, prices of non-landed homes in Potong Pasir at least 3 percent lower
• Compared with Bartley, prices of non-landed homes in Potong Pasir are at least 10 percent higher

As mentioned earlier, leasing demand is expected to be fairly buoyant here, as junior and mid-level expatriates move into the RCR to save on housing costs.

The Bidadari effect

With Bidadari slated to face massive redevelopment in the near future, supporting retail amenities such as the construction of The Poiz Centre and The Venue Shoppes are set to energize the area.

In the longer term, there is a possibility HDB flat owners who own a flat in Bidadari will also wish to upgrade within the vicinity, further supporting the future resale demand for private homes in Potong Pasir.

By then (at least 8 years from now), there will be fewer private homes in the Potong Pasir locality that will be launched and available for HDB upgraders, so the next best choice is to look at the secondary market, where current condos projects such as Nin Residence, The Poiz and Sennett Residences are still fairly new and high in appeal to HDB upgraders.

This article was written by Ong Kah Seng, Director of R’ST Research on behalf of 99.co