Stagnating rental yields for 3 Marina Bay properties

Psf selling prices are outpacing rental prices at The Sail @ Marina Bay, Marina Bay Residences and One Shenton.

Rental yields overall remain at a moderate 2.8%, suggesting that the completion of the Phase 1 development of Marina Bay has had minimum lifting effect.

Here's more from Maybank Kim Eng:

Reclaimed from the sea from the 1970s, Marina Bay was zoned as Singapore’s New Downtown, offering a mix of commercial, residential, hotel and entertainment facilities. It was planned to be a seamless extension of the existing Central Business District at Raffles Place, and to raise the international profile of Singapore as a 24/7 place in which to live, work and play. In addition to the parks and waterfront promenade, new attractions and developments will be rolled out over the next 2-3 years.

The first phase of development has been completed with the newly leased Marina Bay Financial Centre (MBFC) Towers 1 and 2, as well as Asia Square Tower 1 and Marina Bay Residences, expected to bring in an influx of professionals who may wish to live close to Raffles Place. But there are currently only 2,101 condominiums within the district and we surmise that the limited supply would fuel an increase in selling price and rental yield.

Have the new International Grade A office towers indeed spurred a spike in rental yields or property prices? We conducted an exercise on the latest resale transaction prices and rental yields in the area with a focus on Marina Bay Residences, The Sail @ Marina Bay and One Shenton.

Marina Bay. The Sail @ Marina Bay, Marina Bay Residences and One Shenton are among the few residential projects in Marina Bay. Ever since the completion of the area’s Phase 1 development stage, rental yields have stagnated, as the psf selling price climbed faster than the rental price. The Sail, for example, saw median rental prices remaining at $6-6.10 psf pm for the past three quarters, with a total transaction of 598 contracts. At Marina Bay Residences, rents increased by 7% in 1H11 and have stayed at $5.90 psf in the past two quarters.

Overall, rental yield is subdued at 2.8%. From the data gleaned, we conclude that the price premium in the Marina Bay district is currently not supported by attractive rental yields. In fact, rental yields may be less favourable in the long run, given the availability of cheaper rents in other parts of the Downtown Core region and the possibility of reduced rental demand from expatriates.

Including the buyer’s agent commission of 2%, we found a number of unprofitable transactions for units at One Shenton since its initial sales launch in 2007. Only one unit (#23-10) was hit with a 2.6% seller’s stamp duty as it was sold within one year of purchase, but the seller was still able to reap a gross profit of 14% within half a year (or 11.4% net of the seller’s stamp duty).