TL:DR With a low entry price and promising location, Irwell Hill Residences can prove a highly savvy Covid-19 recovery play for property investors.
Project Name: Irwell Hill Residences
Location: Irwell Hill (District 9)
Developer: City Developments Limited
Architect: MVRDV (Netherlands; Concept Architect) and ADDP Architects (Singapore; Principal Architect)
Site Area: 12,786.5 square metres
Tenure: 99-year leasehold
TOP (Expected): To Be Confirmed
Residential Units: 540 (2 blocks of 36 storeys)
Nearest MRT: Great World (120 metres to entrance from side gate; 2-minute walk)
Primary Schools within 1km: River Valley Primary School, Alexandra Primary School
Nearby International Schools: ISS International School, EtonHouse International School Orchard, Furen International School, Dynamics International School
Introduction: Positioning for a CCR condo rebound
If you’ve seen condo prices trending up for the past few months and quarters, you could be forgiven for thinking you’ve missed the boat. But not every ship in the property market has sailed, especially in the Core Central Region (CCR) where the URA Price Index has yet to break previous highs unlike the RCR and OCR.
URA Non-Landed Private Residential Price Index (By Locality)
With obvious catalysts in the horizon such as the projected economic recovery and lifting of travel restrictions, it’s merely a matter of time before CCR property prices play catch up. The window for value buys is narrowing, which is why the new Irwell Hill Residences has really caught the eye with a sub-$1 million starting price for its studio units.
To be realistic, most of these units will be priced between $1 to $1.1 million, which is still attractive because there are currently no new launch condos at that quantum within a one-kilometre radius of Orchard MRT. Resale condos at that price range, although freehold, are typically boutique condos with lower rental yield. (We’ll go into a detailed comparative analysis later.)
Indicative Pricing and Maintenance Fees: Irwell Hill Residences
For this development, there’s a lot of ground to cover when it comes to investment potential. Irwell Hill Residences is the first 99-year leasehold District 9 development to hit the market in 2021 and, right off the bat, the lower quantum of leasehold properties generally translates to a higher rental yield because of a lower quantum.
Even when we assume median prices of Irwell Hill Residences studio units to be around $1.03 million or thereabouts, and one-bedders to be in the $1.2 – $1.3 million range, this still puts the development in a very commanding position versus competing new launch condos in District 9 and the Central Region. (It’s actually the lowest quantum if you leave out The Landmark, which is actually outside District 9 and in an area with far lower land value.)
Lowest quantum ($1.5 million and below) comparison among new launch condos: District 9 and Central Area
*One-bedroom unit type fully sold.
You only have to look at RV Altitude to see just how popular shoebox condo units in D9 have become in recent months. The project’s one-bedder units are now fully sold. For those who missed out, logically the next option, considering that they are less than 400 metres apart, would be Irwell Hill Residences.
At the same time, buyers should also take a serious look at the two-bedroom classic units at Irwell Hill Residences, which will have a very palatable median quantum of around $1.55 million. Starting psf prices of below $2.5k for this unit type is actually the lowest for this development.
Lowest quantum new launch condo in District 9
Nearly unassailable locational advantage
Low maintenance fees
Ample facilities that boost rentability, including a concierge service
Sheltered access to Great World MRT and Great World City mall should be a deal-clincher for many tenants
Units have privacy with stacks spaced out and not directly overlooking one another, which may be favourable to tenants
Studio units are still a rarity in D9, and may benefit from scarcity value in the resale market
Studio unit layout is unconventional but highly functional with minimal wasted space
Possible spillover effects of future price growth in Orchard, aided by the Thomson East-Coast Line (TEL)
Compact floor areas of Classic unit types may not suit family renters, especially when it comes to expat families who are used to more expansive living spaces
With only one bathroom, the two-bedroom classic unit type may be cheap, but it probably won’t be the ideal choice to attract individual room renters who may not be keen on shared bathrooms
Comparative Analysis: New Launch Condos near Irwell Hill Residences
When you look at District 9 right now, especially within the 1km radius from Orchard MRT we talked about, you’ll find that there is a scarcity in supply of new launch condos with low quantum. That’s because many developers would position these projects as high-end luxury developments targeted at ultra-high-net-worth buyers, pouring in money to up the luxury ante while also hoping to get a higher profit margin for such units.
Also, as a result, there are very few studio units within District 9 itself. For a like-for-like comparison you’d have to look as far as The M in District 7 (Bugis), where studio units were fully sold upon launch in Q1 last year at a median psf price of $2,500. Now bear in mind that the CCR property price index has increased by 1.9% since then in the space of three quarters. Couple this with the fact that the Irwell Hill location is considered more prime but is somehow still priced at the same $2.5k psf range, and we think there’ll surely be a buying frenzy for Irwell Hill Residences.
Right across the road from Irwell Hill Residences is prime District 10. To put things in perspective, here’s a roundup of new launch condos and their median transacted psf price in the past year. Again, Irwell Hill Residences sits at the competitive end of the price range.
New Launch Condos in District 9 and 10: Median Transacted PSF Price Roundup
Another thing is that Irwell Hill Residences is the only new launch development with sub-$2.7k psf that’s within one-kilometre of the Orchard Road shopping belt and five-minute walking distance to an MRT station. In fact, Irwell Hill Residences will be just 120 metres from the exit of the upcoming Great World MRT station on the Thomson-East Coast MRT Line (and more about that later).
It’s also worth taking note that District 9 also sees higher foreign buyer demand with 37% of buyers being foreigner and permanent residents (PRs) compared to 30% for District 10. What this means is that, for the same psf and quantum, a D9 property may be able to position an investor to really take advantage of the post-Covid recovery.
Comparative Analysis: Resale Condos near Irwell Hill Residences
Buyers who opt to buy resale condos for investment are typically confident of two things: first they can take on the full instalment upfront, and secondly that there’s ready tenant demand (perhaps they’d even consider buying a unit with tenancy.)
Thing is, the pandemic has changed the game somewhat. Although the rental market hasn’t taken too much of a hit as was expected at the start of the pandemic, buying a newly launched condo where the completion date will likely coincide with a full economic recovery is something that really appeals to those who are stepping up to buy their first investment property right now.
Coupled with the current low interest rate environment, putting money down for a low-quantum unit at a prime location seems like the perfect low risk, low initial outlay for potentially high reward endeavour, even for conservative-minded investors.
That said, it turns out that there are a handful of one-bedroom resale options under $1 million in the vicinity of Irwell Hill Residences, here are the five most recent transactions in 2021 and their corresponding median rent:
Considering the above, Devonshire Residences, which is the only condo in the list within a four-minute walk of an MRT station (Somerset), is the obvious standout in terms of median rent for the 506 sq ft unit. Here’s an interesting detail: If you subtract that unit’s massive 10 square metre balcony and planter, you’ll get the same area as a studio unit at Irwell Hill Residences.
If you’re not a balcony or bay window lover, you’ll find the Irwell Hill Residences studio units highly space efficient and functional. And there’s no bothersome household bomb shelter within the unit either, like the one in Devonshire Residences.
Comparing the two floor plans, we also feel that most prospective tenants entering the studio unit at Irwell Hill Residences will feel a better sense of space within the unit. Aside from differences in layout and tenure, both Devonshire Residences (completed in 2015) and Irwell Hill Residences are both very near to amenities such as an MRT and shopping mall.
But that’s where the similarities end, Irwell Hill Residences then proceeds to outshine Devonshire Residences with the following:
Bigger and better facilities because of site area and total units (540 units versus 84 units)
Personal concierge service (Premier Residential Services)
Even with the above, Irwell Hill Residences has a lower maintenance fee of $325 versus $390
Path to nearest MRT and shopping mall is sheltered
A longer commute to certain parts of the CBD (for example, Tanjong Pagar and Shenton Way)
As for RV Suites and Loft @ Nathan, the location of these condos further down River Valley Road (further away from Orchard and Great World City MRT), downsized facilities as well as minimal common areas owing to small land plots make these developments a poor comparison against Irwell Hill Residences, and also explains their lower psf price range.
Another comparable resale condo, in terms of similarity in psf sale price, is Espada. Completed in 2013, this freehold condo is less conveniently located in terms of access to amenities, but it has facilities scaled up to serve its 232 units (complete with a tennis court like Irwell Hill Residences).
Give and take various factors, and you can argue that the Irwell Hill Residences studio unit should command the same $2.6k psf as Espada, if not higher, because the facilities and locational advantages more than make up for its leasehold tenure. And it’s realistic to say that the market value, in psf terms, of an Irwell Hill Residences studio unit could sit at around $2,750 to $2,850—higher than the developer’s indicative $2.5k range psf starting price.
Furthermore, because its facilities and MRT accessibility are all superior to nearby resale condos, we expect the Irwell Hill Residences studio units to fetch rents higher than that of Devonshire Residences, starting from $3,000. This is a status quo estimate without taking into account any unannounced plans that could provide a further boost to rent and property value.
Irwell Hill Residences: Potentially high rental demand and rentability?
We also observed that rental demand for one-bedroom condos in District 9 has been steadily increasing in the past decade or so. In 2012, one out of eight condo units rented out in the prime district were one-bedder units. Right now, one-bedders make up one out of every four units rented out in D9.
Versus all unit sizes, the proportion of one-bedroom units rented out in D9 is also higher than the Central Region average in 2020 (23.7% vs 22.4%) and in the first two months of 2021 (25.3% vs 23.1%), according to URA Realis data. So, when buying a centrally-located one-bedroom condo unit with rentability in mind, one of the first locations to logically consider would be D9, especially when the quantum is right.
Micro-location price performance: Irwell Hill’s recent advantage
By now, you might have realised that not every neighbourhood within a prime district is equal. For condo units within a 500 metres of Riva Lodge (a 27-year-old private apartment right next door to Irwell Hill Residences), we found the price performance to be robust over the past 20-year period compared to the entire District 9.
Looking specifically at the three-year period to 2000, we see that the median psf resale price for units near Irwell Hill Residence trended upward, despite prices for D9 overall trending down during that period.
With possible future upside and growth drivers, chances are that property value in the neighbourhood of Irwell Hill Residences will continue its upward momentum. This also means that the developer can be confident of revising prices upwards post-launch, and this is a certainty once the CCR prices index picks up the pace.
Indications of future property value upside and growth potential
Irwell Hill Residences is positioned nicely in the corridor that lines up Orchard Road, Great World City and Singapore River for convenience and accessibility to anywhere in the city, and the clearest upside comes from the upcoming Great World MRT station on the Thomson-East Coast Line (TEL).
From the side gate of Irwell Hill Residences, residents will find themselves within a 120-metre sheltered walk to the entrance of Great World MRT station. From there, they can get to the CBD stations Maxwell and Shenton Way in under 10 minutes, the Botanic Gardens in 15 mins, and Orchard in just one stop.
This doorstep proximity of Great World MRT station gives Irwell Hill Residences an almost unfair advantage among condos here in River Valley, especially considering that this neighbourhood has hilly terrain. In fact, the short 220-metre walk from RV Altitude to the Great World MRT entrance has about a nine-metre change in elevation, but the 120 metres from Irwell Hill Residences is flat ground.
No matter what, 120 metres proximity to the MRT is about as good as it gets anywhere in Singapore and, on top of that, being able to stand in the heart of Orchard in less than ten minutes after leaving your house is, to us, the very definition of prime district living.
Speaking of Orchard, the TEL will intersect with the existing North-South Line to create an interchange station. And according to the URA Master Plan the massive plot of land on top the Orchard TEL station stretching from Grange Road all the way to Peterson Road has been zoned for future residential and commercial development, and the land directly on top of the underground tracks could actually be turned into a park.
Now this expansion of Orchard presents upside for Irwell Hill Residences in two ways. Firstly, new and additional retail, commercial and recreational amenities can boost the attractiveness of living in the Paterson and Leonie Hill areas of District 9, and in particular rentability for investors.
Secondly, the residential developments that will eventually rise up above Orchard TEL station will likely be luxury condos similar to The Orchard Residences above ION Orchard. These new developments will likely set new price highs and create a spillover effect that pulls up the resale prices of condos in the vicinity, and without directly competing with Irwell Hill Residences.
Another positive thing is that the empty plot of land directly North of Irwell Hill Residences is currently a Reserved Site, which means this has not been zoned and assigned a definite use. But even if URA decides to eventually zone this land as residential and a new condo pop up, buyers of Irwell Hill Residences would have had a first mover advantage, and a significant one at this very time when CCR prices appear to be at a relatively low base.
Well-positioned for rental yield with low maintenance fees
The connectivity enabled by the TEL will be the main driver in pushing up rents for condos within walking distance of Great World MRT station. But just how much in rental yield can property investors expect if they buy into a studio or one-bedroom unit at Irwell Hill Residences?
The next most important thing to note for investors, after quantum and attributes like the area’s rentability, is the all-important monthly maintenance fee. At an estimated $325 for studio and one-bedroom units, the maintenance fee at Irwell Hill will sit at the lower range in the CCR.
Ultimately, our conservative projection for net rental yield stands at around the 2.5% to 3% range if a 12% Additional Buyer’s Stamp Duty (ABSD) and 5% vacancy rate is taken into account. The projected net rental yield sits above the CPF Ordinary Account interest rate and of course does not take into account any capital appreciation down the road.
The right point in the cycle to buy?
Skeptics will continue to point out the risks in investing in CCR properties, citing examples of projects near Irwell Hill Residences such as Skypark and OUE Twin Peaks and picking out transactions with capital losses to highlight the potential downsides.
It is true that during the period between 2011 and 2013, there were a handful of prime district developments that rode the wave of a cycle near its peak, with developers setting prices that were far beyond the market value at the time. The cooling of the property market through various measures and regulations led to a downward moderation of property prices from 2013 to 2017. This hurt buyers who bought at or near the peak and did not have the holding power to see the cycle through to the recovery and upswing.
All said and done, we are now in a very different property market compared to seven years ago. The government’s successive cooling measures over the past few years have suppressed the potential of a breakneck, windfall-making price growth but without curbing organic upside and capital appreciation from urban development and economic progress. Uptrends quickly returned following the implementation of additional cooling measures in July 2018 and again after the Covid-19 circuit breaker was lifted last year, demonstrating a lot of pent-up demand and a general consensus that we’re far off from the market top.
The truth is that Singapore is still very far from an overheating property market, otherwise an opportunity like Irwell Hill Residences wouldn’t exist. Stay prudent and stay tuned for our full, in-depth interview of this development, and speak to our new launch consultants if you have any questions about which new launches are more worthy of your consideration than others.
[Irwell Hill Residences will open for preview on 27 March.]