Building boom in Geylang
Mention Geylang and many think of the red-light district, but the area is in the middle of a building boom, with developers banking on its proximity to the centre of town.
About 1,900 private homes across more than 25 developments will be completed over the next three to four years, and many will be shoebox flats, an increasingly popular choice for Singaporeans, investors and expatriates.
The challenge, as some agents note, is Geylang's seedy reputation.>
Occupancy will be tested soon enough when many of the flats, in particular the shoebox units, hit the market.
These are homes ranging from less than 400 sq ft to 600 sq ft, and Geylang will be awash with them.
Centra Studios, a 51-unit condominium in Lorong 25 by Pinnacle Realty, has 40 one-bedroom apartments ranging from 344 sq ft to 527 sq ft, while the 39-unit Prime Residence in Lorong 22 by Springlife Development has 12 one-bedders ranging from 398 sq ft to 409 sq ft, and 20 one-plus-one units from 527 sq ft to 538 sq ft.
Property agents told The Straits Times they are confident that these tiny flats will remain popular because of the location, and they pointed to the high rents as evidence.
One housing agent said: 'Location-wise, going to the CBD (Central Business District) is five to seven minutes' drive. With the upcoming Paya Lebar commercial hub, this whole Geylang, Kallang area will be between the CBD and the hub.'
The rents, which are already 'the highest in the Aljunied area', will either stay at the same level or go even higher in the next few years.
The agent estimated that a one- or two-bedder shoebox unit in Geylang can be rented for about $2,500 to $3,000 a month, with 'rental returns going very high at 6 per cent to 7 per cent because of the location'.
He believes most tenants will be expatriates or childless couples.
Monthly rents hover around $3,000 for Geylang shoebox units.
While there might be an oversupply of such units, demand might be able to catch up as eventually, all homes will be occupied. Once the pricing is right, there will be a buyer for the unit.
A check with the Urban Redevelopment Authority's online system revealed that from last November to January this year, median rents for Lorongs 26, 28, 30 and 34 ranged from $2.90 per sq ft (psf) to $3.33 psf.
For a 500 sq ft apartment, this translates to $1,450 to $1,665 rental per month.
It is not known if these rents were for shoebox units. Rents for such units tend to be significantly higher on a psf basis because of their compact sizes.
There are also pitfalls amid the optimism about demand, including concerns that units in this traditional red-light district would draw the wrong crowd.
Units in Geylang all have attached bathrooms. A probable reason for that is they may be used as serviced apartments, dormitories or budget hotels.
Banks may hesitate to lend to investors out of concern over the area's seedy reputation. In official red-light areas, some banks are reluctant to lend their names to such projects due to the risks involved.
Second, the activities carrying out in the area are of questionable legality. This concerns the reputation of the bank and they do not want to be associated with such properties.
The high rental yields may be due only to the lowered capital values of property in the area.
Home prices within Geylang are trading at a 5 per cent to 10 per cent discount as compared to other townships that are of equal distance to the city centre such as Toa Payoh and Pasir Panjang.
One of the reason contributing to the lowering of prices is the seedy reputation of Geylang.
Source: The Straits Times – 23 March 2012