Singapore Property Update

Daily real estate news, advice and strategies for aspiring property investors

Why you should not buy Punggol properties

By Joe Wang

 

The government announced this year the masterplan for the 50ha Punggol Digital District  to make Punggol “a hub for key growth sectors of the Digital Economy”.

The recent BTO exercise in Punggol saw an overwhelming number of applications for the 3-room and larger flats in Punggol Point and Punggol Woods.

Despite the hype surrounding Punggol,  there are few reasons why you should not buy a property there.

 

Far away from everywhere else

Location accounts for 80 percent of a property’s inherent value. All over the world and not only in Singapore, properties located on the fringes of the Central Business District (CBD) usually command a premium and prices usually start to drop the further we move away from the CBD.

Punggol lies in the far-flung northeastern part of Singapore, closer to the Malaysian state of Johor than to Singapore’s city center. Even if you drive during non-peak period, it will take at least 30 minutes to travel from the Punggol to the CBD via the Kallang-Paya Lebar Expressway (KPE), Central Expressway (CTE) and East Coast Parkway (ECP).

If you travel by train or bus, a journey usually need two or more transfers, taking up more than an hour. Though Punggol MRT station is at the terminus of the Northeast Line, many new developments which lie to the north of it are not within walking distance and you have take the LRT or another feeder bus to travel to the station.

 

Possible air pollution from nearby Pasir Gudang

Punggol is situated less then 3 kilometers from Pasir Gudang, an industrial district in Johor with a large concentration of petrochemical industries and Johor Port where hazardous petrochemical products are shipped to and from Pasir Gudang.

Due to the close proximity to Pasir Gudang, residents living in Punggol and Sengkang have occasionally reported “chemical smells” in the air which is caused by a mixture of sulfur dioxide and volatile organic compounds (VOCs)

In September 2017, the National Environment Agency received numerous reports from the public on a strong gas smell. It contacted its counterpart in Malaysia, the Department of Environment (DOE) which traced the source to an industrial facility in Pasir Gudang.

During the northeast monsoon from October to May, prevailing winds from the north may bring higher than thresholds VOCs from Pasir Gudang to Punggol. Prolonged exposure to these VOCs can cause headache, eye irritation, itchy throat and other respiratory conditions. It is particularly dangerous to asthma sufferers as it can trigger an asthma attack.

While the exact extent of the health hazard these VOCs pose to Punggol residents has yet to be studied in detail, properties located in close proximity to such a major industrial complex usually are more difficult to sell and prices tend to grow slower than other districts.

 

Lack of amenities/employment centers/good schools

Being a new HDB town, Punggol lacks many of the major amenities found in established estates such as shopping centers, entertainment hubs, sports facilities etc. With the digital hub is being built, there are at present no key commercial or industrial activities in Punggol to offer employment opportunities to its residents. As such, there is little draw for those seeking to rent and rental yields are typically low for properties in Punggol.

A lack of good schools in the area also deter potential home owners who are seeking properties close to their children’s schools. Properties located within 1 km of popular schools in Singapore usually command a premium over the rest and the absence of such schools make Punggol properties rather unappealing compared to other districts.

 

Hub of mass market homes

Being a new estate, Punggol generally attracts young families and HDB flat upgraders. As such, the potential for capital growth for properties located there is relatively small compared to other areas due to oversupply and limited demand.

Buyers looking to buy into the district are spoilt for choice and have a plethora of properties to choose from. You are unable to ask for a higher price when selling as there may be a dozen other units similar to yours in the same block selling at a lower price.

Punggol, unlike other more popular districts like 10 and 15, does not have a wider appeal among Singaporeans. Those who can afford to buy a property in a better district will usually not choose to buy in Punggol.

A comparison between condominiums in Punggol and nearby Sengkang reveals a gulf in prices though there are just next to each other.

 

Punggol condominiums

Source: SRX

 

Source: SRX

 

Sengkang condominiums

Source: SRX

 

Source: SRX

 

The four condominiums are built around the same period of time. As you can see from the above figures, there is an average of $100 psf price difference between properties in Sengkang and Punggol. For buyers who can afford the $100psf more, they will prefer to buy in Sengkang rather than Punggol as the former is a more established estate with more amenities.

 

Conclusion

At this present moment in time, bereft of any strong economic drivers, it is not advisable to buy or invest in Punggol properties given their perennial low rental yields and capital growth. While the mooted “digital hub” may be a game-changer, construction has not even commenced and it may take many more years to complete. During that period of time, prices in other districts will continue to outpace Punggol. For the same dollar, you will be better off buying in other more established districts in the neighboring districts such as Hougang, Buangkok and Sengkang.

 

Copyright © Singapore Property Update

No part of this article may be republished without the permission of Singapore Property Update

 

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About the Author

Joe is a property enthusiast who bought his first property in Singapore at the age of 26 in 2005. From 2005 to 2015, he built a portfolio of 6 private properties in Singapore and has since sold three of them realizing a net profit of between 60 to 100 percent. He made his first million dollars in property investing at the age of 30 and has now amassed a property portfolio in Singapore, Australia and Malaysia worth more than $10 million dollars.

Joe is a conservative long-term property investor who believes in life-long learning and education in property investing. He does not claim to be a property expert or guru, but rather an adventurer who is in the middle of an exciting odyssey to achieve financial freedom from his property investments.

Email Joe at: joewang@propertyupdate.com.sg

Updated: September 19, 2018 — 3:37 pm
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