What Investment Opportunities Will Geylang’s Rezoning Create?

On Jan 13, 2015, the Urban Redevelopment Authority (URA) announced a proposal to rezone parts of Geylang from Residential/Institution to Commercial/Institution. This is a proposed amendment to the URA Master Plan 2014.

A reader asked if I could kindly share my insights on Geylang’s rezoning plans and whether there are any future opportunities for sellers and buyers. Being very familiar with the location, I’ve addressed her questions below.

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Since 2001, Geylang has always been on my location radar for great property buys. At the time, people thought I was crazy to buy into Geylang, butI’ve achieved profitable results.

In the last few years, I’ve predicted that Geylang will have major changes in its commercial and residential landscape, with an increase in locational prestige, better government initiatives and much more. Almost all of them came true…

1. What does the rezoning mean for existing property owners in Geylang?

URA proposes to rezone the area bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang, from ‘Residential/Institution’ to a new ‘Commercial/Institution’ zoning,excluding the parcels of land zoned Road, the lots fronting Geylang Road and the sports field bounded by Talma Road and Lorong 12 Geylang.

In short, URA will not approve any more new residential projects in a 14-hectare stretch of Geylang from Lorong 4 to Lorong 22 under the proposed rezoning exercise. Existing residential projects may remain as they are. Likewise, new residential projects in the area which have been approved may proceed to be built. Residential use is barred in the new zone.

The maximum plot ratio (ratio of maximum gross floor area to land area) will remain at 2.8.

The rationale, according to the URA: “With more new residential developments in the area, there has been an increasing spill over of disagreements and friction on the ground between residents and the diverse uses in the area. Thus, in consultation with the police and other agencies, our assessment is that the growth of the residential community between Lorongs 4 to 22 needs to be rebalanced and moderated to minimise friction with residential uses and avoid eroding the character of the area.”

There are more commercial activities in the lower Lorongs versus the upper Lorongs. There are more residential enclaves in the upper Lorongs versus the lower Lorongs. The proposed rezoning, which would bar new residential projects, will allow issues arising from conflicting uses to be better managed, and prevent the spill over to surrounding areas.

2. Does this rezoning have a positive or negative impact on enbloc potential?

The rezoning is expected to boost land values in the location generally and spur collective sales.

Any residential properties in the earmarked belt that wants to undergo redevelopment in the future will have to comply with the approved uses permitted in the new commercial/ institution zone.

There will be spill over effect from the earmarked belt to the upper Lorongs since residential developers who want to tap on future opportunities from the area and nearby redevelopment areas, need to find more land to build new residential projects in that area. And with its current high plot ratio of 2.8, freehold land and ‘cheaper to enbloc’ properties, developers will find Geylang very profitable indeed.

There are many freehold residential properties in the upper Lorongs that are older, smaller in size and more cost-effective for developers to enbloc. There could possibly be some interest from developers or investors to amalgamate existing residential clusters through a collective sale process for redevelopment.

Given that by 2030, Paya Lebar Airbase will be moved to accommodate higher building ratios in the area, developers will further tap on these opportunities in the early years for economic reasons.

Over the mid to long term, I expect a positive impact on land values in this precinct.

3. What might be the government’s vision for Geylang as a business hub? How would it fit in with the Paya Lebar and Kallang business hubs?

Will Geylang become a jewel for businesses, especially SMEs? Most likely yes and I think the government has a strong intention for that to happen and help give SMEs easy access to the CBD and other nearby business hubs at more affordable rents. The vision of Jurong Lake District and Woodlands as commercial hubs for SMEs are good examples of what we can expect of Geylang and Paya Lebar.

Being located 10 minutes away from the CBD, Marina Bay and city centre, the locale of Geylang and its reputation forms a ‘huge thorn on a rose’ for the government. For the last 15 years, the government has implemented hard measures to crack down on the many illegal activities popular in the area such as illegal street-walkers and gambling. Today’s Geylang is very different from the old Geylang of the past.

Both the upper and lower Lorongs complement each other very well in the mix of residential and commercial uses.

With the new zoning, we can expect property values and rental incomes to rise strongly because of a stronger synergy in the area as a business hub and with the nearby business hubs as well.

The current commercial development of Paya Lebar, close-by Marina Bay, future Tanjong Pagar, and removal of Paya Lebar air base in 2030, will add even more prestige and commercial viability to Geylang as the next place to be for living and legitimate commercial activities.

4. Should investors start looking out for opportunities in Geylang, if they have not already invested there? Or do you think the sellers would have priced in the proposed changes?

In 2003, Geylang properties were priced in the region of $300 per square foot. In 2014, prices are below $1,000 per square foot for older freehold properties in the area. This has made Geylang one of the most affordable places for living and business today.

The plot ratio is unchanged at 2.8 currently. But this may move to a higher ratio once Paya Lebar airbase is moved from 2030 onward.

Geylang has 4 MRT stations situated within a 12 min-walking radius – the furthest is Dakota MRT. No other location in Singapore has such access. It is easily accessible to major expressways such as the PIE, KPE, ECP, MCE, and CTE. It’s also a 10 min drive to the CBD, Marina Bay and future Tanjong Pagar redevelopment areas. Yet, prices and rents are low for now.

Summary

The Geylang area is very fragmented with many different owners, both businesses and residential. Enbloc can be challenging for developers. But for the successful ones, the sky is the limit.

Most investors including myself have no intention to sell our properties in the mid or even long term. It’s difficult to find similar ones at inexpensive prices. There were enbloc proposals by developers recently but they were turned down because of ‘lowball’ offers.

For owner occupiers, most of them would have been living in the area for many years and have developed an emotional attachment to the area. Unless a developer can offer a very attractive collective sales proposal that takes into account the future positive developments of the area, they will have a tough time.

For savvy and well-informed investors, Geylang may be a gold mine in the future, but for now, the area can be a land mine especially for novice investors or flippers. It is a long term game as it will take at least 10 years before we see the above changes becoming reality.

Without a proper understanding of the many risks, one should tread carefully.

Source: Crei Academy Gerald Tay

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What Investment Opportunities Will Geylang’s Rezoning Create?

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