Here’s a quick overview on Riverfront Residences and how you would apply real estate investing research, principles and calculations before buying a unit in Riverfront Residences purely for real estate investment purposes.
The unit we will be analysing will be a 1 bedroom Unit, preferably Mid floor (10th – 14th floor) and also be comparing it with Boathouse Residences which is 700m away.
This is not a review to tell you how awesome this development is, I will be doing this on a separate page of my website, under the listing section, and I’m sure that by now there are many other websites that are covering it and also not to mention the real estate agents that are stationed at the Riverfront Residences’s show flat who will have that information readily available for you to look through.
Also, I will only be comparing only one unit from Boathouse Residences, which is not the usual practice. For clients interested in Riverfront Residences Condo, I will usually compare 2 more units, Rio Vista (365m away) and Evergreen Park (115m away) or based on which unit my clients want me to do the research on.
So what we will do here is a quick overview of Riverfront Residences before proceeding with the financial calculations which will compare closely with other developments (only Boathouse Residences for this case study) and this will determine for you if it’s a worthwhile purchase that you should consider.
|Expected TOP||31st December 2024|
|Address (Multiple)||41 Hougang Avenue 7|
|Number of Units||1472|
|Bedroom(s) Type||1 – 5 Bedrooms Available|
Oxley Holdings Limited and their joint venture partners bought over the land at which the previous HUDC estate Rio Casa used to sit for SGD 783 Million which works out to be around SGD 706 PSF.
Oxley Holdings Limited is an experienced developer which has a property development presence that spans over Singapore, Malaysia, Indonesia, Vietnam, Cambodia, Myanmar, United Kingdom, Ireland, Australia, Cyprus and China. Apart from Riverfront Residences, its other notable residential developments for Oxley Holdings Limited includes Mayfair Modern, 1953, Kent Ridge Hill Residences, Mayfair Gardens, Affinity at Serangoon and the Verandah Residences among many others.
|Developers Involved (Main only)||Oxley Holdings Limited|
|No of Residential Developments in Singapore (Current)||41|
|No of Previous Residential Developments in Singapore (Past)||27|
|No of Overseas Residential Developments||See Website|
Comparison between Riverfront Residences and Boathouse Residences
|Development||Boathouse Residences||Riverfront Residences|
|Launch Sales Price (psf)||1003||1364|
|Present Transacted Price (psf)||1145||1364|
Calculation of Growth Rate (For Boathouse Residences and General)
My research shows that in 2013, Boathouse Residences was transacting for the following 1 bedroom unit at 23 Upper Serangoon View (#14-XX), 624 sq ft
Transacting at 28 March 2013 – 1003 psf
Transacting at 8 Jul 2019 – 1145 psf
Time Period: 75 Months (To be rounded down for calculation purposes)
The annual growth rate for Boathouse Residences would be estimated to be around 2.12%. Naturally, the more units you use, the more data you have and the more accurate you will get and. And as mentioned, I usually use 3 units from 3 different developments surrounding the unit I’m planning to buy to have a better estimate of the growth rate in that area.
The annual growth rate for OCR (Outside Central Region) based on stats from February 2010 to February 2020 is 3.95%
Let’s just take this at face value. There are many ways we can discuss if we meet why the growth rate should be higher or lower.
Real Estate Investing Formulas used
Before we begin, note that these formulas are usually used for properties which are already existing, similar in age and size. Riverfront Residences will only be completed in 2024 and will be 9 years newer than Boathouse Residences by then. See more in the conclusion section
Gross Rent Multiplier
The Gross Rent Multiplier Formula for Boathouse Residences for a 1-bedroom unit is as follows
GRM = Sales Price / (Annual Rent of Unit)
= 715,000 /(1800 x 12)
= 33.1019 (Rounded to 4 decimal space)
With the following assumptions taken
- Sales Price of 715,000 SGD taken for the unit #14-XX 1 bedroom which was sold on 8 July 2019
- Assumption of Annual Rent of 1800 SGD taken as an average for the year 2019 (No stats given for the floor level, lowest was 1600 SGD/ Month on 1st May 2019 and highest was 2000 SGD/Month on 1 November 2019).
Income Capitalisation Method (Modified)
Using the Income Capitalisation Method Formula, the Cap Rate for Boathouse Residences is calculated as follows
Cap rate = Annual Net Operating Income / Market Value
= (Rent Income – Property Tax – Property Insurance – Annual Maintenance Fees – expected Maintenance and Repair – Vacancies Loss) / Market Value
= (21,600 – 3000 – 120 – (300 * 12) – (2 * 1800)) / 715,000
Assuming the following
- Expected Maintenance and Repair is 0
- Maintenance Fee for Boathouse Residences is assumed to be 300 SGD
Calculation for Riverfront Residences using Cap Rate and Gross Rent Multiplier
Using Gross Rent Multiplier for Riverfront Residences
For the assumption of rent for Riverfront Residences, there are 2 ways to go about it.
- Riverfront Residences 1 Bedroom plus Study unit is 517 sqft. Using 517/624 x 1800 = 1491.35 SGD
- Using Property Guru and finding out the average rent for a 1 Bedroom plus study with the following filters used
- Residential Type Condo
- Within 1km to Hougang MRT
- Less than 750 sqft
- 1 Bedroom + 1 Bath (Study option not available)
We get an average of 2350 SGD
2200 SGD/Month and 2500 SGD/Month for Stars of Kovan (517 sqft and 1.27km from Hougang MRT Station) both transacted at January 2020
For the worst-case scenario, let’s use 1491.35 SGD/Month
Using the GRM of 33.1019 to find the sales price for Riverfront Residences
Sales Price = 33.1019 * (1491.35 * 12)
= 592,396.41 SGD (Rounded to whole number)
Using Income Capitalisation Method for Riverfront Residences
Market Value for Riverfront Residences
= Net Operating Income / Cap Rate
= (Rent Income – Property Tax – Property Insurance – Annual Maintenance Fees – expected Maintenance and Repair – Vacancies Loss) / Cap Rate
=(17896.15 – 3000 – 120 – (300*12) – 2982.69) / 0.0158
= 518,573 SGD (Rounded to whole number)
Where the following assumptions are made
- Maintenance Fee is 300 SGD (To be updated once developer releases the information)
- Expected Maintenance and Repair to be 0
So judging from the calculations above, what would be an acceptable and fair price for Riverfront Residences to be sold at? Always remember, the formulas we are using are originally used for existing properties which are similar in age and with rental prices already available. We know this is not the case as Riverfront Residences will only be ready in 2024
In addition, we need to also consider the following points
- Riverfront Residences will be 9 years newer (2024 – 2015) than Boathouse Residences.
- The estimated rent we are using is of the worst-case scenario at 1491.35 SGD. Stars of Kovan is already transacting at a high of 2500 SGD in January 2020. Similar in size and around the same distance to Hougang MRT although Stars of Kovan is nearer to Kovan MRT. What do you estimate the rent will be in 2024 for this area with the knowledge of the URA Master Plan 2019 which was recently released in December of 2019?
- We are not taking into account the future potential of this location. The development of Punggol as a digital district in 2023 and the development at Paya Lebar after the Paya Lebar Airbase is relocated.
- Riverfront Residences will be using smart home technology 7 years newer than Boathouse Residences
- Buying a unit at Boathouse Residences instead would require renovation cost which can cost upwards of 25,000 SGD to 50,000 SGD and equipment/ appliance cost of 5,000 SGD to 10,000 SGD. If you will be taking the upper end of the renovation cost and equipment cost of buying a unit at Boathouse Residences, this is easily an additional 60K SGD worth of renovation cost you will be saving if you buy a unit from Riverfront Residences.
Congratulations! If you’ve read to this point, you are probably really looking at buying a unit at Riverfront Residences.
This is just a brief thought process on how I would go through with clients who are interested in buying a unit in Riverfront Residences.
If you are looking at buying a 1 Bedroom plus Study unit, I’ve already done for you 33% of the work. You can find out and do the same calculations for 2 other developments which are close to Riverfront Residences with similar facilities to get a more accurate Gross Rent Multiplier and Cap Rate for Riverfront Residences.
If you are looking at buying a Studio, 1-Bedroom (other layouts), 2-Bedrooms, 3-Bedrooms unit, 4-bedrooms or 5 bedrooms unit, why not send me a WhatsApp message or a quick email via the contact form below and let me represent you in buying a unit
There are several advantages when I represent you in buying a new launch
- NO COMMISSION REQUIRED. Probably the biggest advantage. If I sell this development, the developer pays me the commission, not you.
- I do the real estate investing calculation for you. Not only will you have all the necessary information, I will also pass you all the floor plans, the images, the pricing and launch price discounts (if any).
- I will tell you further information which might be of use to you that I’ve not written down here. For example, how the URA Master Plan 2019 affects Riverfront Residences and its surroundings and what will be a good price to purchase.
- If you are looking to buy a unit for investment, I will research the best unit type this condo has to offer to provide you with the maximum returns from your investment money. If you are looking to buy for home living, I will research and let you know the best floor level and direction facing to get to maximise your sales price. Basically, I will study these units and provide you with the highest chance of increasing the future capital appreciation potential of your unit
- My obligation is only to you. You can look for me for advice for anything real estate related, any time and any day. I don’t work for Riverfront Residences. I have no obligation to sell this development for them and therefore, I have no need to pressure you to buy this unit. If you want to buy, buy, otherwise, we move on and will look out for another unit that is more suited for your needs.
- I am part of a team that is very strong in financial calculation. If you are really looking to buy, my team will find different ways and different means to make sure you will be able to afford it. Throw us questions and problems you are currently facing and which your previous agents are unable to answer, let us impress you with what we can do to get you your unit
Buying a condominium (especially for a new launch) for anyone is most probably one of the biggest ticket purchase in their lifetime
Think of me as your friendly and knowledgeable real estate investor friend who’s doing you a favour to make sure the purchase of your new condo is really something worthwhile to purchase or at the very least, something that won’t lose you money in the future.
What are you waiting for? Let’s start!
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