Here’s a quick overview on The M and how you would apply real estate investing research, principles and calculations before buying a unit in The M for home living and/or real estate investment purposes.
The unit we will be analysing will be a 1 bedroom + Study Unit, preferably lower floor (3rd – 5th floor) and also be comparing it with Duo Residence 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 M’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 Duo Residence, which is not the usual practice. For clients interested in the M Condo, I will usually compare 2 more units (Concourse Skyline (1.1km away) and South Beach Residences (500m 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 The M before proceeding with the financial calculations which will compare closely with other developments (only Duo Residence for this case study) and this will determine for you if it’s a worthwhile purchase that you should consider.
|Expected TOP||31st March 2024|
|Address (Multiple)||30 Middle Road|
|Number of Units||522|
|Bedroom(s) Type||1 – 3 Bedrooms Available|
WingTai Asia bought the land at Middle Road for SGD 492 Million which works out to be around SGD 1458 psf. The developer for The M is Wing Tai Holdings Limited which has a property development presence that spans over Singapore (3 Developments), Malaysia (6 Developments), Hong Kong (6 Developments) and China (1 Development). Apart from The M, its other residential developments include Le Nouvel Ardmore in Orchard, The Crest at Prince Charles Crescent and the Garden Residence at Serangoon.
|Developers Involved||WingTai Asia|
|No of Residential Developments in Singapore (Current)||3|
|No of Previous Residential Developments in Singapore (Future)||1 (The M)|
|No of Overseas Residential Developments||13|
Comparison between The M and Duo Residence
|Development||Duo Residence||The M|
|Launch Sales Price (psf)||1777||2400*|
|Present Transacted Price (psf)||1955||2400*|
The Launch Sales Price of 2400 for The M is an estimated price. A more accurate price will be updated as soon as it’s available from the developer
Calculation of Growth Rate (For Duo Residence and General)
My research shows that in 2013, Duo Residence was transacting for the following 1 Bedroom + Study unit at 1 Fraser Street (#03-XX), 689 sq ft
Transacting at 9 December 2013 – 1777 psf
Transacting at 21 May 2019 – 1955 psf
Time Period: 65 Months 13 Days (To be rounded down for calculation purposes)
The annual growth rate for Duo Residence would be estimated to be around 1.76%. 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 RCR Region based on stats from December 2009 to December 2019 is 5.42%
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. The M will only be completed in 2024 and will be 7 years newer than Duo Residence by then. See more in the conclusion section
Gross Rent Multiplier
The Gross Rent Multiplier Formula for Duo Residence for a 1-bedroom + Study unit is as follows
GRM = Sales Price / (Annual Rent of Unit)
= 1,347,000 /(3450 x 12)
= 32.5362 (Rounded to 4 decimal space)
With the following assumptions taken
- Sales Price of 1,347,000 SGD taken for the unit #03-XX 1 Bedroom + Study which was sold on 21 May 2019
- Assumption of Annual Rent of 3450 SGD taken as an average for the year 2019 (No stats given for the floor level, lowest was 3400 SGD/ Month and highest was 3500 SGD/Month, both rented on the same date 1 December 2019).
Income Capitalisation Method (Modified)
Using the Income Capitalisation Method Formula, the Cap Rate for Duo Residence 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
= (41,400 – 4368 – 120 – (390 * 12) – (2 * 3450)) / 1,347,000
Assuming the following
- Expected Maintenance and Repair is 0
- Maintenance Fee for Duo Residence is assumed to be 390 SGD
Calculation for The M using Cap Rate and Gross Rent Multiplier
Using Gross Rent Multiplier for The M
For the assumption of rent for The M, there are 2 ways to go about it.
- The M 1 Bedroom plus Study unit is 527 sqft. Using 527/689 x 3450 = 2638.82 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 Bugis MRT (EW12)
- Less than 750 sqft
- 1 Bedroom + 1 Bath (Study option not available)
We get an average of 2800 SGD
(2700 SGD/Month for Parc Sophia (474 sqft and 960m from Bugis MRT Station) and 2900 SGD/Month for Sophia Hills (450 sqft and 970m from Bugis MRT))
For the worst-case scenario, let’s use 2638.82 SGD/Month
Using the GRM of 32.5362 to find the sales price for The M
Sales Price = 32.5362 * (2638.82 * 12)
= 1,030,288 SGD (Rounded to whole number)
Using Income Capitalisation Method for The M
Market Value for The M = Net Operating Income / Cap Rate
= (31665.89 – (300*12) – 3199.90 – 120 – 5277.65) / 0.0188
= 1,035,436 SGD (Rounded to whole number)
Where the following assumptions are made
- Maintenance Fee is 300 SGD (To be updated once developer releases the information)
So judging from the calculations above, what would be an acceptable and fair price for the M 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 The M will only be ready in 2024.
In addition, we need to also consider the following points
- The M will be 7 years newer (2024 – 2017) than Duo Residence.
- The M will be using smart home technology 7 years newer than Duo Residence and has several new space-saving features for their units. With these space-saving features, a smaller unit has the possibility to look even bigger than usual.
- The floor plans from The M and Duo Residence are different. A quick google search shows that Duo Residence floor plans are not rectangular in shape, so you would require custom-made furniture if you want your unit to look natural and in place.
- Buying a unit at Duo Residence instead would require renovation cost which can cost upwards of 50,000 SGD to 100,000 SGD and equipment/ appliance cost of 25,000 SGD to 50,000 SGD. If you will be taking the upper end of the renovation cost and equipment cost of buying a unit at Duo Residence, this is easily an additional 150K worth of renovation cost you are saving if you buy a unit from the M.
- The estimated rent we are using is of the worst-case scenario at 2638 SGD. What do you estimate the rent will be in 2024 for this area at a location which is closer to Bugis MRT station and with the knowledge of the URA Master Plan 2019 which was recently released in December of 2019? If we used the same formulas for Duo Residence back in 2012, we would have known that the price was probably overpriced at that point and I have done the research to believe that the growth rate will be higher than the average for The M.
Congratulations! If you’ve read to this point, you are probably really looking at buying a unit at The M.
This is just a brief thought process on how I would go through with clients who are interested in buying a unit in The M.
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 The M with similar facilities to get a more accurate Gross Rent Multiplier and Cap Rate for The M.
If you are looking at buying a Studio, 1-Bedroom (other layouts), 2-Bedrooms, 3-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.
- You get the second part of my real estate investing calculations for you. Things like how much rent can you expect when this unit gains TOP status. Even if you are not using this for investment purposes, the ability of how much rent you are able to charge when the unit is finally completed will determine the sales price and market value of the unit. Not only will you have all these necessary and important information through careful research, and I will also pass you all the floor plans, the images, the pricing and launch price discounts (if any).
- The calculations I’ve done for this post are based on the worst-case scenario. I will also show you further calculations which will be more realistic based on the current market conditions. For example, a more accurate growth rate and cap rate based on a minimum of 3 condominiums surrounding the Bugis MRT, a brief summary of what the URA Master Plan 2019 has in store for Bugis and what will be a good price to purchase because real estate investing is making sure we are not overpaying for something the market will not be able to sustain.
- 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 The M. 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 calculations. 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!
The information provided on this Datacrunch Real Estate website has been compiled for your convenience. All information (including but not limited to the property area, floor size, price, address and general property description) on the Datacrunch Real Estate website is provided as a convenience to you.
This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.
Datacrunch Real Estate does not accept liability for any investment decision made on the basis of this information. This website does not constitute financial advice and should not be taken as such.