Are integrated condo developments overrated or worth the premium?

Singaporeans love convenience. And nothing shows this better than the sales trend of new launch integrated developments, which have been flying off the shelves:

Because what could be better than having a proper shopping mall, a bus interchange, an MRT station, or maybe even the public library right downstairs?

However, because of those traits, it's worth noting that integrated condo developments are a rarity in each estate. As a result, these sought-after properties command a significant price premium compared to standalone private residential developments.

The question then arises: Are integrated developments truly worth their price premium? In this analysis, we delve deeper into the appeal and value proposition of these integrated complexes:

What's an integrated development? 

An integrated development is a project that combined residential housing with a commercial component (this can be a mall, offices, or others). Unlike a mixed-use development, which sounds similar, an integrated development also tends to include three other things:

• It’s directly connected to public transport, such as with direct access to the MRT via the mall.
• There’s often some kind of civic institution embedded within the project. This is most commonly the neighbourhood library, but can also include things like clinics, senior day care, and others. 
• An integrated development has full condo facilities, unlike some mixed-use developments that are on top of malls but lack pools, gyms, and so forth 

The tenants of the commercial space, in an integrated development, also tend to be better managed compared to those of a mixed-use condo (e.g., the developer may go out of the way to ensure a proper supermarket, a better mix of food choices, and so on). If anything, the success of these spaces will typically be dependent on how well-curated the mall is.

What's the typical premium for an integrated development?

A common saying, which you'll hear from many a realtor, is that integrated developments can cost around 20 to 25 per cent more. When we looked closer at these developments, however, it's clear the premium gap is usually much higher:

Premium gap at launch

Projects	District	Avg New Sale $PSF	First Sale Date	6 Months Before	Resale PSF 6 months Before 1st Sale	$PSF Premium Gap
BEDOK RESIDENCES	16	$1,338	1/12/11	4/6/11	$933	43.4 per cent
COMPASS HEIGHTS	19	$485	3/2/01	7/8/00	$507	-4.2 per cent
DUO RESIDENCES	7	$2,030	14/11/13	18/5/13	$1,249	62.5 per cent
HILLION RESIDENCES	23	$1,411	26/3/13	27/9/12	$888	58.9 per cent
MARINA ONE RESIDENCES	1	$2,369	21/10/14	24/4/14	$2,032	16.6 per cent
MIDTOWN BAY	7	$3,007	5/10/19	8/4/19	$2,597	15.8 per cent
MIDTOWN MODERN	7	$2,798	19/3/21	20/9/20	$1,701	64.5 per cent
NORTH PARK RESIDENCES	27	$1,344	13/4/15	15/10/14	$809	66.2 per cent
PARK PLACE RESIDENCES AT PLQ	14	$1,896	24/3/17	25/9/16	$1,060	78.8 per cent
PASIR RIS 8	18	$1,635	23/7/21	24/1/21	$987	65.7 per cent
SENGKANG GRAND RESIDENCES	19	$1,735	1/11/19	5/5/19	$1,086	59.8 per cent
THE CENTRIS	22	$502	20/1/06	24/7/05	$305	64.5 per cent
THE ORCHARD RESIDENCES	9	$3,341	22/3/07	23/9/06	$1,110	200.9 per cent
THE POIZ RESIDENCES	13	$1,427	28/11/15	1/6/15	$1,183	20.6 per cent
THE WOODLEIGH RESIDENCES	13	$2,010	10/11/18	14/5/18	$1,418	41.7 per cent
WALLICH RESIDENCE	2	$3,310	16/12/13	19/6/13	$1,475	124.4 per cent
WATERTOWN	19	$1,216	26/1/12	30/7/11	$900	35.1 per cent

Note: Compass Heights is an outlier because it was the first integrated development. When it launched in 2001, the developer was cautious given the novelty of the project.

Premium gap for new launches across districts

District	$PSF Premium Gap
1	112.6 per cent
2	82.2 per cent
3	34.2 per cent
4	82.0 per cent
5	37.5 per cent
7	46.3 per cent
8	37.7 per cent
9	50.6 per cent
10	28.2 per cent
11	27.5 per cent
12	17.8 per cent
13	25.7 per cent
14	37.2 per cent
15	27.0 per cent
16	28.2 per cent
17	10.3 per cent
18	27.4 per cent
19	26.3 per cent
20	39.4 per cent
21	32.3 per cent
22	48.6 per cent
23	37.7 per cent
25	12.8 per cent
26	30.0 per cent
27	33.1 per cent
28	47.2 per cent

This table shows the average $PSF premium gap between new launches and resale properties within their respective district.

Integrated premium gap relative to their district’s premium gap

Projects	District	$PSF Premium Gap	$PSF District Premium Gap	$PSF Integrated Gap
MARINA ONE RESIDENCES	1	16.6per cent	112.6per cent	-96.0per cent
COMPASS HEIGHTS	19	-4.2per cent	26.3per cent	-30.5per cent
MIDTOWN BAY	7	15.8per cent	46.3per cent	-30.5per cent
THE POIZ RESIDENCES	13	20.6per cent	25.7per cent	-5.1per cent
WATERTOWN	19	35.1per cent	26.3per cent	8.8per cent
BEDOK RESIDENCES	16	43.4per cent	28.2per cent	15.2per cent
THE CENTRIS	22	64.5per cent	48.6per cent	15.9per cent
THE WOODLEIGH RESIDENCES	13	41.7per cent	25.7per cent	16.0per cent
DUO RESIDENCES	7	62.5per cent	46.3per cent	16.2per cent
MIDTOWN MODERN	7	64.5per cent	46.3per cent	18.2per cent
HILLION RESIDENCES	23	58.9per cent	37.7per cent	21.2per cent
NORTH PARK RESIDENCES	27	66.2per cent	33.1per cent	33.1per cent
SENGKANG GRAND RESIDENCES	19	59.8per cent	26.3per cent	33.5per cent
PASIR RIS 8	18	65.7per cent	27.4per cent	38.3per cent
PARK PLACE RESIDENCES AT PLQ	14	78.8per cent	37.2per cent	41.6per cent
WALLICH RESIDENCE	2	124.4per cent	82.2per cent	42.2per cent
THE ORCHARD RESIDENCES	9	200.9per cent	50.6per cent	150.3per cent

This table compares the premium gap between Integrated developments versus the premium gap that non-Integrated developments have

13 of the 17 projects showed a premium higher than the typical new launch premium for their district. This is not entirely surprising, as even the land costs tend to be much higher for integrated projects (just by virtue of being so close to the MRT station, as well as near the hub of the neighbourhood). 

Is it worth paying so much for an integrated development?

We looked at the performance of new launch integrated developments with transactions occurring after 14th January 2011. This prevents the data from being distorted by the effect of the Sellers Stamp Duty (SSD), which didn't exist prior to this date. We also took into account those who sold before the development obtained their TOP, so developments like Midtown Bay are inside.

Integrated Developments	Proportions of gains
MIDTOWN BAY	50per cent
MARINA ONE RESIDENCES	59per cent
WALLICH RESIDENCE	60per cent
THE WOODLEIGH RESIDENCES	67per cent
DUO RESIDENCES	79per cent
WATERTOWN	90per cent
HILLION RESIDENCES	92per cent
BEDOK RESIDENCES	95per cent
PARK PLACE RESIDENCES AT PLQ	95per cent
NORTH PARK RESIDENCES	97per cent
MIDTOWN MODERN	100per cent
SENGKANG GRAND RESIDENCES	100per cent
THE POIZ RESIDENCES	100per cent

In the table above, you can see that developments such as Midtown Modern, Sengkang Grand Residences, and The Poiz Residences rewarded every single new launch buyer with a profitable transaction as far as the data is available. On the flip side, Midtown Bay and Marina One Residences saw a low portion of winners so far.

However, it's safe to say that the majority of integrated development can be counted on for gains. Eight of 13 projects managed to see gains in 80 per cent of transactions, with Duo Residences coming close at 79 per cent.  

But we can't just look at integrated developments in isolation. How do these proportions of gains compare to non-integrated developments?

If we look at all 542 projects that had new sales after Jan 14, 2011, you'll find that the majority have at least four in five transactions being profitable (excluding costs):

For new-to-resale transactions and sub-sales, the same pattern holds: around four out of five transactions were profitable, among 272 projects. 

In other words, having a good proportion of new launch buyers winning is not unique to integrated development projects only. Ordinary new launches have also been shown to have rewarded buyers most of the time.

But this is just part of our original question. We wanted to know if the gains are enough to justify the premiums as well. 

Comparison by percentage gains 

Project	Gain	Loss	Average	Integrated Premium Gap
BEDOK RESIDENCES	12.1per cent	-2.2per cent	11.4per cent	15.2per cent
DUO RESIDENCES	13.4per cent	-8.7per cent	8.7per cent	16.2per cent
HILLION RESIDENCES	12.4per cent	-4.0per cent	11.1per cent	21.2per cent
MARINA ONE RESIDENCES	6.8per cent	-6.4per cent	1.4per cent	-96.0per cent
MIDTOWN BAY	2.9per cent	-5.0per cent	-1.1per cent	-30.5per cent
MIDTOWN MODERN	7.6per cent		7.6per cent	18.2per cent
NORTH PARK RESIDENCES	19.6per cent	-2.5per cent	19.1per cent	33.1per cent
PARK PLACE RESIDENCES AT PLQ	13.7per cent	-1.2per cent	13.0per cent	41.6per cent
SENGKANG GRAND RESIDENCES	6.2per cent		6.2per cent	33.5per cent
THE POIZ RESIDENCES	20.9per cent		20.9per cent	-5.1per cent
THE WOODLEIGH RESIDENCES	8.3per cent	-2.4per cent	4.8per cent	16.0per cent
WALLICH RESIDENCE	7.7per cent	-5.8per cent	2.3per cent	42.2per cent
WATERTOWN	18.3per cent	-5.9per cent	15.9per cent	8.8per cent
Average	16.6per cent	-5.7per cent	14.78per cent

Integrated development performance of those who gained, lost, and their average.

Projects	Gain	Loss	Average
Non-Integrated	15.0per cent	-7.0per cent	12.1per cent

Here, we show the percentage gain and loss for integrated development transactions and compare them to every other non-integrated development (for new sale units). 

We can see that in general, integrated developments experienced slightly higher gains when profitable (16.6 per cent vs 15.0 per cent).

Even if there's a losing transaction, integrated developments tend to lose less than regular counterparts (-5.7 per cent vs -7.0 per cent).

This suggests that, despite the initial premium placed on integrated developments, there is still good room for profit.

This is true even if the premium for being integrated is higher than the typical premium for being a new launch. 

North Park Residences, for example, had a premium gap of 33 per cent, but managed a gain of 19.6 per cent, and kept its losses to just -2.5 per cent. 

Watertown had a much lower premium gap of 8.7 per cent, but the percentage gain was largely similar, and percentage losses were much greater at -5.9 per cent. 

There are some exceptions, such as Midtown Bay and Marina One Residences; but this is due to the lack of new launches in the area, which may be distorting the overall picture (and it's still early days for Midtown Bay, but also because there's a cheaper alternative in Midtown Modern). 

Profitability still boils down to the project in question

As we can see, the performance of integrated developments can vary widely from each other. In addition, we have to consider that the number of integrated developments is very small, compared to the number of regular condos; this also limits our ability to predict performance. 

The only general conclusion we can draw is that, overall, you can make at least as much from an integrated development as you could from a typical new launch condo (at least in the context of the past 12 months). 

But integrated developments are better rental assets, right? 

Actually, most realtors will tell you integrated developments have high rentability, not that they have a higher rental yield. The two are not the same (rentability just means it's easy to find a tenant, not that the yield is particularly high). 

Here's the reason for it: when we looked at 12 of the integrated developments, and compared rental yields to condos in the same district, there was no clear pattern that they were better:

Highlighted in green are the integrated development's position in terms of yield from left to right (highest to slowest yields).

Hillion Residences and The Poiz top their district for rental yields, but Wallich Residence and Marina One Residences are at the bottom of their district. So there isn't any strong conclusion here about yield, and it's really more project and location dependent. 

And as is always the case, yield is more about the price you paid: the more expensive the unit, the lower the yield is going to be (gross yield = annual income/unit cost). This could explain Compass Heights: as an older leasehold development, the overall price will be lower; but the rental income can be maintained due to its convenient nature. 

On the flip side, luxury projects like Wallich Residence will always seem to have depressed yields, as these high-end properties are so pricey, to begin with. 

So an integrated development may not necessarily get you a higher rental yield. However, few people would disagree that it's much easier to find a tenant when your condo is directly connected to the MRT. 

As with everything, it's hard to draw a blanket statement regarding integrated developments completely — it will be dependent on the project in question. From the data shown, although they come with a price premium, their scarcity, curated amenities, and direct access to public transport contribute to their appeal, which can be seen even in the resale market.

ALSO READ: Cheaper than nearby flats? HDB terrace house in Balestier selling for $845k

This article was first published in Stackedhomes.