Two weeks earlier, the Government announced the demolition of Thomson Road property in 68 to 74 Thomson Road. Why? It is a freehold property just opposite United Square. The strategically excellent location even had a great en bloc potential. This must have been a catastrophic loss for the owners. But what did they miss? What caused this demolition after all?
What do we know about 68-74 Thompson Road?
Let’s back up a little here to know about the property in question. 68-74 Thomson Road is a mixed use building launched in the 1960s. The small development stretches 8,352 sq ft. As for the building’s location, it has close proximity to United Square Mall. Besides, it is just six metres away from the North South Corridor (NSC) tunnel.
So, what was so wrong which led to the Government’s announcement to demolish the property?
When the building was built, the NSC tunnel’s close proximity was not a problem. However, in 2020, things turned a graver twist when Land Transport Authority (LTA) engineers revisited the issue. Their impact assessment led them to believe that the property’s foundation needed to be reinforced.
So, early this February, all owners and tenants occupying the property were asked to temporarily vacate their house to fix the foundation.
Many of the residents of Thomson Road building evacuated but kept their furniture and heavy belongings inside as they hoped to return soon. However, on April 16, they were informed that the Government decided that the entire development would be demolished.
All owners of the property would be compensated for their assets under the Land Acquisition Act but they will not be returning home. The exact date of the payout was also not ascertained. Hence, now, the property owners of the building are at a limbo. The Act says they will receive payments based on the market value of the land. This may result in breaking a few disputes as owners are not given much of a choice here.
How much is Thomson Road property worth?
Since there is no chance of returning home, house owners are more worried about the worth of their former residence. We could not find the historical pricing data of 68-74 Thomson Road property. So, we looked at nearby properties to get a sense of their worth.
This property is most similar to the nearby Lion Towers and Derbyshire Heights built adjacent to the property. The data states the following:
Located in Essex Road in District 11, Lion Towers is a freehold property. The building was established in 1974 composing 52 units. Its last transaction took place in 2018 at $1,343 psf. As for Derbyshire located in Derbyshire Road in District 11, it is also a freehold property. Built in 2004, it is composed of 24 units. The building conducted its recent transaction in 2020 at $1,338 psf.
Deriving from this data, Thomson Road properties would be around the range of $1,400 psf. The property houses 12 residential units at 68A-C, 72 A-C and 74 A-C. These units have a size of approximately 1,200 sqft according to online listings. That means if the compensation goes through, each owner can expect to receive an estimated $1.68 million for their house.
Do you think this is a fair price for a house in such a prime location?
Being close to malls and offices, it seems like a raw deal if the Government goes with this line of estimate.
If the owners want to buy a similar home in this area then it would cost them $2,346 psf on average. So, the price disparity faced by Thomson Road property owners is quite concerning.
What did we learn from this Thomson Road property Fiasco?
Freehold status is not “Always and Forever”
Thomson Road property is not the first case where a freehold property is reacquired by the Government. Previously, the Spring Road condominium in Granger Road was carved from freehold to a 99 years leasehold property. Multiple projects in Far East Organization were also built on freehold sites. However, later, they were sold on short leases of 103 years to buyers. The properties in question include The Shore Residences, Caban, The Scotts Tower, and Greenwood Mews.
The Land Acquisition Act decides whether your property is freehold or leasehold. Even if it is declared freehold, the Act may change its status anytime. In which case you will have to vacate the property in exchange for fair compensation. In the future, it also can become part of an en bloc sale if Singapore authorities decide to reacquire the plot. So, there is no guarantee that your freehold property can be passed down generation after generation.
Type of freehold site makes a difference
Not all freehold properties are the same. Often investors would pay a premium for conserved freehold properties. Areas like Boat Quay, Chinatown, Kampong Glam and Little India have such freehold properties currently. If you invest in such a property, you are less likely to risk coming in the way of a future expressway or MRT track. Hence, your property will be less likely to be demolished.
Quality of unit maintenance of older properties often goes unnoticed
68-74 Thomson Road property was built on a weak foundation. The first alarming sign arose when it needed to be propped up with piles when a nearby building was demolished in 1994. Such foundation default was common in the older buildings.
However, this should have come to light when the study in 2013 conducted an assessment on the plot but they did not raise any red flags then. This may have misled many owners post 2013 to believe that their property structure is solid as per regulatory standards.
The key takeaway here is we must always dig deeper into the history of older buildings before buying it. It is best to see its record since its establishment to avoid missing cues that the property is in risk of demolition.
En bloc sale is not a viable exit strategy
You must not put too much hope on en bloc potential when making a property investment. Many owners of Thomson Road property thought it was an ideal location for redevelopment. Considering its proximity to malls and standing in a prime location, their reasoning was valid.
Moreover, the property had only 16 units, both commercial and residential combined. Hence, it would have been an easy choice to put it up for en bloc without any internal disputes.
However, with the demolition in place, all hopes for an en bloc is gone! Now, the owners are only entitled to the property’s market value which will be much less than what an en bloc sale could fetch. Hence, it is never a good idea to bank on something like an en bloc which has only a vague prospect to turn to reality in the future.
Be aware of neighbourhood development
When you buy a property, you usually scope out only the key factors related to the property itself. However, it is good to know what the future holds for the area your property is located and the nearby neighbourhoods. For example, Orchard Road is going through a revamp and Woodlands is transforming to a regional centre. If such developments are happening to the area in your property, check out how it would affect your building.
Because more often than not, new developments means building new infrastructures such as new roads, MRTs, expressway, etc. What if your building is in an unfortunate location and comes in this reconstruction plan? Your property may be reacquired by the Government. Or, it may add on disamenities. For example, a new MRT can add to the benefit of your condo for easy commuting. But the railtrack of the very MRT would be a dis-amenity. Everytime, a train passes by, the windows and floors close to the track will rattle which can be a big inconvenience.
So, look to your left, right, high, and below to assess your potential property investment. Not only will it save you from future demolition but it may also add on to your investment factors in the future.
Read more about my forte and service here.