Sunday, October 26, 2014

When the Republic of Singapore Air Force gives ground: Impact on SG's land bank from the closure of PLAB

In the 1978 movie, Superman, Lex Luthor intends to detonate a nuclear device along the San Andreas Fault so that California would slide into the Pacific Ocean, making him immensely richer because hundreds of miles of worthless desert land he had bought would be the new (read: valuable) seafront property.

The cunning plan by Superman's nemesis was engineered to profit from an instant change in geography. Alas, the hero saves the day and the land grab never achieves its intended effect.

In Singapore, the announcement that the Republic of Singapore Air Force would bid goodbye to Paya Lebar Air Base (PLAB) after 2030 has stoked the interest of real estate speculators who sense a good buy. They reason that property limited by height restrictions around PLAB would shoot up in value (if you excuse the pun) once height restrictions are removed and the plot ratio of real estate around what is now the RSAF's largest airbase can be maximised.

There's money to be made from the change in landscape, some property players reason, though on a time scale far longer than the instant success that Lex Luthor has plotted.

While theoretically plausible, property speculators may want to ensure their homework is thorough and money-making instincts are sound before taking the plunge.

The 16-year window (or more) from now till the day PLAB closes shop is likely to be signposted with economic peaks and troughs, looking at how economic cycles have contracted in the past decade or so.

When the RSAF gives ground
In addition, one must pencil in the impact on property prices from the release of prime land after container terminals around the city fringe move to Tuas. And how about the possibility that even more RSAF assets will be released after 2030?

Looking at projections for Singapore's resident population and future demands for living space, it is the opinion of this blog that another RSAF base will eventually make way for urban renewal. When that day comes, the announcement would likely throw a spanner in the works of property players who had banked their hopes on profiting from PLAB's eventual departure. The sudden realisation that tiny Singapore has a bigger land bank for urban redevelopment than estimated by property analysts/experts is likely to dash many hopes and may sink many speculative ventures.

That said, some will profit - and handsomely so.

If one does a scenario play, one can quite clearly see that the release of a substantial tract of land would invigorate the property scene. The dots are already there for you to join in order to hazard a guess how the landscape is likely to change.

Investors with deep, deep pockets and a long-term investment horizon that stretches decades from today are likely to be the ones who can ride out any speculative fever and be left standing solidly to bank in their profits.

Caveat emptor.

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Safe haven, safe house. Click here

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