Property investors are often attracted to the government’s masterplan for growth areas. However, it is important to analyze and identify whether a growth area is worth investing in. Jurong lake district is a growth area that attracted many property investors over the past 3 years. Recently, during a lunch with one of my property investors, I was asked for my opinion about the Jurong Lake District. From this conversation, I decided to share pertinent points herein the article, which I hope will benefit my readers.
Firstly, let us look at why people invest in Jurong Lake District (JLD), below are some cited reasons:
- JLD will be transformed into Singapore’s Second CBD
- JLD will have new Parks and transform into Lifestyle destination
- JLD has close proximity to the Tuas Mega Port
- Invest early – First mover advantage
Some people had bought the area due to High Speed Rail (HSR), barring any u-turn of decision by Malaysia, HSR will be delayed or be cancelled.
Source: Singapore archives, URA (https://www.ura.gov.sg/Corporate/Media-Room/Speeches/speech17-55)
The following abstract is extracted from the Singapore archive from a speech by Minister Wong during the JLD Masterplan exhibition in 2017. He later commented in 2018 that JLD will be unchanged regardless of HSR outcome, after Malaysia announced that the HSR would potentially be delayed or even cancelled (see image below)
Source: Straits Times- Jul 9 2018
I would agree with what Minister Wong said, that JLD will be unchanged regardless of the HSR outcome. JLD will continue to be part of Singapore’s growth plan and part of Singapore’s most important industrial park locations.
If you think that I am going to say that JLD is not worth to invest in due to not having the HSR, you would be disappointed. In order to analyze this investment, we first have to ask the following:
Question 1 : For investors who bought JLD in anticipation of capital gains from the realization of Jurong being the second CBD… how long would it really take to grow?
In my opinion, the Government will focus to grow our main CBD – Marina Bay, our FinTech and Blockchain hub. Reports have shown that many tech companies have offices in the CBD to attract talents, young millennial workforce and to foster a creative thinking environment. To add on, the government has slated JLD to be ready by 2040, which is a 20-year wait.
Question 2 : With Tuas Mega Port only fully operational by 2040, it is still a question what part Jurong Lake District will play.
In my opinion, Jurong has come a long way from being a swamp to a first world industrial park town. With the currently outlet malls like IMM and shopping malls like JEM and Westgate. However, if one is buying JLD due to the fact that it is near to Tuas Mega Port, and expect many companies to move to Jurong and therefore having more expats or workers wanting to rent properties in this vicinity, it will be wise to reconsider.
An investor would have to think about the type and quality of tenants who will rent in the JLD, the number of expats that will likely stay in the JLD area, and whether properties outside the JLD will offer more value investment. These tenants will only be flowing in closer towards year 2040.
In summary, it is too early to invest in properties in Jurong Lake District vicinity in 2018. The 22 year wait for JLD to become the 2nd CBD in 2040 would be an opportunity cost for most investors.
Without spending too much time to discuss about opportunity cost, just ask yourself how many property cycles you could see in 22 years? How much gains are you expecting from this 22 year wait? Are there other alternate investment choices? Are there other locations to consider for more immediate returns?
Investing in an asset at a location that would provide more immediate returns would be a better choice. If one would like to relook to invest in JLD, perhaps so after 2025 when there is more clarity. In the following articles, I will go through a case study on opportunity costs. Stay tuned.