Land swap: Who got the better deal?

The real worth of the railway land to Singapore is not the market value of the sites itself but the value it can unlock for the surrounding areas

by Colin Tan

Politically it is a win-win deal. However, since the governments of Singapore and Malaysian announced on Monday their agreement to a land swap to end a two-decade long stalemate over the Malayan Railway (KTM) land issue, many have been asking which country emerged better off - commercially?

The swap involves three plots of railway land in Tanjong Pagar, Kranji and Woodlands, and another three in Bukit Timah.

In lieu of those six plots, the Singapore Government will offer in exchange four parcels of land in Marina South and two parcels in Ophir-Rochor.

The Marina South parcels are on adjoining sites behind the Marina Bay Financial Centre and "at the heart of the financial and business cluster in Singapore".

The two plots in Ophir-Rochor are next to the Kampong Glam historic district and across the road from the Gateway on Beach Road. The value of these lands could - when it is finally vested in the new joint venture firm and depending on the market conditions at that time - be worth billions of dollars.

However, no details were given of the six parcels of railway land to be surrendered back to the Singapore authorities. One can only guess that these were, for quite a substantial portion, irregularly-shaped, elongated and narrow.

Presumably, they lie along or close to the existing railway line all the way from the Tanjong Pagar Station up to Woodlands, just before the Causeway.

A day after the announcement of the land swap, reporters have been pressing property consultants hard for the worth of these railway land parcels. How much were these worth compared to the choice sites in Singapore's commercial district. Did Singapore give up too much?

While it was easier to estimate the market value of the six sizeable and fairly rectangular shaped parcels in Marina South and Ophir-Rochor, it was difficult to arrive at a "guesstimate" for the six parcels of railway land.

From an appraiser's perspective, one can only put a market value on a piece of land if it was capable of fully supporting an independent development on its own. Otherwise, the land has little or minimal value and the valuation process is more of an academic exercise.

Only those portions of railway land from which sizeable plots can be carved out can fetch a market value. While the rest of the land may add up to the same area, they will only be worth a fraction of the total value.

Tracing the path of the railway line, some of the railway lands appear to be land-locked or are not easily accessible. Until rights of access are secured from the surrounding land owners, these sites will also have little economic value.

So far, we have been dealing with only the quantifiables. On that score alone, one can conclude that Malaysia got the better deal.

But the real worth of the railway land to Singapore is not the market value of the sites itself but the value it can unlock for the surrounding areas.

To use an analogy, the railway land and surrounding areas along the railway line is like a mega-exhibition hall supported by massive columns. What is the incremental worth of the hall if it were column-free?

Is it just the value of the freed additional space previously occupied by the massive columns?

Obviously not. The entire worth of the hall space goes up as the place can now be used more efficiently and more conveniently.

Presently, no comprehensive development can take place in those areas near the railway lines. Incremental development and only the most pressing and urgent ones will be undertaken.

These still have to be worked around the lines. Where it is unavoidable, bridges, overhead passes and flyovers are needed to link those areas divided by the railway line. Where accessibility is significantly affected, property values remain subdued.

Other than that, planners would prefer to leave things as they are and not cast in stone some of the inefficiencies of the land use in the area.

As a result, progress in these areas tend to be slower than in other parts of Singapore. If you pay a visit to some of these places, you will feel like you have just entered into a zone where time has stood still.



The writer is the head of Research and Consultancy at Chesterton Suntec International. Courtesy of WeekendToda
y