Despite the Covid-19 downturn, landed homes have again taken centre stage in the Singapore private property market. In Q3 2020, the volume of landed home sales surged by over 50 per cent; there were 544 transactions, compared to just 212 in Q2 the same year. This has been the strongest showing for landed properties since 2018.
This is unsurprising, given that properties – in particular, landed homes – are seen as safe-haven assets during a downturn. For example, take a look at the performance of landed properties between mid-2007 to early 2009, the worst period of the last Global Financial Crisis:
During this downturn, home prices fell across the board (although they would later rebound sharply and peak again by 2013). We can see that landed home prices also fell by over 11.6 per cent, from an average of $2.3 million, to $2.04 million.
However, during the same time, private non-landed homes saw prices drop by almost 39.6 per cent, from an average of $1.47 million, to just around $899,400.
Throughout this brief storm however, we can see that landed properties are able to hold their value better than other housing segments.
Later, during the recovery in property prices between 2009 to 2013, landed properties significantly outpaced condos and apartments:
Landed home prices had soared to an average of $4.3 million between end-2009 to end-2013, while condo/apartment prices recovered to $1.44 million.
As such, the surge in landed home sales is likely from investors who recall the last downturn, and see it as a safe place to park their wealth in volatile times.
However, there are many different kinds of landed homes; and it’s often debated as to which type is the best.
This is a lengthy topic that can’t be covered in a single article – the issues range from leasehold versus freehold property, to location, if it’s a terrace house, corner unit, semi-detached versus bungalows etc.
For this reason, I’ll start by focusing on the most common question asked by many investors: Is it better to purchase landed property in the form of cluster housing, or is it better to buy “pure” landed property?
These would be the key factors to consider:
Note that only Singapore citizens can buy “pure” landed properties on the mainland; foreigners can usually only purchase such landed properties in Sentosa Cove. Exceptions for foreigners are made on a case-by-case basis, via an appeal to the Singapore Land Authority Land Dealings Approval Unit (SLA: LDAU).
Foreigners, however, can purchase cluster housing. As such, cluster homes often appeal to expatriates who are not used to the confines of apartment / condo living, and wish to have the convenience of living in mature neighbourhoods or close to the CBD.
2. Cost considerations
Cluster housing is priced more affordably than “pure” landed properties, but the price difference is not straightforward; it varies significantly based on location.
For example, the discrepancy between landed homes and cluster housing is notoriously wide in District 4 (Sentosa), where “pure” landed homes can cost as much as 70 per cent more. A “pure” landed property in this district averages about $1,550 psf, whereas cluster housing here is seldom above $750 psf.
In the Upper East Coast area, however, landed homes average around $1,080 psf at present, and cluster housing averages around $685 psf; the difference is about 44.7 per cent.
As cluster housing is almost always cheaper, it could mean more room for appreciation; and as most landlords know, a lower quantum can mean a higher rental yield.
However, it would be a gross oversimplification to say that one is better than the other, in terms of ultimate yield or gains. As I’ve pointed out, it can vary depending on which district is involved, as that would determine the premium you’re paying for “pure” landed.
Furthermore, we need to consider that cluster housing projects all have different maintenance contributions (which then impact your net rental yield), and some landed properties have improvements which can rival cluster housing common facilities – see below.
There are simply too many variables to make an accurate general conclusion. The only reasonable way to get a sense of the numbers if we compare a specific cluster housing project, to a specific landed property.
Do feel free to contact me on Facebook, if you need to compare between landed and cluster housing for asset progression / investment potential.
3. Freedom to rebuild
Cluster homes are strata-titled properties. This means you do not in fact own the land – you only own a share of it with the other owners, very much like in a condo. This is why landed homes are often differentiated with terms like “true” landed or “pure” landed.
Because cluster homes are strata-titled properties, you cannot do as you please with them. The management committee has to approve any changes you want to make to the property, and one of the things you definitely can’t do is to tear down the house and rebuild it to your liking.
As such, some buyers may dislike the lack of flexibility; they may see cluster housing as being “not really different” from a condo.
On the other hand, some home buyers may not mind, as they’re still mostly free to customise the interior as they wish. They may have no intent to change the floor plans or external facade of the house anyway, so being able to rebuild has no relevance.
I should add that, for “pure” landed properties, there are some houses that are conserved – such as Good Class Bungalows or shophouses. These also cannot be torn down and rebuilt to your liking. In fact, some of these properties may have even more restrictions than cluster housing.
4. Availability of common facilities
Cluster housing includes access to common facilities, such as pools, BBQ pits, gyms, and so forth. This is broadly comparable to what you’d find in most full-suite condo developments. This is one reason why cluster housing is popular among family units: they cost less than true landed properties, and have family-friendly facilities like playgrounds and gathering areas.
With “pure” landed properties, your facilities are limited to what you build. Assuming you can get approval, for instance, you can have your own pool. This, of course, would be much more expensive; plus you would have to maintain everything yourself. In cluster housing, it’s the job of the management to hire cleaners and upkeep the common facilities.
The upside for landed property is that, if you do build facilities like a pool, you don’t have to share it with anyone. This leads me to talk about…
5. Maintenance issues
Landed properties can be a bit more troublesome, with regard to long term maintenance. Unless you hire someone, you are in charge of repainting your own house facade, pruning your garden, picking the leaves out of your pool, re-tiling your driveway, and so forth.
Maintenance costs can also be a bit more unpredictable. For example, cluster housing owners will not suddenly encounter a situation where their pool filter spoils, and they’re personally liable to pay $10,000 to replace it; there’s a shared maintenance fund to deal with these incidents.
On the other hand, cluster housing comes with regular maintenance fees – often collected quarterly – that can range from $250 to $1,200 a month. This is generally more than what landed homeowners pay per month; although very old landed properties can end up costing the same or more to upkeep.
6. Private security
This is not as big a factor as it is in many other countries, due to the low-crime nature of Singapore. However, 24/7 private security should not be underestimated as an amenity.
Cluster housing owners don’t usually need to deal with as many instances of littering, whereas landed property owners sometimes discover people knocking over their bins, or even leaving furniture outside their gate.
Another common complaint is people parking right in front of the driveway of landed property, and preventing the residents from driving out – this doesn’t happen often with cluster housing, where there are security guards walking around with wheel clamps.
Finally, if you’re the sort to travel often, consider that landed property is more at risk of fires or break-ins. You have only your neighbours to look out for your house, not a whole security team.
7. Parking space
Most cluster housing projects will provide each resident with two parking lots, and visitor lots. For landed property, it really depends on the unit in question; some landed homes only have enough room in the driveway for a single-vehicle.
This can be inconvenient at times, such as when relatives come visiting during Hari Raya, Chinese New Year, Christmas, etc. Bear in mind that, in some landed housing enclaves – such as in the Siglap area – the narrow roads will further compound the parking issues.
In general, “pure” landed properties suit two types of owner-occupiers well:
Cluster housing, on the other hand, is lighter in terms of maintenance (although not necessarily cheaper), and is often preferred by families with children.
With regard to investment, I again have to emphasise my previous point – this can only fairly be done via specific side-by-side comparison. This topic is broad in scope, and it’s too simplistic to conclude that one side is better than the other.