Originally Posted by
land118
LANDED HAS LEGS, STILL
KU SWEE YONG MAKES THE CASE FOR INVESTING IN LANDED PROPERTY
...
Homing in on landed properties
On Feb 25 last year, Today published our forecast that “we
expect demand for landed properties to exceed supply for
the next few years”. That article had its arguments centred
on the demographic changes that brought demand from
Generation X (those born between 1960 and 1980) into
the landed property segment. It also argued that the lack
of significant fresh supply in the landed property segment
and the median dollar per sq ft price lag of landed versus
non-landed residential properties will lead to continued
price growth, albeit at a slower pace than the searing 30.8
per cent growth achieved in 2010.
According to the Urban Redevelopment Authority’s
Private Residential Properties 4th Quarter 2011 report, the
landed property sub-index climbed from 212.9 to 234.8
last year. This is an increase of 10.3 per cent, or double
the growth of the non-landed sub-index which climbed
4.6 per cent from 189.7 to 198.4. Although the pace of
price growth for the landed property sub-index might moderate
somewhat this year, dampened by policy measures and
the tentative global economy, we believe that price growth
should remain positive.
Across 2011, the price increases in the landed segment
were also supported by increases in rentals: 3.3 per cent
for detached, 5.3 per cent for semi-detached and 8.4 per
cent for terrace, versus the non-landed rental index which
climbed by 3.4 per cent.
In terms of vacancies, the landed segment fared much
better last year. There were 2,294 vacant units versus a
total stock of 69,743 units of landed properties at the end
of 2010, giving us a vacancy rate of 3.3 per cent. This
increased to 3.4 per cent at the end of last year (2,394
vacant units versus a total stock of 70,145 units). Given
the sizable number of non-landed units supplied last year,
vacancy in the non-landed segment was at 5.6 per cent
at the end of 2010 (10,589 vacant units against total
stock of 188,500 units) and this rose to 6.8 per cent at the
end of 2011 (13,586 vacant units against total stock of
198,623 units). The strong supply of completed properties
added 3,000 vacant apartments and condominiums to the
market last year.
Loo kin g forward
The supply pipeline for the landed segment is comfortably
small. There are 1,949 units under construction and 1,858
units in various stages of planning. This puts the landed
supply pipeline at a total of 3,807 units, or 5.4 per cent of
the current stock. Considering it is merely a 5.4 per cent
growth over the next four to five years, the annual increase
is a manageable 1 to 2 per cent. In contrast, the current
pipeline of apartments and condominiums is a potential
85,724 units. We can expect to add another 43.2 per
cent to the total non-landed stock over the next four to five
years — an increase of almost 9 per cent per year.
To be fair, it probably takes half the time (18 to 24
months) to construct landed properties compared to condominiums.
Therefore, we cannot forecast the supply pipeline
in the landed segment beyond three years. However, looking
at the Masterplan 2008, we can safely say that the
supply of land for landed properties is limited, and therefore
it is not likely we will see a deluge of landed properties
anytime soon, unless we convert several more of our islands
into landed housing estates.
Therefore, based on the limited supply growth, and
as the demographics of Generation X-ers continue to add
demand to landed properties, we believe that price growth
should continue in the landed segment, well into the next
four to five years, possibly until the children of Generation
X-ers have flown the coop. As we had advised just over
a year ago, if you wish to buy a landed property, do not
dream of a price drop, just do it!
Ku Swee Yong is the chief executive officer of real estate
agency International Property Advisor, and the author
of Real Estate Riches — Understanding Singapore’s Property
Market in a Volatile Economy.
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