http://www.businesstimes.com.sg/hub/...a-landed-homes

Deciding between strata and non-strata landed homes

By Nicholas Mak / Kim Huynh

Mar 19, 2015


OWNING a landed house is a dream for many Singaporeans. To most landed home owners, their landed residential properties are likely one of the most expensive assets that they own.

Hence, most buyers would generally exercise a great deal of care in their selection of the property. A common question that often arises is whether a strata landed house or an individual land title house (also called a non-strata landed house) would be a better investment.

Here, we examine which types of landed housing have provided the strongest price appreciation in recent property market booms.

We analyse the price performance of strata landed homes vis-à-vis individual land title housing in the past 10 years, spanning two market boom periods.

Individual land title houses refer to the usual private landed homes where each property has an individual land title.

According to the Urban Redevelopment Authority, strata landed housing is defined as low-rise or low density residential developments with strata-titled arrangements.

These developments offer buyers the option to combine a landed housing lifestyle with communal facilities and greenery similar to those found in condominiums. Such developments are also commonly known as cluster housing.

Both individual land title houses and cluster houses can be divided into three types: detached houses (or bungalows), semi-detached houses, and terraced houses.

We further divide the sales transactions of strata landed and individual land title houses into two smaller groups based on their land tenures: freehold and 99-year leasehold.

In our research, we take freehold to include leasehold tenures longer than 200 years. The sample of reported landed housing transactions from 2004 to 2014 is hence divided into four categories:

a) 99-year leasehold strata landed housing;

b) 99-year leasehold individual land title housing;

c) Freehold strata landed housing;

d) Freehold individual land title housing.

Based on these four categories, a time series of the transacted prices of each group is computed based on the median unit price per square foot (psf) on a half-yearly basis.

Thereafter, the time series is converted into price indices using H1 2004 as the base period. The frequency of the time series is six months.

We also selected two property market boom periods: from H1 2004 to H1 2008, and from H1 2009 to H2 2013.

In the first market boom from 2004 to 2008, the median price of freehold cluster houses increased at an annualised rate of 15.4 per cent per year or 77.3 per cent over the four-year period, which is the fastest among the four landed housing groups.

An example is Casa Fidelio, a freehold cluster-housing development in Siglap.

A terraced house in this project was reportedly transacted in 2004 at S$760,000 and was subsequently re-sold for S$1.18 million in 2008, netting a 55 per cent gross profit.

The slowest price growth in the four-year period was that of 99-year leasehold non-strata landed houses at 7.7 per cent per annum. The slow rate of price increase is partly due to the relatively high median price of S$435 psf at the start of the market boom in H1 2004.

In the second market boom from H1 2009 to H2 2013, the median prices of 99-year leasehold cluster housing surged by an impressive 20.1 per cent per annum from S$357 psf to S$813 psf, ranking it the landed housing group with the fastest capital appreciation.

For example, for the 99-year leasehold cluster housing project called Springhill, the median transacted price in H1 2009 was S$324 psf. In H2 2013, the median transacted price increased by 83 per cent to S$593 psf.

The second and third fastest rate of growth was seen in the median prices of freehold and 99-year leasehold individual land title housing respectively.

The median price of freehold cluster housing grew the slowest during the period at 10.2 per cent per annum.

CONCLUSION

Based on our findings, among the four groups of landed housing, freehold individual land title housing is the most popular and commonly transacted group with the highest number of recorded transactions, numbering more than 24,000 from 2004 to 2014.

This group was ranked second in terms of price appreciation in both market boom periods, indicating that it has been fairly superior in performance among landed properties.

The results of the analysis of the price performance of freehold cluster housing are mixed. The median price of this group increased the most in the first market boom period from 2004 to 2008.

However, it turned in the slowest price appreciation in the second market boom.

For 99-year leasehold landed properties, the results show that the price growth of cluster housing has outperformed that of individual land title housing in both periods of market boom.

Conversely, the analysis also shows that 99-year leasehold houses with individual land titles has under-performed other types of landed homes during these two periods.

The writers are head of research & consultancy, and analyst at SLP International.