April 5, 2009


Landed home values hold up well

However, rental yield may be lower than that of similarly priced private apartments

By Joyce Teo, Property Correspondent

Landed homes are not necessarily subjected to depreciation over time as a major part of the value is locked up in the land. -- PHOTO: ORANGETEE.COM

Owning a piece of land in land-scarce Singapore is something many here dream of.

A landed home often offers more space as well as a certain prestige.

Its value also typically holds well over the years as the market has a limited supply of landed properties.

The landed home market does not attract many speculators because it is relatively small. Foreigners are not ordinarily allowed to buy landed homes.

Many landed home sellers also have better holding power and can wait for a better price, said Mr Steven Tan, executive director, residential, of property firm

At the moment, landed home prices are still falling, although at a smaller extent than apartments.

In the first quarter, landed home values slipped by an average of 1.5 per cent to $542 per sq ft for leasehold houses and fell by 2.2 per cent to $1,193 psf for prime freehold houses. In comparison, private flats fell by a greater margin of 2.6 to 3.6 per cent, according to DTZ data.

Still, what is music to the ears of owner-occupiers may not sound as sweet to the ears of investors.

For one thing, few landed home investors make the type of quick and sometimes very high returns that have been witnessed in the condominium market, experts said. Rental yields are also comparatively lower.

Renting out a house

If you want to keep your house for rent, it would be great if you can hit a yield of at least 3 per cent. The average is about 2 per cent, said Ms Mary Sai, Knight Frank's director and auctioneer.

If you buy a 2,000 sq ft four-bedroom condo unit located in a convenient area for $1.5 million, or $750 psf, you can, in good times, rent it out for about $6,000 a month, she said. That would give a rental yield of 4.8 per cent.

In comparison, if you spend your $1.5 million on a terrace house in say, Watten Estate in Bukit Timah, you may get a lower rent of $4,000 a month. This works out to a 3.2 per cent yield.

Generally, people prefer to rent a condo unit as the development comes with a host of facilities that they can enjoy. They also do not have to worry about the maintenance of a house, which may include work like mowing the lawn.

On the flip side, there are people who favour landed properties because the rent can be comparatively lower, said Ms Sai.

Mr William Wong, managing director of RealStar Premier Property Consultant, said: 'My advice to most is to go for those with a rental yield of 3 per cent to 4 per cent, which is still above the mortgage interest quoted by the banks.'

Generally, houses in districts 9, 10 and 11, as well as 15 and 16 in the east, can command better rental returns.

Buying a house

Most investors who buy landed property for investment are looking more into capital appreciation than long-term rental income, industry players said.

Over a longer period, houses can prove to be better investments value-wise.

One distinct difference between landed homes and private apartments is that the former do not necessarily depreciate in value over time.

This is because the land - and not the building - constitutes the major part of the total value, said Mr Wong.

Also, landed homes are scarcer. Foreigners are not allowed to buy a landed home unless they have a special permit.

A condo or apartment may still fetch a good value if it is less than five years old, said Mr Wong. Once it reaches the five-year mark, 'in general, its value will depreciate unless there is an opportunity to go en bloc, which is highly unlikely nowadays', he said.

To make sure you land a house that could appreciate in value over a three- to five-year period, choose one that has an excellent land shape, is on a hilltop or has redevelopment potential, he said.

A site with redevelopment potential could be one that can be developed into a low- to mid-rise apartment block or a pair of semi-detached houses, he added.

Patience may pay off for landed homes owners. 'Landed properties generally double in value every seven to 10 years,' said Mr Wong.

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