Why landed property is a great store of wealth

By
/ EdgeProp Singapore
|
October 8, 2021 6:00 AM SGT
The highest Good Class Bungalow transaction in terms of absolute price this year is $128.8 million for this property at Nassim Road (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) - The star performer in the residential market this year is the landed segment. And it is not just the Good Class Bungalows (GCBs), where many of the record-smashing deals have taken place. In the first nine months of 2021, the tally of house deals numbered 2,649, traversing the different regions, and included terraced houses, semi-detached and detached houses, as well as GCBs.
Ray Teo, senior group district director of PropNex Realty, is projecting that the current pace of sales — an average of at least 800 deals per quarter — will be maintained through 4Q2021, bringing total deals for the year to between 3,200 and 3,500 house transactions. “This has been a phenomenal year,” notes Teo, who headlined the Landed Property Webinar by PropNex and EdgeProp Singapore on Oct 3.
Ray Teo - EDGEPROP SINGAPORE
Teo: This has been a phenomenal year for the landed property market (Photo: PropNex)
After all, there are only 73,263 houses across Singapore as at end-2Q2021, compared to a total of 340,283 non-landed units (apartments, condominiums and executive condominiums). Meanwhile, there are 1.08 million HDB flats as of end-2020, according to HDB data. (Find HDB flats for rent or sale with our Singapore HDB directory)
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“Only 5% of the Singapore population live in landed property,” says Teo. “The buyers are predominantly Singaporeans and new citizens.” Foreigners are only allowed to purchase landed property if approved by the Land Dealings (Approval) Unit of the Singapore Land Authority. Due to the high price tags of such property, there is less speculation, and hence less volatility, in the landed property segment, notes Teo.

Pullback in difficult times

LANDED 2001 - EDGEPROP SINGAPORE
Landed property transaction volume and average price psf in 2001 (Source: EdgeProp Singapore)
Twenty years ago, the total transaction volume of landed property was 1,836 and the average price was $483 psf.
Both transaction volume and average prices then started to climb, reaching the all-time high of 5,525 deals in 2007 at the height of the property boom, with average prices at $645 psf. “A significant portion of the transactions was for new houses,” says Teo.
Landed 2007 - EDGEPROP SINGAPORE
Landed property transactions at the peak of the property boom in 2007 (Source: EdgeProp Singapore)
The next year, 2008, marked the onset of the global financial crisis. Transaction volume plummeted 61% to 2,145 units. However, average price inched up slightly to $666 psf, according to EdgeProp Singapore data. “What it shows is that most landed property owners have strong holding power, and reacted by pulling their property off the market,” says Teo.
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LANDED 2008 - EDGEPROP SINGAPORE
Landed property transactions plunged 61% y-o-y during the Global Financial Crisis in 2008 (Source: EdgeProp Singapore)
Confidence returned, and hit a new peak in 2010, with 4,331 transactions and average price at $868 psf. In 2013, three property cooling measures were introduced: hikes in both additional buyer’s and seller’s stamp duties as well as the imposition of the total debt servicing ratio loan framework. That led to a 68% plunge in transaction volume to 1,382 units that same year. However, average price plateaued at $1,234 psf.
LANDED 2010 PEAK LANDED - EDGEPROP SINGAPORE
Landed property transactions at the last peak in 2010 (Source: EdgeProp Singapore)
LANDED 2013 AFTER TDSR - EDGEPROP SINGAPORE
The plunge in transaction volume in 2013 after a series of property cooling measures were introduced; yet landed property prices did not fall (Source: EdgeProp Singapore)

New highs

Today, average prices are at $1,379 psf, and even though the Covid pandemic has dented sentiment in the broad economy, the residential market, and notably landed property, has been sizzling. “My prediction is that transaction volume will remain high, but there’s currently a lack of stock,” Teo observes. The dearth of housing stock for sale, coupled with strong demand, could drive prices to new heights, he notes.
LANDED 2021YTD - EDGEPROP SINGAPORE
Transactions in the first nine months of 2021YTD, where transaction volume and prices have soared in the midst of the pandemic (Source: EdgeProp Singapore)
This is already seen in the GCB market, where the highest-price transaction this year, in absolute terms, was for a GCB at Nassim Road that was sold for $128.8 million — also a record at $4,005 psf — in March this year. A new record in terms of psf price was achieved just two months later when a GCB at Cluny Hill changed hands for $63.7 million or $4,291 psf. The house was still under construction then. The seller, a property developer, has committed to completing the project as part of the sale.
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Good Class Bungalow at Nassim Road - EDGEPROP SINGAPORE
The Good Class Bungalow at Nassim Road that achieved the highest absolute price this year (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Top 10 Detached House Transactions by Absolute Price*

Top 10 Detached House Transactions by Absolute Price - EDGEPROP SINGAPORE
* Based on transactions of the last six months until end Sept, 2021 (Source: EdgeProp Singapore)
CLUNY HILL - EDGEPROP SINGAPORE
The highest psf price achieved for a Good Class Bungalow is $4,291 psf for this property at Cluny Hill, which was still under construction at the point of purchase in May (Artist's impression: Wallflower Architecture)

Top 10 Detached House Transactions by PSF Price*

Top 10 Detached House Transactions by PSF Price - EDGEPROP SINGAPORE
* Based on transactions of the last six months until end Sept, 2021 (Source: EdgeProp Singapore)
New highs were also seen in the semi-detached segment, where the top three transactions in terms of psf price were for the houses at One Tree Hill Collection by Lum Chang Holdings. There are only 14 units, of which 12 are semi-detached and two are detached houses. One Tree Hill Collection is a redevelopment of the former One Tree Hill Gardens, which was a three-storey development with six maisonettes and seven apartments. The latest transaction at One Tree Hill Collection was for a semi-detached house that fetched $8.428 million ($3,783 psf) last month.
One Tree Hill Collection - EDGEPROP SINGAPORE
The semi-detached houses at One Tree Hill Collection are hitting new highs in terms of psf prices for the landed property segment (Photo: Lum Chang Holdings)

Top 10 Semi-Detached House Transactions by PSF Price*

Top 10 Semi-Detached House Transactions by PSF Price - EDGEPROP SINGAPORE
* Based on transactions of the last six months until end Sept, 2021 (Source: EdgeProp Singapore)
In the terraced house segment, the properties that topped the list of highest psf prices were the conservation terraced houses at Emerald Hill Road, off Orchard Road in prime District 9. They are coveted for their rarity, as supply is limited.
Emerald Hill Road - EDGEPROP SINGAPORE
The conservation terraced houses at Emerald Hill Road have topped the list of highest psf achieved for the housing segment (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Top 10 Terraced House Transactions by PSF Price*

Top 10 Terraced House Transactions by PSF Price - EDGEPROP SINGAPORE
* Based on transactions of the last six months until end Sept, 2021 (Source: EdgeProp Singapore)

‘Never too late’

Likewise, GCBs are just as rare. There are only about 2,700 such properties, and supply can only increase through sub-division of larger land plots into smaller parcels. Even then, not all sites can be carved up as the minimum land size for a GCB is 1,400 sqm or 15,070 sq ft.
Conservation terraced houses at Cairnhill Road - EDGEPROP SINGAPORE
Conservation terraced houses at Cairnhill Road (Photo: Samuel Isaace Chua/EdgeProp Singapore)
Teo is confident that prices will continue on its current trajectory. “More wealthy Singaporeans are snapping up landed property because they feel it’s the best store of wealth,” he says.
Indeed, it is never too late to start, according to Ismail Gafoor, CEO of PropNex. He purchased his first landed property, an intermediate terraced house, sometime in the early 1990s. The purchase price then was $610,000. It was a brand-new development, and he had purchased it directly from a developer. Today, that same house is worth $3.5 million, he adds.
“It doesn’t matter if your first property is an intermediate or corner terraced or a semi-detached house, or whether it’s in District 15, 19 or 28,” says Gafoor. “The mere fact that you have a foothold in the landed property market means you will get to enjoy the space and the lifestyle. The house will provide you with a hedge against inflation; and when the time is right, you can either upgrade or downsize and cash in.”

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