Understanding Private Condominiums as an
Investment Asset
by Oh Qi Qi, Isaac Ibrahim, Gideon Yip
Private condominiums have always been seen as a good potential
invesment asset in diversifying the investment portfolio in the
real estate sector.
What is Market Segment?
URA has divided Singapore into 3 main regions also term as "Market Segments". These market segments contain all the 28 Singapore district and are known as:
- Core Central Region (CCR)
- Rest of Central Region (RCR)
- Outside Central Region (OCR)
The CCR occupies the smallest planning area in Singapore and is where most high end luxury condos, prestigious schools and Grade A offices can be found.
The RCR is often considered as a mid-tier region within the central part of Singapore but just outside of CCR.
The OCR occupies the largest planning area and is where condos at the lower price range are mostly located.
Sources:
How to be a Happy Property Buyer Part 1 | Planning Areas
Singapore District Map: Defining the CCR, RCR and OCR by
the 28 Districts
Since OCR is the largest planning area and has the most number of transactions, we will be focusing on the private condominiums that were a new launch in 2015 and lies within the OCR market segment.
Private Condos launched in 2015
In the year of 2015, there are a total of 7 newly launched private condos in the OCR market segment:
- Adana @ Thomson
- Botanique at Bartley
- High Park Residences
- Hilbre28
- Kingsford Waterbay
- North Park Residences
- Symphony Suites
Source:
New Condo launches in 2015
Each bubble represent a private condo, hover a bubble to find out more about the condo
Project: -
District: -
Landsize (sqm): -
Total Units: -
Description: -
One common question asked by people:
How far is the condo away from the Mass Rapid Transit (MRT) Station ? Distance to the MRT
Station matters because it can affect the price and also act as a
landmark. MRT stations are the locus of where all the Retail,
commercial, industrial activities cluster and is also the heart of
neighbourhoods.
Distance from MRT/LRT Stations
When talking about a specific location to someone in Singapore, we seldom go as far as to mention the street name or avenue. Instead, we tell someone that it’s that cafe in Bugis or that office near Marina Bay station.
When asked where we stay, we almost always reply that it’s near this or that MRT station. MRT allow people to easily relate to one another spatially. We almost instantly know where the person is talking about, for most of us take the train as part of our daily routine.
It is important to know how far the condo is away from the MRT/LRT Station as it serves as a guide whether is the condo very accessible and convenient for the residents to commute.
Hover over each circle to view each condo distance away from the nearest MRT/LRT Station.
Source:
A New Buyer’s Map for 2022 - PLB’s Near-MRT Condo
Catalogue
After having a basic overview of each of the private condos, how many purchase was made in the year 2015 when it was newly launch? The number of purchase transaction in the year it was launch indicates the popularity level of the private condos.
Popularity of new Launch in 2015
From the data, it was observed that High Park Residence has the most number of units sold out in 2015 which was the year it was launched, followed by Botanique at Bartley and then North Park Residence.
High Park Residence has the shortest distance to the nearest MRT/LRT station followerd by Botanique at Bartley and then North Park Residence.
It would appear that the distance of the condos to the nearest MRT/LRT affects the volume of transactions which indicates the popularity of it. This might be due to the fact that people generally would prefer properties nearer to MRT/LRT stations.
Therefore, a possible general guide to know whether the property will be popular can be related to how far it is away from the nearest MRT/LRT station.
Hover over each bar to view the transaction volume for each respective private condo.
Based on the data, approximately 15% of the buyers that bought in 2015 sold their private condominiums within the next few years. Therefore, we will focus on the profitable transactions of the private condominiums sold after 2015 to determine buyers' likely behaviour and spot any possible transaction trends.
Profitable Transactions Volume Trend
Most transactions occur approximately 4 years (2019-2021) after the year 2015 (the year of purchase), which may be due to the Seller Stamp Duty (SSD). The SSD is a property tax that a property seller has to pay when he/she sells a property within the holding period (number of years that you own a property). For purchase made between 14 Jan 2011 and 10 Mar 2017, the SSD is as per follow:
| Number of years after purchase | Payable SSD |
|---|---|
| Up to 1 year | 16% |
| More than 1 year and up to 2 years | 12 % |
| More than 2 years and up to 3 years | 8% |
| More than 3 years and up to 4 years | 4% |
| More than 4 years | No SSD Payable |
One interesting observation is that the number of profitable transactions dipped in the year 2020 which may be due to the COVID-19 pandemic.
Source: Seller's Stamp Duty of Up to 12%: What Property Sellers Need to Know
Hover over each point to view the profitable transaction volume for each year.
Since there are more transactions from the year 2019 to the year 2021, we will be focusing on the profitable transactions between those years. Next, we will view the number of profitable transactions and the breakdown of bedroom size for each property in each respective year.
Transactions and Bedroom Size
From the data, it was observed that 1/2Br have more transaction across different private condos as compared to 3/4/5 Br.
This might be due to the fact when buying for investment, a popular guide is to buy the smaller unit as smaller units give better cash flow and appreciate at a faster rate.
Therefore, normally people who buy just to invest will purchase 1Br or 2Br as it is the more popular choice and will sell it fast after the minimum required holding period to avoid paying SSD.
Furthermore, the development size might also affect the future transactions. This is reflected in Hilbre28 who is a small development with only 28 units. Therefore, there might not be much transaction volume given a small amount of units available.
Filter based on the years and hover over each bar to view the transaction volume of bedroom sizes for each respective private condo.
Since there are more transactions for 1/2Br, we will be focusing on property that have profitable transaction for 1Br and 2 Br from year 2019 to 2021. Next, we will view the profit made by the property for 1Br and 2Br from 2019 to 2021.
Profits by Bedroom Size
All the selected private condos actually did made some profits on average.
From the data, the dip in profit in 2020 correlates with the dip in the number of profitable transaction most likely due to the Covid-19 pandemic.
North Park Residence 1Br did not earn as much as compared to the 2Br. This was because the purchase and sale PSF for the year of 2020 and 2021 did not differ much hence rendering lesser profit.
Wherease High Park Residence 1Br have a significant difference hence generating a higher profit.
Summary
When considering newly launched residential property as an asset class for investment, here are a few points to take note of:
- Knowing which market segment the new launch is under is very important as in different market segments, the pricing range will be different.
- It is suggested that an individual looks at a new launch condo distance to the nearest existing or future MRT/LRT station as it will indicate the property's convenience, affecting its popularity.
- From an investment point of view, it will be good to purchase a 1/2 BR unit to allow for better cash flow and lower upfront capital.
However, there might be many more factors that might affect the profitability of a new launch. Therefore, consulting a subject matter expert such as a property agent focusing on the private condo market is advisable to understand more.
Last but not least, happy investing!