We have a $4.5-$6m budget - should we buy a freehold condo, cluster landed or landed home?

Hi

We have a budget of $4.5 million to $6 million and would like to understand which of the options would make the most sense in terms of practicality and investment return.

We are a family of two adults and two kids (one 12 and one 10 years old). In the future, we may have parents staying with us or need to live closer so we want something accessible to amenities.

Kids' schools are near Ang Mo Kio and Buona Vista, while work is near Buona Vista and Lavender respectively. So we are thinking Thomson or Stevens MRT is a good one for public transport.

1. A FH four-bedroom apartment in District 9/10/11 with full facilities eg. Park Infinia or the Shelford
2. A FH cluster landed in a fairly central location eg. Chancery or Stevens area 
3. A FH landed terrace or small corner terrace in Thomson, Ang Mo Kio area 

We would especially like to understand your analysis on how FH cluster landed has compared to landed historically and welcome your feedback on what you think would make the most sense for us among the three options.

Thanks

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Hello there,

That's a fairly broad spectrum of different locations and property types.

It would seem that you are still quite early on in your decision-making process, and perhaps it is worth really honing down on the location first (as that would present the biggest lifestyle change for you given the variance in everyone's different locations) rather than thinking about what type of property would suit your needs better.

Nevertheless, the general rule of thumb is that freehold properties tend to perform better in the long run and have better value retention potential, so you'll notice that they mostly have a lower transaction volume as owners usually hold on to these properties for a longer period of time (say >10 years).

With lower transaction volumes, prices also move slower in the short run as compared to 99-year leasehold developments which typically see the most appreciation in their younger years.

Seeing that you are only looking at freehold properties, we presume your plan is to stay in the property for a long time (as it makes it more worth it to pay that premium). As your kids are now 10 and 12, they'll soon be attending secondary school so perhaps your choice of the location of your property should not be affected by their present school locations.

But since your workplaces are in Buona Vista and Lavender, we understand the draw of staying somewhere more centralised. However, if your plan isn't to stay for the long term, then these options may not be the most suitable.

Let's go through the options that you have listed:

Option 1: Freehold 4-bedroom apartment in D9/10/11 with full facilities

From the graph above, we can see that prices of freehold four-bedders in the Central area are moving in line with all other freehold condominiums in the same area, along with freehold condominiums in Singapore as a whole.

It is interesting that you mentioned full facilities because this is one factor that may affect the demand and in turn value, of a property.

There are many freehold developments in the Central region and quite a number of them are smaller luxury condominiums that cater to a niche group of buyers and may not have extensive facilities.

A development with full facilities not only attracts homeowners but also investors who are buying the place to rent out as tenants would appreciate a project with more (functional) facilities over one with fewer facilities.

Having full facilities usually also means that the development is of a certain size and being in a decently sized project has its perks. Generally, the bigger the development, the more the cost of maintenance is shared amongst more households, keeping it more affordable.

This is the reason why some new landed owners choose to put in a pool, regardless of the usage of one, as they know that this would be an attraction point when it is time to sell later on.

Option 2: Freehold cluster landed in a fairly central location

In terms of affordability, your budget of $4.5 to $6 million will allow you to purchase a freehold cluster home. For your information, here are some transactions in the past six months within the CCR:

Most of these were built in the last 10 to 11 years, so we doubt that major renovations are needed.

Moreover, the benefit of a cluster home is that you would typically only require renovations done internally as compared to landed homes where you may want to raze the building to the ground and rebuild it.

So should you get a cluster landed home or one that's purely landed?

First, let's briefly touch on the difference between the two.

Both cluster landed and landed properties are houses (that is, a standing building with a ground floor and usually one or more upper floors). 

The difference is whether or not there's a strata title.

Cluster housing involves a strata title, in which there's a Management Corporation Strata Title (MCST). The overall development is shared by multiple owners. It works the same way as a condo, except your unit is a house and not just an apartment. 

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Cluster housing includes common facilities, such as a pool, clubhouse, gym, etc., and the owners share the maintenance costs for these.

With a landed property, there are no other owners except you; the land and the property on it are yours to maintain and change as you see fit (within the bounds of URA regulations). 

Also, note that for cluster homes the monthly maintenance costs will be higher than what you might expect from a typical condo, given the smaller number of units.

Some of these cluster homes do come with a lift, and private pool – but these will come with their own set of additional monthly maintenance fees that will come out of your own pocket.

If you haven't viewed any cluster homes yet, it is also worth mentioning that sometimes the house doesn't quite feel as big as spacious as the size may suggest on paper.

Especially if it is set over several floors, there's a lot of "wasted" space that goes to the landing, stairs, planters, and balconies, etc.

You've also asked about the performance between cluster and pure landed homes.

Looking at the graph, we can see that prices of cluster landed in the Central region have been rather stagnant and its growth rate in the last two years at 15 per cent is slower compared to landed properties which have appreciated by 27 per cent in the same time period.

The price gap between the two property types is also increasing with cluster landed transacting at an average PSF of $1,061 and landed at $2,358 from January 2022 till date.

If we are looking at a 2,000 sq ft house, it will cost $2.594M more to purchase a landed than a cluster landed which is a considerably large difference.

Buyers who are set on buying a landed house in the Central region but are priced out of buying a landed property may then turn to a cluster landed instead.

It ultimately boils down to what you are looking for in the property. Besides the space, buyers looking to purchase a landed property usually appreciate the privacy a landed house provides.

So if their affordability allows, most buyers will likely pick a landed over a cluster house. But if you want to stay in a landed but do not want the hassle of maintenance, you prefer cluster housing where the maintenance is handled by the MCST.

Option 3: Freehold terrace in Thomson or Ang Mo Kio area

First things first, unless your kid would be continuing their secondary school in the Ang Mo Kio area, it doesn't seem like a great choice in the long term as it is still an unknown where their secondary schools would be in the future.

Nevertheless, let's check out the latest transactions for freehold terrace homes in the Ang Mo Kio Planning Area:

Quite clearly, homes in the area are well within your budget (most are actually below). One that falls within your budget is this corner terrace home that has a pretty sizeable land area of 3,850 sqft and is within walking distance to Lentor MRT:

The home looks to be two-storeys high with an attic, and looks to be suitable for housing a room on the ground level (potentially for your parents) and three bedrooms upstairs.

There's also a long driveway which allows for plenty of space for your kids to run around (assuming you wouldn't be parking too many cars here!).

So how have prices of cluster homes fared here compared to landed homes? For this, we'll consider D20 as a whole which covers the Bishan and Ang Mo Kio area:

From the graph it may seem like prices of cluster houses in D20 are rather erratic but this is due to the extremely low transaction volume so it may not be reflective of their true value.

On the other hand, if we were to just look at landed houses, prices are on a gradual uptrend and have appreciated 33 per cent in the last two years.

District 20 is a popular choice for many homeowners for obvious reasons.

Besides its good location on the city fringe, you get to enjoy the benefits of staying in a mature estate – there are many renowned schools for families with kids, lots of markets and food centres, shopping malls for retail options, proximity to nature parks, etc.

Cluster landed vs landed performance

For the most part, cluster houses experience a lower price appreciation compared to landed houses and also condominiums in fact.

As certain districts do not have cluster houses or a very small number of them, it may not be a fair comparison to look at the overall trend. So we've picked out a couple of districts across the island for comparison.

We can see that cluster houses in some districts perform better than others, but even then they are always lagging behind the landed properties in the same area.

This could be due to several reasons. Firstly, there is a smaller number of freehold cluster houses as compared to freehold landed properties so generally, transaction volumes are lower and prices may appear more volatile.

Secondly, if their affordability allows, we believe the majority of landed buyers would choose a landed house over a cluster house so cluster houses actually cater to a niche group of buyers and demand does not fluctuate too much.

This also means reselling it in the future could pose a challenge.

What would make the most sense for you?

Suffice to say, with a budget of $4.5 to $6 million you do have many options to choose from as shown in the transactions above.

In terms of practicality, it really depends on what is important for you.

For instance, you'd have convenient access to an array of facilities if you were to stay in a condominium but you will not get the same privacy as staying in a landed house.

The former may be important to you as having facilities could mean a lot of spare time can be spent doing recreation or exercise in the condominium's swimming pool – particularly important if you want your kids to exercise frequently.

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The latter could make a lot of sense if you prefer privacy – not that a condominium isn't private, but it's certainly less so compared to owning your own home.

Staying in a landed home also means there's a good chance that your kids have to walk more out of the estate to get to access transportation options.

Staying in a central location such as D9, 10, 11 can be very accessible in terms of getting around, but it does not have the same infrastructure that a heartland has, like wet markets and hawker centres due to a lack of HDBs around.

In other words, practicality is very subjective as it's based on your lifestyle needs.

On investment returns, seeing that the performance of cluster houses typically lags behind condos and landed properties, it will be the last on our list.

It is also important to consider your holding period. Even if you were to stay for a long term, how long is long exactly?

One thing buyers tend to overlook is the upkeep of the property. For a landed, you'll have to bear the cost of maintenance and over time as there could be an external or structural repair that needs to be done and these can be rather hefty.

Since we are looking at freehold properties, their prices generally hold up well over time but it's hard to say for sure which property type has the upper hand. But in land-scarce Singapore, many times buyers ultimately choose a landed property over a condominium.

If we were to look at the price trends of freehold condominiums and landed in the last eight years, prices of condos have grown faster than that of landed properties. However, we also need to consider consumers' quantum affordability as well.

Overall, among your options, if appreciation and practicality are your main concern, then freehold condominiums in D9/10/11 would be a better choice.

There are several options that are also close to amenities like those in Novena, where malls such as Novena Square and Square 2 with a plethora of F&B options are hosted.

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Having facilities could also be very desirable as you have kids, and you mentioned your parents may want to move in with you, so having a landed home may not be as suitable unless you're prepared to build a room on the ground level for them to stay in (or at least build an elevator which can be very costly!).

Its freehold nature also gives you a hedge against real estate inflation. Moreover, there is only that much supply of four-bedroom freehold condos in D9/10/11 Singapore today which can help protect your upside further.

That said, a freehold landed can still make sense for you – if you find the right one. While we aren't sure if Ang Mo Kio/Thomson is the right choice given your requirements, perhaps other locations may be a better fit.

The issue for a landed home would be if the layout is suitable for your needs in the long term. Besides having a lift, you would want to have a bedroom on the first floor for your parents.

This article was first published in Stackedhomes.