Published 3 March 2011
The Business Times
By Wendy Tang and Png Poh Soon
LANDED properties shone brightest in the private residential properties category in 2010 when prices soared by some 30.8 per cent year on year (based on the Urban Redevelopment Authority’s property price index) compared to non-landed properties which appreciated by 14.0 per cent. Prices of detached houses took the lead, increasing by 37.6 per cent year on year while the prices of semi-detached and terrace houses went up by 26.3 per cent and 26.1 per cent respectively.
For the whole of 2010, there were a total of 543 strata landed property sales, excluding enbloc sale transactions. This was slightly higher than that in 2009 when about 511 strata landed units were sold. Average transacted prices of strata landed housing increased by 12 per cent to 28 per cent for freehold and leasehold properties respectively. While prices of apartments increased by some 15 per cent in general, strata landed housing, in particular leasehold properties, performed better.
Strata landed houses are low-rise landed residential properties that do not come with land titles but are instead strata titled. In some instances they may also be known as cluster housing for those in landed locations while those in mixed landed or non-landed developments are called townhouses.
Legally, the ownership structure of strata landed housing is similar to condominiums where the land in the development is shared among all owners and subjected to procedures like voting being required on issues such as major alterations and addition works, election of a management committee or disposal of property whether in part or whole.
The concept of strata landed housing has been around for 18 years since it was introduced in 1993. The intent was to add variety and choice for home buyers who prefer to live in landed housing but would like to enjoy communal facilities such as gyms, clubhouses, swimming pools and security services within a gated community.
Broadly, strata landed housing can include any one or a combination of bungalows, semi-detached houses or terrace houses within a development and should be located in designated landed housing areas.
Cluster housing appeals to buyers who enjoy communal facilities and require larger living spaces but cannot find suitable units in condominiums. Similar to landed properties, cluster houses, typically about two to three storeys high, come in sizes ranging from about 2,500 sq ft (terrace) to as much as over 7,000 sq ft (detached/bungalow).
A set of revised strata housing guidelines came into effect on Feb 3, 2009 in which strata landed housing were prescribed a minimum plot size per unit depending on the conventional landed housing form. Under the guidelines, strata landed housing for bungalow, semi-detached and terrace houses require a minimum plot size of 400 sq m, 200 sq m and 150 sq m respectively.
The revised guidelines reduce the number of strata houses allowable per development and were implemented to resolve concerns of increasingly congested strata landed developments. After all, strata-landed property buyers, in particular those with larger families, prefer the bigger built-up space typical of landed homes but want to have condominium facilities as well.
While foreigners in general are not allowed to buy landed residential private properties, they may purchase strata landed properties within developments with condominium status without seeking approval from the Land Dealings (Approval) Unit. Some recent new projects in this category include D’Leedon and The Vision where one in every 10 strata landed property buyers within the development is a foreigner.
Investors’ interest also picked up as strata landed homes command a higher rental yield compared to similar sized landed properties. Tenants are often willing to pay higher rentals for the convenience of communal facilities like the pool, gym and playgrounds and in some cases for the close proximity to good local and international schools.
Some new cluster homes can command rental yields of some 4 to 5 per cent compared to 2 to 3 per cent for landed homes. For example, cluster homes in districts 10 and 11 with average sizse of 3,000 to 4,500 sq ft can command monthly rents of $10,000 to $19,000 while similar sized suburban ones can get $5,000 to $12,000.
There is an ample supply of private residential units, in particular non-landed properties. As at the end of the fourth quarter 2010, there was a total supply of 65,699 uncompleted units of private housing from projects in the pipeline. Of these, 32,776 units were still unsold. This includes 16,104 non-landed and 1,034 landed private residential units which are uncompleted, planned and under construction. The number of new landed properties is significantly lower because of limited land supply.
Strata landed projects are becoming increasingly attractive and are preferred alternatives over non strata landed projects as they offer the best of both worlds – having landed properties’ spaciousness, condominium facilities and gated security.
To cater to rising demand and expectations, developers have increasingly built more strata landed projects with condominium like fittings. For example, the upcoming Eleven @ Holland comprises 82 luxurious units with private lifts complete with swimming pool and clubhouse. Some other new strata landed properties coming onstream include Watercove Ville (80 units), Poets Villa (40 units), strata housing at Westwood Avenue (93 units) and Cluster Housing at Mount Rosie Road (193 units).
As 2011 gets underway, the property market is caught in another round of government cooling measures, this time even more aggressive than the last three rounds. The fourth round of measures is evidence of the government’s strong determination to stabilise the property market, and prevent a bubble from forming.
Some had wondered if the market for strata landed homes will be significantly affected. Demand has been fairly stable over the past five years with an average 480 units changing hands each year with the exception of the recessionary year in 2008 and notwithstanding three rounds of cooling measures in 2009 and 2010. Sub-sales activities for strata landed homes are fairly low as most buyers are genuine home owners motivated by bigger space needs and long-term investors looking for stable returns.
The outlook for the strata landed market looks positive as its current pricing level still lags that of comparable landed properties.
The new measures will invariably affect current buyers’ sentiment. However, what is more important is that the measures should not be viewed as permanent. The government welcomes long-term investors who believe in the Singapore story and not short-term liquidity swishing around, pushing up prices artificially.
With Singapore expected to run at full employment and a positive economic outlook in 2011, the tight labour situation should continue to draw more foreign talent. The leasing market is expected to remain active. While prices have increased significantly and can be expected to stabilise, rentals should continue to increase – making strata landed houses an attractive investment, especially when current interest rates are low.
Perhaps we can take a leaf from experiences in the US, Europe and Australia. Home buyers and investors should evaluate their property position and undertake some form of stress testing for scenarios such as property prices suddenly falling and interest rates spiking, all of which may arise from unexpected external events that may negatively impact our open economy.
If one can stomach the short-term downside risks, one can enjoy the potential upside returns from long-term property investments.
Wendy Tang is executive director, head of residential services, and Png Poh Soon is associate director, head of consultancy & research, Knight Frank