Your search results

Should You Splash Your Cash on a Condo Despite the Sky-High PSF?

Posted by Jayson Ang on December 2, 2023

| 0

TLDR

The blog post discusses various aspects of investing in condos in Singapore, covering topics such as leasehold versus freehold properties, rental yields, property values, and factors affecting investment decisions. It emphasizes the importance of considering specific projects rather than general property types. Additionally, it provides insights on hidden expenses, market trends, and tips for property buyers. The post offers strategic real estate advice, highlights key considerations for first-time Chinese buyers, and explores potential challenges in the property market.

Recently, I stumbled upon a Reddit thread where people were spilling their regrets about buying condos. The topic of debate was whether investing in a condo is still a good move.

As I scrolled through the comments, some points caught my eye. A few made sense, while others seemed like half-baked truths or twisted facts.

One comment that received loads of upvotes (and I agree) said, “Location is key.” But as I dived deeper into the thread, things got a bit murky. The next hot topic was about the actual value of owning leasehold vs. freehold land.

One user pointed out, “For me, it’s either public housing or private freehold. Leasehold private properties don’t make any sense. Their prices are nearly as high as freehold ones (around 80%?), making the lease decay even harder to swallow.”

But hold on! Before you write off leasehold properties, let’s break this down. Interestingly enough, some wise landlords actually avoid buying freehold properties. Why? Because they yield less rental income.

Let’s take two condos located in the same place: one leasehold costing $1.5 million, and the other freehold priced at $1.725 million. They both generate an annual rental income of $48,000. Yes, you read that right. Tenants don’t pay more for living in freehold properties; it doesn’t matter to them.

When you do the math, the gross rental yield for the leasehold property comes out to be 3.2%, while the freehold one is only 2.78%.

So, it all boils down to this: whether it’s leasehold or freehold, the real deal is if it’s the right investment property.

Imagine buying a freehold condo in an already developed area versus a leasehold one in an area that has future potential. Which one do you think will give you a better return?

It’s not always about the type of ownership, but the real value it holds.

Here’s another:

“If you skip out on Freehold (FH), you’re potentially dropping 1% each year. It’ll take a decade or fifteen years to make up for the insurance premium. But let’s admit it, in the property game, that isn’t a long stretch.

A drop of 1% per year sounds a bit shaky. Let’s take a quick look at how leasehold condos hold up against freehold ones over a span of 15 years (leaving out the Executive Condominiums):

Over this time frame, freehold properties don’t seem to be keeping pace with their leasehold counterparts.

Now, there’s no hard and fast rule here. It all depends on the age of the property you’re considering. But if you’re thinking about buying a brand-new freehold versus a leasehold condo, it’s not quite right to assume that you’ll be losing 1% annually.

In case you’re interested, we’ve done some homework on new freehold and leasehold launches since 2014. Feel free to take a peek right here.”

Let’s look at a few other things:

“It all boils down to the type of condo you’re looking at. They’re not all cut from the same cloth.

Take newly launched condos, for instance. They’re often not worth the dough. Paying 2k per square foot for tiny apartments? Get real. You could get a condo in River Valley for what they’re charging for Pasir Ris 8. Plus, most of these are on 99-year leases.

Check out Ki Residence. They’ve got places ranging from 700 to 1300 square feet, going for 2-2.4k per square foot. And these are on 999-year leases.

Then there’s Clementi Park, just across the street. Their units start at about 1100 square feet and go up to over 2000 square feet. Prices range between 1.4k and 2k per square foot. Plus, these are freehold properties.

Fresia Woods is a bit further away, but it’s a similar deal.

With a budget of 2 million, you could snag a 1065 square foot condo at Fresia Woods or a larger 1400 square foot place at Clementi Park. Your only option at Ki Residence would be a smaller 965 square foot unit. If you’re good with just one bedroom, 1.5 million could get you a 1039 square foot apartment at Clementi Park. For 1.6 million, you could get a 750 square foot apartment at Ki Residence.

Clearly, Ki Residence isn’t the best bang for your buck.

Venture a little further to Pandan Valley, and you’ll find 2000+ square foot condos going for 1.5k per square foot or even less!

So, in my book, older condos are where it’s at. The newer ones? Not so much.”

Someone hit the nail on the head with this comment: “You can’t just eyeball the price per square foot and make a blanket judgement.”

I’ve mentioned this before, but the price per square foot isn’t always the best gauge of value. It tends to increase as the units get smaller and cheaper, but decrease as they get bigger and pricier.

Say you were to buy a bungalow. You could be looking at about $1,600 to $1,700 per square foot. But for a huge 7,000 square foot detached home, that’s a whopping $11.9 million.

On the flip side, a one-bedroom place at $3,000 per square foot, measuring just 500 sq. ft., would set you back a cool $1.5 million.

Also, let’s not forget how rules and regulations have been shaking things up over time.

You see, it’s all well and good to weigh the cost per square foot when everything else lines up. But, when you’re dealing with older condos that come with their own quirks like planters and bay windows, judging them purely on square footage pricing just doesn’t cut it.

Instead of focusing on the cost per square foot, it’s a better idea to concentrate on the overall price. Why? Well, it influences a few things:

1. The stamp duty you’ll owe 2. The amount you need to borrow and subsequently the interest you’ll have to pay over the years 3. How your budget might get strained after the buy

The cost per square foot can be handy in certain cases. For instance, when you are comparing two properties with similar layouts and sizes, it can give you a feel for which one offers more bang for your buck.

However, this approach becomes less helpful when you start comparing different types of properties, like HDB flats and private condos, or landed properties.

Consider this: “HDB flats are definitely a better deal, even if the resale price exceeds 1mil! I regret pretty much everything about buying a condo, except for the fact that it’s just across the road from an MRT station. But, when your combined income is around 20k, your options are limited. You’re not eligible for BTO/EC and can’t afford a landed property…”

Still, if you’re earning $20k a month and have your heart set on a resale flat, go for it! There’s no income cap for these properties.

But somewhere along the line, the conversation veered off track, and became more about buying a home than investing in one. When asked if it’s worth investing in a condo, my response would be: which condo?

Properties aren’t all the same. A savvy investor doesn’t just invest in condos or landed properties as a whole. They invest in specific projects, like The M, Midtown Bay, Pandan Valley, etc.

There are certain condos I’d definitely consider investing in even now; but there are others I’d steer clear of, despite any attractive discounts offered by developers.

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

You May Also Like …

All Buying Tips

5 Exciting Trends Shaping Singapore’s Property Market for Future Buyers After 2024

Jayson Ang – July 5, 2024 –

TLDR When it comes to the evolving landscape of property development in Singapore, developers are facing new challenges and opportunities....

All Opinion

Singapore’s Property Market: Will the Newly Proposed 2023 Cooling Measures, Including a 60% Foreigner ABSD, Make Waves or Mere Ripples?

Jayson Ang – April 27, 2023 –

TLDR The recent surge in Additional Buyer's Stamp Duty (ABSD) rates in Singapore targets mainly foreigners and entities, with rates...

Mandarin Top 5

Top 5 Rules for Investing in Singapore’s Property Market – Expert Insights!

Jayson Ang – October 15, 2024 –

Investing in Singapore's property market has long been considered a lucrative and stable investment option. With its robust economy, strong...

Mandarin Top 5

5 Most Iconic Landmarks In Singapore’s Landscape

Jayson Ang – June 14, 2024 –

Singapore's landscapes is renowned for its innovative and dynamic approach to urban development, boasting some of the most iconic landmarks...

Mandarin Top 5

Top 5 : Golden Tips to Spot a Good Investment Property

Jayson Ang – March 9, 2025 –

Investing in real estate can be a lucrative venture, but it's essential to know how to spot a good investment...

All Buying Tips

A First-Time Condo Buyer’s Guide to Evaluating Property Developers in Singapore

Jayson Ang – May 9, 2026 –

TLDR When buying a new launch condominium in Singapore, a developer’s reputation is crucial since buyers rely on trust and...

All Blog Posts Opinion

Singapore Property Bubble Ahead? My Friends Share My Market Predictions

Jayson Ang – March 12, 2023 –

TLDR The author delves into various opinions on the Singapore property market for the year 2023. Experts have differing views...

Mandarin Top 5

5 Pros of Buying a New Development

Jayson Ang – March 3, 2024 –

Deciding whether to buy a new development or a resale property can be a challenge. In the next few video...

All Buying Tips

5 Reasons To Invest In UK Property In 2024 Instead Of Saving

Jayson Ang – February 8, 2024 –

TLDR Investing in UK property in 2024 offers significant advantages over saving due to the potential for long-term value growth,...

All Buying Tips

Is the Singapore Property Market Set for a Dip in 2024?

Jayson Ang – January 26, 2024 –

TLDR The Singapore property market is experiencing shifts with Morgan Stanley adjusting its outlook on major developers. A forecast predicts...

All

Mortgage Interest : The True Cost of Buying and Owning Properties in Singapore

Jayson Ang – March 16, 2023 –

TLDR When considering buying a property in Singapore, it's crucial to understand the true costs and risks involved. High monthly...

Mandarin Top 5

Top 5 : Key Reasons to Invest in Industrial Property in Singapore

Jayson Ang – February 15, 2025 –

Singapore, a small yet densely populated country, has emerged as a significant player in the global industrial property market. Its...

Mandarin Top 5

Top 5 : Benefits of Investing in Newer vs. Older Singapore Property Market Condos for International Buyers

Jayson Ang – January 4, 2025 –

Singapore's property market has always been an attractive investment option for international buyers, thanks to its stable economy, strategic location,...

Mandarin Top 5

5 Tips : Riding the Wave: How to Profit from the Upcoming Boom in Singapore’s Property Market

Jayson Ang – August 5, 2024 –

Singapore's property market has always been a hot topic among investors and homebuyers alike. With million-dollar HDBs being sold and...

All Blog Posts Buying Tips

What Will Happen When Your 99-Year Housing Lease Expires?

Jayson Ang – February 11, 2023 –

TLDR We delve into the challenges faced by Singaporeans with expiring 99-year housing leases. It explores the types of leases...

All Buying Tips Opinion

4 Key Factors to Consider When Purchasing a Private Property for the First Time

Jayson Ang – August 27, 2023 –

TLDR When considering buying or selling property in Singapore, it's crucial to understand factors like Additional Buyer’s Stamp Duty, Loan-To-Value...