1 Bedroom or 2 Bedroom investment Singapore – Which is better ?

1 bedroom or 2 bedroom investment

Table of Contents

Introduction – 1 Bedroom or 2 Bedroom investment

Deciding between a 1 bedroom and 2 bedroom unit type is a common consideration amongst investors that are planning to decouple their property or sell their current property to purchase 2 property

Both unit types come with a quantum that is within reach of investors looking to purchase their 2nd property.

Credit given to the 3 bedroom unit type that has proved to be the best condo size for investment

But it is no easy feat for an investment orientated family to possess the earning capability to afford another 3 bedroom unit as a 2nd property investment.

Focus for this article 

This article is written for property owners that are looking to purchase their 2nd property and specifically those whose budget permits them to consider either a 1 bedroom or 2 bedroom unit. 

For property owners that are budget constraint, the decision pathway would be slightly more straightforward, your consideration will revolve around finding the best 1 bedroom unit that can maximise your risk and reward.

For this take the segway to refer to the article “are 1 bedroom condos a good investment“, article link inline. “

Key consideration for investors – 1 bedroom condo vs 2 bedroom condo investment

Given this article seeks to address the considerations of a 2nd property investor. Let’s iterate the key factors that matter the most when evaluating the option of 1 bedroom vs 2 bedroom condo as an investment property.

Profit from capital appreciation

For the uninitiated, profit from capital appreciation is the key return to make your real estate investment worthwhile.

Aside from the larger quantum, 200 to 350k reward. It is simply a more capital efficient way of making money, compared to generating income from rental income.

Singapore is not a landlord friendly environment, the non owner occupier tax and the rental income tax, results in inefficient loss of rental income to government taxes. 

In comparison, there are no taxes on capital appreciation. 

There following are metrics that we will look at to evaluate the profitability of 1 bedroom vs 2 bedroom condo 

  • Potential return – Quantum
  • Holding period

Rental yield and rentability 

Rental yield and rentability, can be seen as a defensive feature for an investment property.

Being able to rent out a 2nd investment property promptly with decent rental income, will help offset the property’s monthly mortgage payment.

This gives you the holding power to hold on to your property, while awaiting for its price to appreciate.

As a side note, refer to Best place to buy a rental property in Singapore for more insights on locational factor that will affect rental demand.

We shall consider the following metrics to evaluate rentability of 1 bedroom condo vs 2 bedroom condo.

  • Rental yield 
  • Rental demand

Fallback options

A much overlooked aspect, having a plan B is pretty important when venturing out to purchase an investment property. 

When all else fails or you would like to have the option to liquidate one property and be able to live in either one of the property you own.

Flexibility also opens up opportunities as well. Assuming you are able to live in your investment property, you would have the flexibility to profit from the sale of your homestay property, and live in the second property instead.

Quick intro – Decoupling Expertise

Quick introduction, before you decide to commit the next 5 mins reading this article.

We are decoupling expertise, a team of specialist realtor that specialise in helping Singapore property owners derive the best strategy to purchase their second investment property without ABSD.

While decoupling property is often the go-to strategy that property owners adopt. We pride ourselves for helping our client explore and evaluate other alternatives that best suit individual circumstances and objectives. 

Drop us a text to explore the best strategy to minimise ABSD on your next property purchase.

Research Method

We will be using the transactional data from condo developments that have achieved its TOP status 5 to 6 years from the date of writing to provide data for evaluation.

Selecting recent transactions would be important for this research as it reflects the latest buyer sentiment after factoring in the latest ABSD rate increase and the latest interest rate environment, which will alter buyer’s behaviour in the market.

We also ensure that the condo developments selected are greater than 500 units and are well diversified across geographical regions to provide sufficient transaction data, representative of 1 bedroom and 2 bedroom condos performance in Singapore.

Defined size of 1 bedroom and 2 bedroom unit

  • 1 Bedroom unit – below 600 sqft
  • 2 Bedroom unit – 600 to 850 sqft

List of condo developments selected for analysis

Project NameTenureCompletionNo of units
PARK COLONIAL99 yrs FROM 20172021805
Queens Peak99 yrs FROM 20152020736
Forest Woods99 yrs FROM 20162020519
BOTANIQUE AT BARTLEY99 yrs FROM 20142019797
PRINCIPAL GARDEN99 yrs FROM 20142018663
COCO PALMS99 yrs FROM 20082018944
THE SANTORINI99 yrs FROM 20132017597
SIMS URBAN OASIS99 yrs FROM 201420171,024
THE TRILINQ99 yrs FROM 20122017755
THE PANORAMA99 yrs FROM 20132017698
J GATEWAY99 yrs FROM 20122016738
EIGHT RIVERSUITES99 yrs FROM 20112016843

Profit from capital appreciation

Profitability – Quantum 

Referencing the performance of 1 bedroom units vs 2 bedroom units, the widely taunted proposition that a larger sized 2 bedroom unit brings about higher quantum capital gain is held true.

On average we see 2 bedroom condo owners making $115k more than a 1 bedroom condo property owner. 

Project NameAverage Profit – 1 BedroomAverage Profit – 2 BedroomDifference
PARK COLONIAL143,117199,11956,002
Queens Peak164,399233,84369,444
Forest Woods166,829224,88958,060
BOTANIQUE AT BARTLEY139,914248,969109,055
PRINCIPAL GARDEN86,098288,005201,907
COCO PALMS128,430220,50792,077
THE SANTORINI66,545124,68658,141
SIMS URBAN OASIS97,025172,67775,652
THE TRILINQ62,345140,47878,133
THE PANORAMA125,280260,749135,469
J GATEWAY119,793255,095135,302
EIGHT RIVERSUITES88,838148,44659,608
Average115,718209,78994,071

Holding period

In terms of holding duration, to make decent profit, both 1 and 2 bedroom condo owners held their properties over an average duration of 6 years.

Interesting note is that investors often underestimate their holding period for 1 and 2 bedders, looking to exit their investment within the 3 to 4 year mark. But in actual fact, most profitable transactions are made with a longer than expected holding duration.

Expanding on this, given that holding duration is longer than expected, at an average of 6 years. It could be worthwhile getting a larger 2 bedroom unit to rein in a bigger quantum profit over the same holding period, if your budget permits. 

Project NameHolding Period (years) – 1 BedroomHolding Period (years) – 2 Bedroom
PARK COLONIAL54
Queens Peak55
Forest Woods45
BOTANIQUE AT BARTLEY66
PRINCIPAL GARDEN65
COCO PALMS77
THE SANTORINI76
SIMS URBAN OASIS46
THE TRILINQ67
THE PANORAMA77
J GATEWAY48
EIGHT RIVERSUITES88
Average66

Profitability rate

1 Bedroom condos, is often stigmatised with the notion that the risk of making a loss is much greater than its 2 or 3 bedroom counterpart. 

It is interesting to note the number of unprofitable transactions for 1 bedroom units is not significantly higher than 2 bedroom units. In fact, across both unit types the number of profitable transactions over total transaction averages between 97% to 99%. 

This reaffirms the fact that, even smaller investor centric, 1 bedroom units is a hard asset  that is capable of holding value. As long as, owner possesses the holding power to hold on to their property while balancing monthly mortgage with rental income. 

Project NameProfitable Transaction – 1 BedroomUnprofitable Transaction – 1 BedroomProfitability Rate
PARK COLONIAL180100%
Queens Peak63297%
Forest Woods130100%
BOTANIQUE AT BARTLEY760100%
PRINCIPAL GARDEN57198%
COCO PALMS320100%
THE SANTORINI51788%
SIMS URBAN OASIS1110100%
THE TRILINQ31489%
THE PANORAMA400100%
J GATEWAY61198%
EIGHT RIVERSUITES38490%
Average49297%
Project NameProfitable Transaction – 2 BedroomUnprofitable Transaction – 2 BedroomProfitability Rate
PARK COLONIAL580100%
Queens Peak55198%
Forest Woods370100%
BOTANIQUE AT BARTLEY1310100%
PRINCIPAL GARDEN800100%
COCO PALMS600100%
THE SANTORINI310100%
SIMS URBAN OASIS123199%
THE TRILINQ31294%
THE PANORAMA610100%
J GATEWAY64198%
EIGHT RIVERSUITES100694%
Average69199%

Rental yield and rentability 

Referencing the rental yield of 1 bedroom unit vs 2 bedroom unit, the rental yield between those 2 unit types are generally similar, within the high 3% to 4% range. 

Despite the lower quantum of a 1 bedroom unit, its yield is not significantly higher than that of a 2 bedroom unit. 

On the flip side, the notion that there will be higher rental income generated by renting out 2 bedrooms instead of one, is not held true. a 2 Bedroom unit’s rental yield did not surpass that of a 1 bedroom unit. 

Project NameRental Yield – 1 Bedroom (%)Rental Yield – 2 Bedroom (%)
THE SANTORINI4.52.4
COCO PALMS4.54.8
BOTANIQUE AT BARTLEY4.31.2
Forest Woods4.23
THE TRILINQ4.14.3
SIMS URBAN OASIS4.34.5
THE PANORAMA4.24
PRINCIPAL GARDEN54.3
PARK COLONIAL43.4
Queens Peak4.34.7
EIGHT RIVERSUITES44.1
Average44

Fall back considerations 

Having the flexibility to live in your investment property is a contingency option that is helpful when things get out of whack. 

Assuming you are a couple without children or a small family with 1 or 2 children, you will still have the option to move into your 2 bedroom investment property. 

Where else a smaller 1 bedroom unit may not offer you that option.

On another note, from a family needs perspective, a larger 2 bedroom unit can address the need for a family looking to get their child into a reputable family within 1km radius. And once the child is enrolled into the school, the 2 bedder can resume its role as an investment property and be rented out. 

Conclusion – 1 bedroom or 2 bedroom as investment property ?

So inventorize the insights we have gathered thus far

  • 2 bedroom units brings about at least 115k more profit than a 1 bedroom unit
  • The holding period for both unit types is similar, averaging at 6 years. 
  • The rental yield of both unit type is similar at 4% 
  • 2 bedroom units provides more flexibility when it comes to contingency planning

The reasonable conclusion would be, it would be optimal for an investor to get a 2 bedroom unit as a second property if your budget can be prudently stretched. 

But having said that, if stretching your budget compromises your ability to hold on to the property in times of challenging financial situations, then it would be better to purchase a 1 bedroom unit. 

How to own 2 properties in Singapore ? – Next Steps

Having committed the last 10 mins to reading, let’s take the research to the next steps. 

Drop us a text to share what’s on your mind and gather some 2nd opinions and ideals on whether your plan is the best way to purchase the 2nd property without ABSD.

More relevant reads with regards to purchasing a 1 bedroom or 2 bedroom unit as a 2nd investment property

Author

  • Jue Wen

    Jue Wen is the content marketing lead. This means he spend his waking hours researching and writing all things real estate. He believes life is a hustle and there is no joy in grinding away daily in our little rat races. He believes making wise moves in real estate investment can be a game changer. Aside from writing all things real estate, you can find him in your nearest bouldering gym.

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Jue Wen

Author

Jue Wen is the property analyst and content marketing lead at decoupling expertise.
He specialises in helping clients overcome the complexities involved in owning their second private property in Singapore.
He had over 10 years of experience in real estate investing and have written over 40 detail guides on decoupling and minimising ABSD. He is a licensed real estate consultant and holds a Bachelor degree in Business Management from the Nanyang Technological University.

Kenji

Co-Author

Kenji is the Group Division Director of ERA Realty Network.
He have got over 20 years of experience in real estate and have successfully helped over 50 couples purchased their second property. He specialises in helping client achieve the best approach towards acquiring their ideal investment properties while minimising ABSD.