2 Bed 1 Bath vs 2 Bed 2 Bath condo – Which is better for investment ?

Who is this article written for ?

This article is written specifically for investment minded buyers caught in a dilemma between purchasing a 2 Bed 1 Bath unit vs a 2 Bed 2 Bath unit. 

2 Bed 1 Bath units are often priced at a more competitive psf and affordable purchase quantum compared to a 2 Bed 2 Bath unit. 

But the common concern is that a 2 Bed 1 Bath unit lacks an additional guest toilet making it less desirable for future buyers and tenants, compromising on both profitability and rentability. 

Scope of this article 

This article will seek to validate if the common notion that 2B1B units are less profitable is true. We will conduct a profitability comparison between 2B1B vs 2B2B across 8 new launch developments. 

In later sections we will dive into reasons that account for 2B2B units that are more profitable and also explore reasons behind 2B1B units that defy the odds and outperformed 2B2B units in terms of profitability. 

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Profitability 

Diving straight into profitability. The convention of 2 Bed 2 Bath being more profitable is validated to be generally inline. Out of 8 new launch developments, 2B2B units in 5 of out 8 new launches outperformed their 2B1B counterparts in terms of average profitability. 

Average profit difference

But the point to note is that the profit disparity between the 2 different unit types is generally not that significant across the board. 

For most developments the 2B2B units are generally $20k to $30k more expensive than the 2B1B units. 

For a selected few like Avenue South Residences and Stirling Residences, we observe significantly greater average profit disparity of $60k and $70k respectively, between 2B1B vs 2B2B units. 

Outlier 2 Bed 1 Bath that outperformed 2 Bed 2 Bath units

Referencing the profitability comparison table above, there are some 2B1B units with 3 out of the 8 new launch developments that outperformed 2B2B units. 

These are 2B1B units within Penrose, Parc Esta and Park Colonial. 

We will investigate further and share findings on possible reasons accounting for their outperformance. This will help provide valuable insights into how we can select a profitable 2B1B unit. 

Average Holding Duration 2 Bed 1 Bath Unit vs 2 Bed 2 Bath Unit

On the point that 2 Bed 1 Bath are harder to sell, this has not been proven via the average holding duration for each unit type. 

Comparing the average holding duration for each unit type, both unit types took around the same time for its owner to exit its investment. 

Difference in holding duration

Reasons why 2B2B outperform 2B1B 

These are the developments with 2B2B units that have outperformed their 2B1B counterparts. Let’s explore the reasons behind their success. 

#1 – Timing of purchase and lower purchase price gap for 2B2B

Here’s the thing, when it comes to a new launch condo, the prices are set directly by the developer and not by buyers and sellers interaction in the resale market.

Typically, developers will launch the units at a lower price during launch day and increase selling prices for the remaining units to increase overall profitability. 

2 Bed 2 Bath units being the more sought after units tends to get selected on launch day and results in 2 Bed 1 Bath units being the natural selection available for selection by buyers post launch. And these 2 Bed 1 Bath units tend to be priced higher post launch as part of developer price increase initiative. 

Diving deeper into the data for these 5 developments. We observed the majority of the profitable 2B2B units were purchased the same year the development was launched, and their corresponding purchase psf is lower than that of a 2B1B purchased later. 

On the other spectrum, majority of the 2B1B units were purchased the year post launch with higher average purchase psf. 

Stirling Residences – Difference in Timing of Purchase and PSF Price Disparity

Referencing the tables below for Stirling Residences, majority of the 2B2B units were purchased in 2018 at launch and its average purchase psf is $1,769. Compared to a 2B1B purchased in 2018 at $1,776, the premium paid for a 2B2B unit is only $20 psf. 

This allows the cost price for a 2B2B unit to come close to a 2B1B unit but yet command a higher selling price in the resale market, optimising its profitability. 

On the other hand the 2B1B, priced a minimal discount, is constrained to be priced below the benchmark price set by the 2B2B units, hence compromising on its profitability. 

JadeScape – Difference in Timing of Purchase and PSF Price Disparity

Similar situation in terms of time of purchase and pricing for 2B2B and 2B1B units in JadeScape. 

#2 – Layout efficiency, enclosed kitchen

As a side note, I am impressed to see how much the market’s reflexivity is at play in influencing the performance of these 2 unit types.

What is touted on the ground by agents to buyers get translated into purchase criteria during launch and eventually better taken up during resale as well.

Enclosed kitchen is one attribute that is touted as a must have for 2 bedroom units by agents on the ground.

And all of these developments with 2B2B units significantly outperforming a 2B1B unit have have an enclosed kitchen, while their lesser 2B1B counterparts do not have one.

Referencing the following layout comparison between 2B1B vs 2B2B unit type in Avenue South Residences and JadeScape

Both 2B2B unit feature an enclosed kitchen while the 2B1B unit feature an open concept kitchen.

And both 2B2B units in each of these developments outperformed its 2B1B counterpart in terms of average profitability.

Avenue South Residences – 2B1B – 657sqft

Avenue South Residences – 2B2B – 732sqft

Jadescape – 2B1B – 646sqft

Jadescape – 2B2B – 775sqft

#3 – Unit Facing 

Again developers played an influential role in influencing the profit outcome of a 2B2B vs 2B1B unit.

Developers tend to arrange unit facing in a manner whereby premium units like 3 bedroom deluxe, 2 bed 2 bath premium, 2 plus study to be located in blocks that are inner facing, facing pools or gardens.

They also tend to locate more affordably priced 1 bedroom unit, 2 bed 1 bath units facing the main road, surrounding HDB flats or less premium views.

This consequently resulted in 2B2B being resold at a better price vs 2B1B due to higher Buyer’s demand.

So if you were to see a constellation of small price gaps between 2B2B vs 2B1B, better facing and better layout, then it is a recipe for higher profits for 2B2B units.

Jadescape – 2B1B – Facing HDB

Jadescape – 2B2B – Inner Facing Pool and Garden

#4 – Rental rates and rentability

2B2B units tend to command slightly higher rental rates than 2B1B units. And the ease of rental for 2B2B units tends to be higher than that of a 2B1B unit.

With this in mind, investors selecting between the 2 unit type tends to prefer the 2B2B unit, bidding up its resale price.

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Reasons why 2B1B outperform 2B2B 

Now let’s explore the outliers. Let’s find out how these 2B1B manage to defy the norm and outperform its 2B2B counterparts.

Below are the 3 developments with better performing 2B1B units.

#1 – The 2B1B units are significantly more affordable then the 2B2B unit

Affordability of a unit is a factor of 2 things when it comes to purchasing a condo.

1. Price per square foot
2. Size of unit

Multiplying both together gives you your eventual purchase quantum.

One of the key reasons why these 2B1B units can outperform competing 2B2B units is due to its affordability.

The 2B1B unit is of a smaller square footage, without compromising much on living space but only short of 1 common bathroom.

While Psf pricing is significantly lower than the 2B2B units, this allow for a much more affordable purchase quantum. That is translated into the resale market at a much more affordable purchase price translating to higher Buyer’s demand.

Purchase quantum comparison 2B1B vs 2B2B

Referencing the table you can sell that first time owners purchased the 2B1B units at a discount of $166k and $239k respectively.

#2 – Layout efficiency of the 2B1B unit

Again back to enclosed kitchens, if you see a 2B1B layout with an enclosed kitchen and is significantly more affordable than a 2B2B. Then it is a positive signal.

Parc Esta is one such example, its 2B1B features an enclosed kitchen which is rather uncommon for a 2B1B unit.

And its 2B1B units outperformed its 2B2B units.

Potential emerging trend for 2B2B units

One narrative or trend that yet to be proven by the data is the potential shift of small families towards purchasing larger 2 Bed 2 Bath units for homestay purpose. 

This is driven by the increasing price of 3 Bedroom units, eventually there will be a segment of HDB upgraders that can no longer afford a 3 Bedroom unit and start considering 2 Bed 2 Bath units as a upgrading option. 

Factor this into your consideration when selecting between these 2 unit types. As observed the real estate buyer market is highly reflexive, what is being pitched by agents on ground may eventually play out as a buyer’s selection criteria. 

As sidenote, we dive deep into researching the investment viability of 3 bedroom compact unit type, a unit type that is often sought after by investors in the article titled “Are 3 bedroom compact new launch worth investing in ?“

Conclusion – when to select 2B1B vs 2B2B unit ?

Let’s conclude with a summary and a decisional tree of what your thought process can be when you are caught in a dilemma between selecting a 2 Bed 2 Bath unit vs a 2 Bed 1 Bath unit. 

1. Pricing – Is the 2B1B unit price a lot cheaper than the 2B2B unit ? For both psf and quantum
2. If the price and quantum gap is very close between a 2B2B and a 2B1B, go for the 2B2B as priority. 
3. If the price gap is significant, 2B1B is much more affordable than 2B2B, consider the following criterias as next steps. 
4. Check 2B1B units for any drawback in the floor plan. Is there any enclosed kitchen ? 
5. Consider the facing of the 2B1B unit, can you select a stack that will have minimal objections from buyers ?

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