Introduction
The fact that you have landed on this article. It would be safe to assume that you are a real estate investor looking to develop an understanding on what are the best locations to purchase an investment or rental property in Singapore.
In fact, you are already one step ahead of other investors, as you are looking to first develop a top down understanding landscape before zooming down into specific development and units.
Many times, under the influence of overly zealous property agents and the fear of missing out. We are guilty of jumping straight into selecting a property, without developing a thorough understanding of the property’s location in comparison with other locations in Singapore.
Focus of this article
In this article, we seek to dissect the Singapore real estate landscape into its specific locations and review the location’s developments average rental yield and average annualised capital gain. The goal is to provide a real estate investor with an effective top down view of the strengths and weaknesses of properties in different locations within Singapore.
A little bit about ourselves
To give you some assurance that you will not be wasting the next 5 mins reading some generic information plugged from the interweb by some freelance writer, allow us to introduce ourselves.
We are a team of property investors turned full time realtor. Our journey started with us trying to figure out the best way to elevate our gains from our own properties. Having countless obstacles, we have fine tuned the process of searching for an investment property.
We now turn our attention to using our accumulated skills and processes to help fellow investors get their hands on a profitable property.
If reading is not your thing, drop us a text and we can talk you through the process.
Defining what’s an ideal rental property
Before we jump into the meat of the discussion, let’s first define what is an ideal rental property.
There are two ways to make money from real estate, rental income and capital appreciation, each serving its purpose in contributing to a profitable real estate venture.
Rental income is crucial in helping us defray the monthly overheads of supporting a rental / investment property. Owning a rental property with high rental income, allows the property to fund its own monthly mortgage and maintenance fee.
In the optimal case scenario, the excess of rental after netting off overheads forms our monthly passive income.
On the contrary, owning a rental property that generates a low monthly rental income would mean that you have to top up a significant amount of cash monthly to make good on the monthly mortgage payment.
Capital appreciation is the main driver of profits for Singapore real estate. With the efficient use of leverage, an average real estate investor would be able to make an average profit of 300k to 350k over a 3 to 4 year time frame.
Long story short, the ideal rental property is one with a high rental yield, coupled with a healthy price appreciation.
4 Different categories of rental properties
Using rental yield and capital appreciation as vectors, we are able categorise rental property into the following 4 different categories.
- Category 1 – Cash cows – High rental yield, low capital appreciation
- Category 2 – Stars – High rental yield, high capital appreciation
- Category 3 – Question Mark – Low rental yield, high capital appreciation
- Category 4 – Dog – Low rental yield, low capital appreciation
We will later group the different locations / places in Singapore into these 4 categories for a more in depth discussion.
Reviewing locations to buy rental properties in Singapore
To achieve our goal of providing an exhaustive view of the best places to purchase a rental property in Singapore.
We broke down Singapore into its 51 planning areas, identifying the private condo, executive condo and apartments in the location and overlay each location with an average of the properties’ rental yield and annualised capital gain.
We will then further categorise and highlight specific locations in accordance with the category of rental properties that we established above.
| Planning Area | District | Region | Average Rental Yield (%) | Average Annualised Capital Gain (%) | Sum of Rental + Cap Gain |
| Marina Bay | 1 | CCR | 4.08 | 0.5 | 4.58 |
| Tanjong Pagar | 2 | CCR | 4.3 | 1.4 | 5.7 |
| Outram | 2 | CCR | 0 | ||
| Sentosa | 4 | CCR | 3.8 | -0.5 | 3.3 |
| Bugis | 7 | CCR | 4.4 | 4.9 | 9.3 |
| Orchard | 9 | CCR | 2.9 | 2.0 | 4.9 |
| River valley | 9 | CCR | 3.0 | 2.5 | 5.5 |
| Bukit Timah | 10 | CCR | 3.1 | 3.9 | 7.0 |
| Holland Village | 10 | CCR | 3.2 | 2.7 | 5.9 |
| Newton | 11 | CCR | 3.3 | 2.1 | 5.3 |
| Novena | 11 | CCR | 3.0 | 2.2 | 5.2 |
| Clementi | 5 | OCR | 3.7 | 3.6 | 7.3 |
| Bedok | 16 | OCR | 3.3 | 2.8 | 6.1 |
| Tanah Merah | 16 | OCR | 3.9 | 2.8 | 6.8 |
| Changi | 17 | OCR | 3.7 | 2.9 | 6.5 |
| Pasir Ris | 18 | OCR | 3.9 | 3.4 | 7.3 |
| Tampines | 18 | OCR | 4.1 | 3.4 | 7.5 |
| Hougang | 19 | OCR | 4.4 | -1.6 | 2.9 |
| Serangoon | 19 | OCR | 3.2 | 4.1 | 7.4 |
| Kovan | 19 | OCR | 3.6 | 3.5 | 7.1 |
| Punggol | 19 | OCR | 3.9 | 4.4 | 8.3 |
| Sengkang | 19 | OCR | 3.8 | 5.0 | 8.8 |
| Ang Mo Kio | 20 | OCR | 3.2 | 4.4 | 7.6 |
| Boon Lay / Lake Side | 22 | OCR | 4.1 | 4.2 | 8.4 |
| Jurong East | 22 | OCR | 4.4 | 2.8 | 7.2 |
| Jurong West | 22 | OCR | 0 | ||
| Bukit Batok | 23 | OCR | 3.9 | 3.3 | 7.2 |
| Bukit Panjang | 23 | OCR | 3.5 | 2.7 | 6.2 |
| Choa Chu Kang | 23 | OCR | 3.7 | 4.2 | 7.9 |
| Hillview | 23 | OCR | 2.9 | 2.8 | 5.8 |
| Lim Chu Kang | 24 | OCR | 0 | ||
| Tengah | 24 | OCR | 0 | ||
| Woodlands | 25 | OCR | 4.3 | 3.1 | 7.4 |
| Lentor | 26 | OCR | 3.0 | 3.7 | 6.7 |
| Sembawang | 27 | OCR | 3.2 | 4.1 | 7.4 |
| Yishun | 27 | OCR | 3.9 | 3.3 | 7.3 |
| Queenstown | 3 | RCR | 4.0 | 3.5 | 7.5 |
| Harbourfront | 4 | RCR | 3.4 | 2.4 | 5.8 |
| Buona Vista | 5 | RCR | 4.0 | 1.6 | 5.7 |
| Toa Payoh | 12 | RCR | 3.6 | 3.2 | 6.8 |
| Boon Keng | 12 | RCR | 4.0 | 2.9 | 6.9 |
| Potong Pasir | 13 | RCR | 3.8 | 3.1 | 6.9 |
| Woodleigh | 13 | RCR | 3.6 | 2.7 | 6.3 |
| Dakota | 14 | RCR | 3.3 | 3.7 | 7.0 |
| Geylang | 14 | RCR | 0 | ||
| Kallang | 14 | RCR | 4.2 | 2.4 | 6.6 |
| Paya Lebar | 14 | RCR | 3.9 | 3.1 | 7.0 |
| Marina Parade | 15 | RCR | 3.4 | 3.4 | 6.8 |
| Bishan | 20 | RCR | 3.4 | 2.2 | 5.6 |
| Thomson | 20 | RCR | 3.1 | 3.4 | 6.5 |
| Lorong Chuan | 20 | RCR | 3.5 | 3.3 | 6.7 |
Benchmark for rental yield and capital appreciation
Referring to the median rental yield and median annualised capital appreciation derived from the table above, we can establish the benchmark for what makes a healthy rental yield or capital appreciation.
- Median rental yield – 3.6%
- Median annualised capital appreciation – 3.1%
Category 1 – Places with high rental yield and high capital appreciation
These are places with real estate development that possess cash cow like characteristics. These locations in Singapore have got high rental yield above 4%, but a below median annualised capital gain of 1.6% or lower.
The places feature rental properties that are suitable for investors that are looking to prioritise monthly rental income over capital appreciation.
From an investment life stage perspective, it would be suited for someone that is working towards retirement and prioritises stable monthly cash flow over longer term capital gain.
| Planning Area | District | Region | Average Rental Yield (%) | Average Annualised Capital Gain (%) |
|---|---|---|---|---|
| Marina Bay | 1 | CCR | 4.1 | 0.5 |
| Tanjong Pagar | 2 | CCR | 4.3 | 1.4 |
| Sentosa | 4 | CCR | 3.8 | -0.5 |
| Buona Vista | 5 | RCR | 4 | 1.6 |
Common attributes for these locations
Aside from Sentosa as an outlier, all the areas listed in the table above are all prominent core central and city fringe locations.
High Rental Demand
The properties in these locations are situated at close proximity to the most prominent commercial nodes in Singapore. This provides a healthy source of rental demand from high earning white collar executives, working in the finance and tech industry.
Elaborating on the point above, the properties in the Marina Bay area caters mainly to tenants working in the prestigious grade A offices within the Marina Bay Financial District.
Next, the properties within the Tanjong Pagar area mainly cater to the abundance of offices within the central business district.
Lastly, the properties within the Buona Vista area serve the rental demand of tech and research executives working in the nearby Biopolis and Fusionopolis business park.
| Project Name | Tenure | Completion | No of units | Avg Price (S$ psf) | Avg Rent (S$ psf pm) | Rental Vol | Rental Yield (%) | Annualised Capital Gain (%) |
|---|---|---|---|---|---|---|---|---|
| ICON | 99 yrs FROM 2002 | 2007 | 646 | 1,902 | 7.11 | 131 | 4.5 | 5.2 |
| THE SAIL @ MARINA BAY | 99 yrs FROM 2002 | 2008 | 1,111 | 1,991 | 7.07 | 261 | 4.3 | 3.8 |
| MARINA ONE RESIDENCES | 99 yrs FROM 2011 | 2017 | 1,042 | 2,176 | 7.08 | 202 | 3.9 | -0.3 |
| Project Name | Tenure | Completion | No of units | Avg Price (S$ psf) | Avg Rent (S$ psf pm) | Rental Vol | Rental Yield (%) | Annualised Capital Gain (%) |
|---|---|---|---|---|---|---|---|---|
| THE CRITERION | 99 yrs FROM 2014 | 2018 | 505 | 1,249 | 4.47 | 10 | 4.3 | 5.6 |
| A TREASURE TROVE | 99 yrs FROM 2011 | 2015 | 882 | 1,378 | 4.23 | 81 | 3.7 | 3.6 |
| LA FIESTA | 99 yrs FROM 2012 | 2016 | 810 | 1,521 | 4.9 | 86 | 3.9 | 2.9 |
Limited Demand From Home Stay Buyers
While rental demand and rental yield is healthy, annualised capital gain is sub-optimal. This is attributed to a lack of demand from local Singaporean buyers looking to purchase properties for their own stay purpose.
As these areas are mainly geared towards commercial activities, there is generally a lack of amenities that supports the needs of a typical family unit in Singapore.
For example, there is a lack of reputable schools within these areas and the extended family care network of parents and parents- in-law are normally located some distance away, further out into the heartland of Singapore.
| Project Name | Tenure | Completion | No of units | Avg Price (S$ psf) | Annualised Capital Gain (%) |
|---|---|---|---|---|---|
| Properties located near the central business district | – | – | – | – | – |
| ICON | 99 yrs FROM 2002 | 2007 | 646 | 1,902 | 5.2 |
| THE SAIL @ MARINA BAY | 99 yrs FROM 2002 | 2008 | 1,111 | 1,991 | 3.8 |
| MARINA ONE RESIDENCES | 99 yrs FROM 2011 | 2017 | 1,042 | 2,176 | -0.3 |
| Properties located in the residential district | – | – | – | – | – |
| THE CRITERION | 99 yrs FROM 2014 | 2018 | 505 | 1,249 | 5.6 |
| A TREASURE TROVE | 99 yrs FROM 2011 | 2015 | 882 | 1,378 | 3.6 |
| LA FIESTA | 99 yrs FROM 2012 | 2016 | 810 | 1,521 | 2.9 |
Demand And Price Appreciation Is Driven By Property Investors
The buyer demand for properties in these areas are mainly coming from investors looking to purchase an investment property.
From our experience, investors that are attracted to purchasing property in these areas, are mainly looking for a 1 bedroom to 2 bedroom unit that comes with a healthy rental yield and is priced at an affordable quantum.
With this in mind, if you are looking to purchase a unit in these locations. It would be important to cater to the needs of your future buyer, keep to a 1 bedroom unit to 2 bedroom unit and acquire the property at a reasonable entry price, to ensure that future resale price remains appealing for future buyers.
Category 2 – Places with high rental yield and high capital appreciation
These would be the most ideal places which you should look into for a rental / investment property.
Properties in these locations possess “star” like qualities, featuring both above median rental yield of greater than 3.6% and above average annualised capital gain of above 4%.
| Planning Area | District | Region | Average Rental Yield (%) | Average Annualised Capital Gain (%) |
|---|---|---|---|---|
| Bugis | 7 | CCR | 4.4 | 4.9 |
| Punggol | 19 | OCR | 3.9 | 4.4 |
| Sengkang | 19 | OCR | 3.8 | 5 |
| Boon Lay / Lake Side | 22 | OCR | 4.1 | 4.2 |
| Choa Chu Kang | 23 | OCR | 3.7 | 4.2 |
Common attributes for these locations
These places are mainly located in heartlands, the outer core region (OCR) of Singapore.
Each of these locations highlighted within this category share the common attribute of above average capital appreciation. This is driven by the following factors.
Healthy Demand From HDB Upgraders
Singapore’s residential real estate market is driven mainly by buyers buying for their own stay purposes, investors form a minor fraction of the buyer’s demand.
Drilling one level deeper. Significant portion of these homestay buyers are owners of BTO and resale HDB flats that have profited from the sale of their HDB flats and are now looking to upgrade to a private condo.
Punggol, Seng Kang and the Jurong West areas are all hot spots for BTO developments, over the years the government have launched a significant number of BTO units within these areas.
As these BTOs fulfil their minimum occupancy period, owners will exit their current BTOs and seek to upgrade to a private condo within the same location.
This accounts for a significant drive of private property prices in these areas.
Reputable Schools As A Additional Driver Of Demand
These areas also feature reputable schools that attract parents to relocate to these areas in order to be within the 1km radius of these schools to facilitate primary school application.
Seng Kang is a good example. From our experience working with clients, we have seen many families looking to relocate or rent a unit within 1km radius of the popular Nan Chiau primary school
In Punggol, you got the equivalent with Mee Toh primary school and in Jurong West areas you got the popular Rulang primary school.
As a side note, we have written a seperate article to discuss in depth on how to find the best investment condo around Rosyth primary.
Healthy Rental Demand Driven By International Schools And University
You could be wondering, what would be the main source of demand for rental in these heartland residential areas that are located far away from the central business districts.
International schools serve as the primary driver of rental demand for these areas.
In Punggol, you have the popular Indian International School, that attracts Indian expatriate families to rent in the area. Over in Jurong West, you got the Canadian International School, One World International School and Nanyang Technological University.
Pointers to look out for when purchasing a unit in these areas
Bearing in mind that you are eventually looking to resell the unit to a buyer purchasing for his family’s own stay. It is important to take note of the features that attract or repel these buyers.
Size and usable space matters to these segments of buyers. It is important to avoid small 1 or 2 bedroom units, and aim to purchase at least a 3 bedroom to 4 bedroom unit with a good regular shaped layout.
Other finer details such as having an enclosed kitchen with windows for ventilation when cooking and having an additional helper room would be a plus point that can help attract more buyer demand for your rental property.
Category 3 – Places with average rental yield but high capital appreciation
A bulk of the locations in Singapore falls within this category. This is a category of locations whereby properties possess average rental yield but displayed healthy capital appreciation.
Rental properties in these places are suitable for investors that prioritise capital gain and do not mind forking out cash monthly to cover the additional mortgage payment required, when the rental income is unable to cover the entire mortgage payment.
| Planning Area | District | Region | Average Rental Yield (%) | Average Annualised Capital Gain (%) |
|---|---|---|---|---|
| Bukit Timah | 10 | CCR | 3.1 | 3.9 |
| Serangoon | 19 | OCR | 3.2 | 4.1 |
| Ang Mo Kio | 20 | OCR | 3.2 | 4.4 |
| Lentor | 26 | OCR | 3 | 3.7 |
| Sembawang | 27 | OCR | 3.2 | 4.1 |
| Dakota | 14 | RCR | 3.3 | 3.7 |
| Thomson | 20 | RCR | 3.1 | 3.4 |
Common attributes for these locations
If noticed, bulk of these locations are again located in the outer core region (OCR) with some locations in the city fringe area.
Similar to what was mentioned earlier, the bulk of the recent property price appreciation has been driven by local Singaporean buyers purchasing property in the heartlands.
Launch Of New Launch Developments Serve As A Catalyst For Price Appreciation
The launch of new condominium developments within these areas is a common catalyst for price appreciation.
Common across most of these areas listed within this category, we see several prominent new launch developments being launched at record selling price, setting new benchmark prices for comparable developments in the area.
In Ang Mo Kio, the launch of AMO residences in July 2022 saw a record sale of over 98% units sold on launch date, selling at $1890 psf, this set a new price benchmark for other condo developments within the Ang Mo Kio area.
The Lentor area is another hot spot for new launches, between 2022 and 2023, we have seen the launch of Lentor Modern, Lentor Hills, Hillock Green. And in 2024, we will continue to see the launch of Lentoria, Lentor Mansion.
With each new launch, a new price benchmark is set to prop the price of existing development in the area, driving price appreciation.
Affordable Quantum
With the rise in mortgage interest rate over the past years, affordability has taken centre stage when buyers are considering which unit or development to buy into.
This is also a common feature that has contributed to demand and price appreciation for properties in these areas.
In areas, such as Sembawang, Ang Mo Kio, Lentor and Serangoon, buyers will still be able to get their hands on a sizable 3 bedder unit below 1.9 mil.
On the other hand, if you move closer to the city centre you would need at least 2.2 to 2.5 mil to purchase a decent sized 3 bedroom unit.
Pointers to look out for when purchasing a unit in these areas
Bearing in mind that properties in these areas provide potential for healthy capital appreciation but rentability and rental yield may not be optimal.
Be Ready To Fork Out Cash Monthly To Cover Mortgage And Maintenance Fee
Financial management becomes key when purchasing a unit in these areas for investment purposes. You would have to be prepared to set aside a cash monthly to cover for mortgage payment and maintenance fee that supersedes the rental income.
Look Out For Future Price Catalyst From New Launch Developments
Given that upcoming new launches in the area help set new price benchmarks for the development in the area, it helps to keep a lookout for upcoming new launches or land parcels for sale under the government land sales programme.
This will ensure that there will be a potential price catalyst for the resale unit that you will be looking to buy into.
Be conscious of the price disparity between your potential unit and the new launch benchmark price.
Assuming you are purchasing a resale condo in these areas, it would be important for you to ensure that there is a healthy price disparity between your unit and the comparable new launch unit in the area.
If your entry price comes too close to the price of the new launch unit, it would make more sense to purchase into the new launch developments instead.
Category 4 – Places with low rental yield and below average capital appreciation
These are places that feature properties that have performed poorly both in rental yield and capital appreciation.
If you are an investor buying purely for investment purposes it would be advisable to avoid rental / investment properties in these areas.
| Planning Area | District | Region | Average Rental Yield (%) | Average Annualised Capital Gain (%) |
|---|---|---|---|---|
| Orchard | 9 | CCR | 2.9 | 2 |
| River valley | 9 | CCR | 3 | 2.5 |
| Novena | 11 | CCR | 3 | 2.2 |
| Hillview | 23 | OCR | 2.9 | 2.8 |
Common attributes for these locations
These areas are mainly prestigious residential districts within the core central region of Singapore. Foreign buyers and investors form the bulk of the buyer demand for these areas.
Recent Hike In ABSD Rate Targeting Foreigner And Investors Have Dampened Buyer Demand
The recent 2023 hike in ABSD has seen ABSD rates for foreigners increase from 30% to 60% and ABSD rates for Singapore citizen owners 2nd property increase from 17% to 20%.
This have deterred many foreign buyers and Singaporean property investors from buying properties in these areas, resulting in sub-optimal capital gain
High Price Quantum Affecting Rental Yield And Affordability
Rental demand and rental rates for these areas remain healthy, but its rental yield is being weighed down by its high purchase price.
Comparing the purchase of a 3 bedroom rental property in the outer core area of Singapore costing $1.4 million, generating a rental income of $5,000 per month will give you a rental yield of 4.2%.
Where else a 3 bedroom rental property in area like Orchard and River valley, costing $2.5 million, generating a rental income of $7,000 per month will only give you a rental yield of 3.3%.
Pointers to look out for when purchasing a unit in these areas
When looking to purchase a unit in these areas, it would be optimal to adopt a hybrid homestay and investment approach.
Instead of purchasing the unit purely for investment, it could be better to consider living in these areas while enjoying a higher standard of living.
Final words
This marks the end of our article on the best places to buy a rental property in Singapore. We hope this gives you a good macro overview of the residential property landscape in Singapore.
While identifying the right places to buy a property is important it is also important to review other micro development and unit specific criterias that makes a good investment property.
