Who is this article written for ?
This article speaks to property buyers that are considering the purchase of a small boutique condo, condo developments that range anything from 15 units to 100+ units.
These are quaint developments that are often overshadowed by its mainstream counterparts featuring over 300+ units.
You are probably attracted to a boutique condo development for the following reasons.
- Located in the heart of a desirable neighbourhood that you vibed with. I.e Katong, Joo Chiat, Tiong Bahru, Dakota.
- Quaint and private feel, compared to bigger developments that are crowded with families with children on the weekends.
- Spacious and non conventional layout which allows you to build your dream nest.
- Affordability.
Having said that, you probably landed on this article to rationalise all the bad rep that has been given to boutique condos.
The focus of this article
This article seeks to highlight 5 key disadvantages of owning a unit in a boutique condo development. Mindful of not leaving you in the lurch, we go further to explore solutions on how you mitigate these downsides and still live in the ideal boutique condo of your choice.
Quick Intro – Decoupling Expertise
Before committing the next 5 mins to reading this article. It helps to know who’s behind the pen.
We are Decoupling Expertise, an investment focused real estate agency. We specialise in helping our readers research, shortlist and source for properties that serve the dual purpose of investment and home stay.
We set out to answer every investment minded homeowners property related query via quality long form content and non obligatory Whatsapp Q&A.
Drop us a whatsapp text if you need help getting started on your next steps.
Two main reasons why boutique condo often underperform normal condo
It is common to come across advice from property agents and friends that boutique condo developments are not the best for investment and in extreme cases you will lose money owning one.
This is due to two main reasons, one being more obvious than the other.
Obvious one being sub optimal fundamental attributes vs a mid to large sized condo.
This is the basic framework of how an investor should screen for good investment properties.
- Unit sized at least 300 units and above
- Facilities – full facilities
- Plot density – lower density with more open space
- Regular and efficient layout geared for family
- Lots of BTO and HDB surrounding development to provide ready source of HDB upgrader demand.
This is how a boutique condo fare in comparison to a regular mid to large sized condo development.
- Unit size could be lower than 100 units.
- Facilities may be compromised with a smaller pool, with the absence of tennis court, sky garden, bbq pit etc.
- Plot density – normally built on a small land plot, with limited open space
- Layout – can be a little more outlandish with unique shapes and layout
- HDB upgrader – normally wedged within neighbourhoods that are not mainstream to HDB dwellers.
With the 1st obvious reason established, let’s dwell into the more subtle, understated reason.
Self fulfilling prophecy driving the under performance of boutique condo developments
If you observe carefully, there is a cycle of self fulfilling prophecy or market reflexivity driving the under performance of boutique condo developments.
It begins with the buyer’s agent on the ground advocating against the risk of owning a boutique condo, followed by a consequential reaction of buyers not buying one.
Eventually resulting in the lack of price appreciation for boutique condo developments.
Finally, resulting in the second order effect of publications and analysts publishing articles reporting the downsides of owning a boutique condo. This sequence of events is then perpetuated with readers prompting their buyer agents to avoid shortlisting boutique condo development for them.
The point of sharing this is to make known the general sentiment and direction of property buyers in the market, and to segway into our next section on highlighting the risk of owning a boutique condo development.
4 key risk of buying a boutique condo development
By no means this article is going to be a one sided article beating down on boutique condo developments.
The intention is to first make known the risk that lies ahead and eventually prescribe solutions to mitigate it, while still achieving your goal of living in a boutique condo of your choice.
#1 – Paying a premium for a boutique condo due to its freehold status
Boutique condos normally come with a freehold status, one of the potential risks of getting a freehold boutique condo revolves around the fact that you could be paying a premium for its freehold status vis a vis a comparable mid sized, leasehold condo development in the same area.
The challenge comes at the point of resale, with prospective buyers prioritising the affordability of a leasehold mid sized condo development over a freehold boutique development. Consequently, this results in difficulties in reselling your property at an ideal profitable price.
Referencing the 2 tables below. You will see the last transacted prices for boutique development Spring @ Katong being priced at a $120k and $200k premium over Cote D’Azur, a 99 year leasehold condo, for 2 and 3 bedroom units.
From a buyer’s perspective, the thought of getting a larger sized 2 or 3 bedroom unit at a mid sized 612 units Cote D’Azur priced at a discount, does not work well to justify paying a higher price for a unit in a freehold boutique condo.
The same situation is observed for freehold boutique condo, Moonstone in Potong Pasir vs leasehold 731 units leasehold, integrated development, The Poiz.
Premium paid for freehold boutique development in Katong vs leasehold mid sized condo
| Development | Tenure | No of Units | Location | Size (sqft) | 2 BedroomLast Transacted Price |
| SPRING @ KATONG | Freehold | 52 | Katong | 1,055 | 2,250,000 |
| COTE D’AZUR | 99 year | 612 | Katong | 1,356 | 2,120,000 |
| Development | Tenure | No of Units | Location | Size (sqft) | 3 BedroomLast Transacted Price |
| SPRING @ KATONG | Freehold | 52 | Katong | 1,739 | 2,920,000 |
| COTE D’AZUR | 99 year | 612 | Katong | 1,313 | 2,720,000 |
Premium paid for freehold boutique development in Potong Pasir vs leasehold mid sized condo
| Development | Tenure | No of Units | Location | Size (sqft) | 2 BedroomLast Transacted Price |
| Moonstone Residences | Freehold | 76 | Potong Pasir | 1,044 | 1,539,188 |
| THE POIZ RESIDENCES | 99 year | 731 | Potong Pasir | 753 | 1,460,000 |
| Development | Tenure | No of Units | Location | Size (sqft) | 3 BedroomLast Transacted Price |
| Moonstone Residences | Freehold | 76 | Potong Pasir | 1,238 | 1,868,000 |
| THE POIZ RESIDENCES | 99 year | 731 | Potong Pasir | 1,152 | 2,400,000 |
#2 – You may make a loss when reselling a unit in a boutique condo development
One of the key appeals of owning a real estate property in Singapore, is that it is a “hard” asset, meaning it holds its value very well and can beat the 3-4% inflation with its price appreciation.
This holds true for most conventional mid to large sized condo developments, you will hardly see any loss making transactions for conventional mid sized condo developments that are geared for home stay purposes.
But as you venture into the less conventional boutique condo development, you will tend to see more volatile performance, with higher rates of non profitable transactions. And note, a sale transaction that breakeven or make less than 100k profit, may not register as a loss making transaction. But in actual fact, the owner can still be making a net loss after subtracting the buyer stamp duty and interest expense incurred when purchasing and owning the property.
This is attributed to the 3 factors stated below.
Limited transaction volume for boutique development
As a rule of thumb, for a property’s price to appreciate, there must be historical transactions of similar units being sold, to establish a higher benchmark price, to justify its new selling price.
The challenge for boutique development arises when there is a lack of recent transactions, or in the worst case scenario, when there is a loss making transaction. This dampens your chance to resell your unit at an ideal price.
| Boutique development size | Average Sales Vol |
| Less 100 | 1.2 |
| Between 100 – 150 | 6.3 |
Small addressable buyer market
The 2nd factor leading to more volatile pricing and profitability for boutique condo is attributed to its significantly smaller addressable buyer market size as compared to conventional mid to large sized condo.
Most conventional buyers purchasing for home stay or investments tend to prioritise consideration of conventional mid to large sized condo developments with full facilities. This is also a function of the buyer’s agent being more familiar with larger sized condos and tends to promote and shortlist them more for buyer’s consideration.
In some ways this reduced the buyer audience for boutique condos, resulting in greater difficulty in selling it at a higher price.
Self fulfilling prophecy
Discussed in an earlier section, the self fulfilling cycle of buyer agent deprioritising the promotion and shortlisting of boutique developments for buyers reinforces a unfavourable sentiment for boutique condo developments.
#3 – You will face difficulty when upgrading into another condo down the road
Picture the following scenario, you bought into a boutique condo today, as a Single or with your spouse. You loved its unique layout and its location of being in the heart of a quaint neighbourhood filled with your favourite cafes and boutique gyms.
3 Years passed and you now have a child and would like to be relocated closer to your parents place in the heartland and are looking at a conventional 3 bedroom condo in a mid to large sized condo development.
The challenge arises when your boutique condo appreciates at a slower rate then the price of a condo in a mid to large sized development. Due to a sub-optimal capital return from the sale of your boutique development, you will have to have more cash and cpf savings on hand to fund the purchase of your next property.
To ensure an optimal number of options upgrading options available, the rule of thumb is to always hold on to an asset with appreciation potential that can beat the market. This allows you to accumulate greater cash equity in your current property to fund any future property purchase.
#4 – You will have one less asset to fall back on for retirement
For the majority of Singaporeans, much of your cash and CPF savings are locked up in the property you own. The de facto fall back plan for retirement is to sell your property, unlock 500k to 700k profit and repurchase a smaller condo or even a HDB for retirement.
The challenge with holding on to a boutique development which does not appreciate much is that you would have a much smaller pool of funds to tap on for your retirement.
You would have to make sure your money works harder in your investment asset to fund the lifestyle you desire upon retirement.
Solutions to live in a boutique condo development without inheriting its risk
Having established the key risk to be expected when owning a boutique condo development. Let’s explore how we can live in a boutique condo, while mitigating these risks.
#1 – Rent a boutique condo, own a unit in a mid sized development
One of the best of both worlds option is to not purchase a boutique condo but rent one instead and deploy your capital into owning a main stream 2 or 3 bedroom unit in a mid to large sized condo development that has high rental yield and capital appreciation potential.
This is sometimes called the rent to rent model, you will rent the 2 or 3 bedroom unit you owned in the mid sized development to offset the rental you incur in the boutique condo.
This configuration allows you to enjoy the stability and capital upside of owning a regular sized condo development that is optimised for investment, while allowing you to freely rent a unit in any boutique development of your choice.
In the ideal case scenario, you may even be able to create some positive cash flow monthly if the rental income for your unit in the regular sized condo exceeds that of your rental expense incurred renting a boutique condo.
Downside to note
To be objective, there are disadvantages to this strategy.
You will not be able to make major renovation to the boutique condo that you rent
Am totally aware of that, the motivation for some of you looking to purchase a boutique condo is to revamp the interior of the unit, creating your dream home.
The downside to renting is that you cannot make any major reconstruction to the unit. You will only be able to enjoy the unit as it is and make do with furnishing it and enjoying the location of the unit.
You will incur higher property tax
A major cost increment that is overlooked by property owners executing the rent to rent strategy is the higher property tax to be incurred for non owner occupied property. This cost amounts to a significantly higher property as compared to the normal property tax incurred for an owner occupied property.
Non Owner Occupied Income Tax Rate
| Annual Value ($) | Effective 1 Jan 2024 |
| First 30,000Next $15,000 | 12%20% |
| First $45,000Next $15,000 | -28% |
| First $60,000Above $60,000 | -36% |
Owner Occupied Income Tax Rate
| Annual Value ($) | Tax rate effective from 1 Jan 2024 to 31 Dec 2024 |
| First $8,000Next $22,000 | 0%4% |
| First $30,000Next $10,000 | -6% |
| First $40,000Next $15,000 | -10% |
| First $55,000Next $15,000 | -14% |
| First $70,000Next $15,000 | -20% |
| First $85,000Next $15,000 | -26% |
| First $100,000Above $100,000 | -32% |
#2 – Own an affordable boutique condo for home stay and own a 2nd property for investment
The second option is applicable for property buyers or couples that have a little more funds to spare. If you are really bent on owning a boutique condo, you can consider purchasing it solely under 1 name first, and keeping the other spouse’s name free for a second property purchase in the future.
As you enjoy your stay in the boutique condo, you can aim to pay up its loan fully and accumulate capital for the 2nd property purchase under your spouse name that has yet to be utilised.
This mitigates the risk of not having a higher growth asset that you can count on from capital growth and wealth preservation.
Downside
A downside to this is that you cannot utilise the CPF of the spouse whose name is not included in the ownership of the boutique condo.
#3 – Instead of selling, decouple the boutique condo to unlock its value
Consider the following scenario, you own a freehold condo in Tiong Bahru which market value registers a healthy unrealised paper gain for you. But you face problems unlocking this paper gain as you cannot find a seller to purchase from you at the ideal selling price.
One way to unlock this paper profit is to decouple the property at its official market value, free up one spouse name from the jointly owned property to purchase a second property.
As a by-product of the decoupling process, you or your spouse will be selling your share in the property to another party via an internal sale transaction. Through this, you will be able to unlock the paper profit accumulated within the boutique development without having to sell it.
To find out more about this method refer to the following article
- Using equity from one property to buy another property in Singapore
- Decoupling Property Singapore – The Complete Guide
#4 – Select a boutique condo that have got greater potential to appreciate
From our research, not all boutique condos are made alike. We have seen multiple instances of boutique condo developments registering healthy profits.
One way to own a boutique condo while mitigating some of the risk associated with it is to do your due diligence to select a boutique condo development that has got higher capital appreciation potential.
Boutique Condo that displayed healthy annualised capital gain
| Project Name | Tenure | Completion | No of units | Rental Yield (%) | Annualised Capital Gain (%) |
| EASTVILLE APARTMENTS | Freehold | 1966 | 16 | 3.1 | 8.2 |
| SPRING @ KATONG | Freehold | 2006 | 52 | 2.8 | 7 |
| MURANO | Freehold | 2008 | 50 | 3.7 | 6.9 |
| THE NCLAVE | Freehold | 2007 | 30 | 3.6 | 6.8 |
| DUKU APARTMENTS | Freehold | 1998 | 8 | – | 6.7 |
| THE MIDAS | Freehold | 2008 | 28 | 3.8 | 6.7 |
| THE EASTSIDE | Freehold | 2006 | 32 | 2.7 | 6.6 |
| ENG HOON MANSIONS | Freehold | 2005 | 19 | 3.2 | 6.5 |
Attributes that a profitable boutique condo development possess
Referencing the list above, these boutique condo developments are outliers that out performed its peers, defying the norm of boutique condo not performing well in the area of capital appreciation.
Reverse engineering to sieve out the common attributes amongst these boutique developments. You would realise that they all possess the following traits.
Appeals to the right target audience
Take this with a pinch of salt, as this lacks statistical backing. We personally feel that buyers interested in boutique condos belong to a niche indie group.
They are not your usual, middle income family looking to purchase a condo to serve their family upgrading needs and excited to make the next 300-500k from their property.
They are indie couples or singles looking to build their dream pad located in a neighbourhood that they vibe with.
At the risk of being stereotypical, picture your film directors, professional photographers, creative designers looking to purchase a walk up apartment like home right smack in the street of Joo chiat and Tiong Bahru.
These are buyers that value the unique layout and generous space that a boutique condo offer, and the absence of a pool overcrowded with kids taking swimming lessons is a plus to them.
Located in the right neighbourhood
In line with the earlier point, to appeal to these specific pools of buyers. Your boutique condo should be located in the right neighbourhood. You should aim to get a boutique development in Joo Chiat, Katong, Marine Parade over getting a boutique development in the common heartland areas.
Fyi, majority of the strong performers in the list above are located in the east coast, Marine parade area.
Look out for the sweet spot in price quantum
Another pull factor that attracts buyers to look at boutique condos is when they are unable to afford an equally spacious freehold condo within a mid to large sized development in the same neighbourhood.
This is a common driving factor in areas saturated with freehold condo developments, buyers being priced out of a freehold unit in a popular mid-sized development will start considering equally spacious freehold units in a smaller boutique development.
This is common in neighbourhoods like Newton, Katong, Tiong Bahru, Bukit Timah.
Next Steps – 2nd Opinion for your plan ?
Having spent the last 10 mins reading this article, hopefully, it has helped you crystalise some of the thoughts you have in mind.
Take the next step by seeking a 2nd opinion for your ideas and furthering it by having us shortlist some potential property for consideration.
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