Landed Property vs Condominium – Which is better for investment ?

Who is this article for ?

This article is specifically written for investment minded property buyers that fall into the following categories.

• Both you and your spouse have a combined budget of $3.5 mil 
• You are caught in a dilemma with the following options
• Whether you should buy a sizable 4 to 5 room private condo vs an entry level landed property ?
• Whether you should buy a sizable 4 to 5 bedroom condo vs cluster landed ?
• Whether you should buy 2 private condos vs 1 landed property ?

What does it take to have a $3.5 mil budget ?

For those executing a property transaction of this quantum for the first time, $3.5 mil may seem like a huge, unachievable budget. Let’s dispel that by establishing what it takes to have a $3.5 million budget. 

You would come to realise that $3.5 mil is actually within range of most couples that have a mid to high earning power and currently own a property that they have appreciated reasonably over the years.

Monthly salary and required loan eligibility. 

• Spouse 1 – earns monthly salary of 15k, this equates to a eligible loan size of $1.5 mil
• Spouse 2 – earns monthly salary of 10k, this equates to a eligible loan size of $1.0 mil 

Cash, CPF equity that can be unlocked from current property 

• Cash – capital appreciation + initial cash input – $500k 
• CPF – assuming both party utilised a total of $500k CPF including accrued interest

Cash and CPF savings currently have on hand

• Savings – assuming both couples have got an additional $200k sitting on the byline ready to be deployed. 

Total Budget

• Summing up all 3 different funding sources listed above, will lead us to a final budget of $3.7 mil. 
• In which $3.5 mil will be used to purchase properties and $200k will be reserved to handle buyer stamp duty and legal conveyancing fee. 

From our experience, the profile of a couple with a $3.5 mil budget is within reach of most couple owning a first property (eg. EC) that have appreciated significantly and whose career and earning power have progressed simultaneously, inline with the appreciation of their property. 

The dilemma and the options that lies ahead 

You have got a decent $3.3 – $3.5 mil budget ready to be deployed. 

Should you …

• Buy a large 4-5 bedroom condo in good locations, priced between $2.9 mil – $3.3 mil.  
• Or purchase an entry level freehold inter terrace priced between $3.2 mil – $3.4 mil. 

What about …

• Buying a nicely renovated freehold cluster landed priced between $3.0 mil to $3.4 mil. 

What if …

• You were to purchase 2 private condos instead. A 3 bedroom for your ownstay and a 2 bedroom for investment ? 

Quick Intro – Decoupling Expertise

Before you commit the next 5 mins of your life towards reading this article, it helps to find out who’s behind the keyboard. 

We are a team of specialist realtors specialising in helping our readers research and shortlist investment properties for both homestay and investment objectives. 

We seek to answer every real estate related query that a investment minded property owner could have, with well researched content and non obligatory consults. 

Condo vs Cluster Landed 

To facilitate our decision making, let’s reduce one option by getting Cluster Landed out of the way first. 

What is Cluster Landed ? 

Cluster landed housing or aka strata landed is a hybrid between a condo and a landed property. 

Similar to landed property, you own a house that is connected to the ground, but the key difference lies in you not owning the land that it sits on.Unlike landed property, you will not have the option to tear down the house and redevelop to enhance its value. 

Similar to a condominium, you will hold a strata title ownership instead of a land title ownership. There will be common facilities that are jointly owned and maintained by all residences within the cluster housing development. 

Cluster landed is not as profitable as a 4-5 bedroom condo 

Referencing the 2 tables below, with a budget of between $3.3 to $3.5 mil, the following Cluster Landed and private condo development will be available for you. 

The first downside to getting a Cluster Landed is on average its profitability is $130k lower than that of a 4-5 bedroom private condo. 

Over a similar average holding period of 7 years, Cluster landed property owners makes a average profit of $539,303, while owners of 4-5 bedroom private condos made an average profit of $669,721. 

Profitability of Cluster Landed 

Profitability of sizeable a 4-5 bedroom condominium

Cluster Landed is a riskier asset than a 4-5 Bedroom condo

Another downside when comparing Cluster Landed with a 4-5 bedroom condo is its risk profile. When it comes to making a profitable exit, you will face challenge in justifying your selling price to future buyers, due to the lack of transactional volume. 

Cluster Landed, similar to a small boutique condo development, usually has a very small 10-15 unit count within the development. Historical transactions could be few and far between, hence when you are looking to sell your unit at a higher price, you will face problems finding a good benchmark price to justify your ideal selling price. 

Referencing the images below. 

Phillip Residences, a cluster landed in the Hougang / Kovan area sees only 9 transactions from 2006 to 2020, with 2020 being the latest transaction. 

On the contrary, a 4-5 bedroom unit in Haig court, located in the Katong area sees over 520 transactions, with the latest transaction dated Aug 2024. 

Low transaction volume in Cluster Landed – Phillips Residences

High transaction volume in 4 -5 Bedroom condo – Haig Court

There are some gems amongst Cluster Landed

Enough of beating down on Cluster Landed. To be fair, in our research, we can see some Cluster Landed developments that owners have made outlandish $700k + average profit over a holding period of 4 to 11 years. 

But note, these are outliers, but it is worth referencing the attributes of these outliers if you are bent on getting a cluster landed property. 

Attributes of Outlier – Watercove Cluster Landed development

• Development provides a sea view, facing Sembawang Beach
• Owners that made over $1.5 mil in profit, bought during the pandemic lows and sold during the post pandemic high. 

Attributes of Outlier – Summer Villas Cluster Landed development

• Affordable landed living with proximity to Seletar Mall and Buangkok Square Mall.
• Long holding period of 11 years.

Condo vs Landed Property 

Now this is where the biggest dilemma arises, should you get a 4 to 5 bedroom condo closing in on a price tag of $3.0 to $3.5 mil or should you get a freehold inter terrace within the same price range ?

Which one would make you more money in the long run ?

Before we touch on profitability let’s first cover the fundamental pros and cons of owning a landed vs a private condo.

#1 – Land ownership over unit ownership

With a landed property, especially a freehold one, you get to own the piece of land that the property is sitting on.

With that you have got additional profit making options and additional selling propositions.

You can aim to buy into a good piece of land and simply aim to flip the land for profits.

An option to consider is to buy into a good size piece of land with attractive attributes, make some basic renovation to the existing build up, sit on it and flip it to another buyer that sees potential in redeveloping it.

Some attributes to consider 

• 1 km radius to reputable primary school
• Good landed neighbourhood with privacy
• No disamenities associated with having eateries nearby
• Good size land with potential to redevelop built up with more square footage
• Central location if possible 

You can aim to redevelop the built up sitting on the land and flip it for a higher price 

Another way to further juiced up your gains for landed property is to first procure the land and eventually infuse another 1 mil budget to redevelop the built up area, to increase its square footage and resell it for a higher price.

Landed provides more money making options than private condo.

Without diving into details, landed property offers you more options to further juiced up profits than a private condo.

But that is on the pretext of you being able to do the following.

1. Willing to live in an older built up and simply wait for land to appreciate.
2. You have additional capital to redevelop the building that sits on the land.

#2 – Better supply dynamics for Landed property 

On the supply side, Landed property has an edge over private condos.

There is a fixed and limited inventory of landed property available for sale. So hoarding a freehold land puts you in a good supply-side position. On the flip side, new condo supply increases yearly with new government land sales. 

#3 – Better demand dynamics for Private condo 

On the demand side, condo takes the lead. Landed due to its price tag, gives you access to a smaller buyer audience, hence a lower transactional volume to prop up prices.

#4 – More price catalysts for private condo vs landed property

The positive and limited supply side condition for landed property is a double edged sword, on one hand it ensures value preservation, gradual and sustainable appreciation. But on the other hand, it also results in a lack of new developments that can be launched to prop up prices.

For private condo, one of the textbook catalyst for price appreciation, is the launch of a new launch condo within the same vicinity to push up prices. 

#5 – Landed is more profitable than private condo

Considering the option of owning a landed vs a 4-5 bedroom private condo, the average profit that you will make over the same holding period of 7 to 8 years would be higher for landed properties. 

Referencing the tables below, if you were to deploy your $3.0 mil to $3.5 mil into a landed property you would see an average profit of $934k over a 8 years average holding period. 

On the flip side, if you were to deploy the same capital into a sizable private condo, of equal freehold status. You will be looking at potential profit of $669k over a 7 year holding period. 

Profitability of landed property within $3.0 mil – $3.5 mil price range 

Profitability of private condo within $3.0 mil – $3.5 mil price range

Important factors to note when getting a entry level priced landed property 

While the average profit of a landed property supersedes that of a private condo, on paper the thought of getting a landed property seems attractive. But there are some considerations to be taken note of before making the move. 

Can you live in a landed property with older buildings built up or do you have capital to renovate ?

Getting an older freehold condo into an ideal living condition requires much less capital in terms of cost of renovation versus the potential cost to be incurred in renovating and redeveloping a landed property with an older build up. 

Back of the napkin math. 

• Renovating a old 1500 sqft freehold, 5 bedroom condo – $150k to $200k 
• Renovating the interior of a landed property with a old built up – $200k upwards
• Redeveloping a landed built up to increase square footage – $1.0 mil upwards

Covid price surge is abnormal, consider if Landed Property price will still appreciate as fast when entering at this price point, post pandemic. 

This is a point to note if you are considering an entry today, post pandemic. The psf price gap for landed vs condo have narrowed significantly over the years, especially post pandemic when the preference for larger sized units is in play. 

Consider the following factors when thinking through this point

• With supply of freehold landed property being fixed, will demand from higher net worth Singaporean buyers looking for a “hard asset” like landed property increase ?
• Can you hold out for an 8 to 10 year duration if prices do not appreciate as fast as before ?

Narrowing psf price gap of landed property vs private condo. 

Buying 2 Private Condo vs Landed Property 

Having addressed the main consideration, let’s address a different permutation. Given that we specialise in helping Singaporean property owners purchase their 2nd property, this is an option that we have to consider. 

What if you were to purchase 2 private condos instead ?

• Husband – own 3 bedroom 900+ to 1000 sqft, valued at $2.1 mil 
• Wife – own 2 bedroom condo 600+ sqft, valued at $1.4 mil 

Will owning 2 Private Condo be more profitable than owning 1 Landed Property ?

First off, let’s work out the potential profit associated with owning 2 private condos, to prudently do this, let’s assume an annualised price appreciation of 3.5% for both properties. 

For context, the annualised price appreciation for private condo ranges from 6% to 3%. A 6% growth rate is typically enjoyed by highly sought after private property, while a 3% -4% is the average inflationary growth rate of a property in general. 

With this annualised growth rate, let’s project the year on year price appreciation, assuming a holding period of 8 years, similar to the average holding period of a landed property, and work out the potential profit for holding onto 2 private property. 

Potential Profit – Owning 3 Bedroom and 2 Bedroom Condo for 8 years

Potential Profit – Owning 1 Landed Property for 8 years

More profitable to own 2 private condo vs 1 Landed Property 

Referencing the 2 tables above. Holding on to a 3 bedroom and 2 bedroom condo would generate a potential profit of $1.1 mil over 8 years, while owning 1 Landed Property would generate a $934k profit over a similar 8 year holding period. 

Lower Interest expense of owning 2 private property vs 1 Landed Property

Looking into the interest expense incurred when holding onto 2 private property vs a 3.5 mil landed property. The interest expense would be lower when owning 2 private properties, as 1 property can be rented out, and rental income can be used to offset the rental expense of 1 property. 

Lower Buyer stamp duty incurred in buying 2 property over 1 Landed Property

This is a minor point, but for the sake of completeness, let’s cover it. 

Due to the nature of the latest buyer stamp duty rate table being implemented in 2023, the progressive tax rate results in a higher buyer stamp duty being levied on property exceeding the $3.0 mil price range.

Hence you will incur a 34k more BSD expense when buying a landed property vs purchasing 2 smaller quantum private property. 

Buyer stamp duty incurred when purchasing 2 private condo

Buyer stamp duty incurred buying 1 property valued at $3.5 mil 

Different monetisation cycle when owning 2 condo vs 1 landed property 

Assuming you are approaching this from an investment mindset, then how and when you can monetise your assets would be an important consideration. 

Landed property – downgrade to realise $900k + profit

The monetisation “arch” for owning a landed property is significantly different from that of owning 2 properties. You will only see the $900k + profit, when you are ready to sell your landed property and downgrade to a smaller private condo. 

For the lifetime of living in the landed property, you will have to shoulder the monthly mortgage and continually maintain your monthly income in order to support the property. 

2 Private Condo – Freedom to monetise 1 property within 4-5 years

The beauty of getting to 2 properties, is that with your homestay property settled, you have the liberty to keep flipping the 2nd property and monetising the 300k to 350k gain. 

Worst case scenario, the day when you are looking for a break or a change in career, you can liquidate the 2nd property to reduce the monthly loan obligation significantly. 

Landed property may provide the space you need over 2 condo

Having said all this, we are aware that there are many lifestyle and homestay factors that need to be considered when considering the option of landed vs condo. 

The idea of owning 2 smaller properties within a $3.5 mil budget may not be everyone’s cup of tea, especially if you have more than 1 child and would like to have more space for the family. 

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. 

Pure information, no sales obligation or pitches ever, via Whatsapp. 

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