I have always advocated landed properties as a better property investment as compared to most condominiums. As condominiums get more expensive, landed properties should be considered as a viable alternative for Singaporeans. Only Singapore citizens are allowed to own landed properties and this should be a viable alternative especially when the condominium which is under consideration crosses $2 million.
Consider a 3 bedroom premium at the 99-year leasehold Park Place Residences. A 3 bedroom premium unit with a size of 1163 square feet was sold for $2,130,000 based on the caveat lodged on the Urban Redevelopment Authority’s (URA’s) website. Let us look at how much the upfront payments would cost.
Let us make some assumptions
- The buyers do not have any other property
- The buyers have sufficient cash and CPF when necessary
Property: Park Place Residences, 99-year leasehold, 3 bedroom premium, 1163 square feet
5% Cash: $106,500
15% CPF: $319,500
Stamp Fee: $69,800
Total cash and CPF required: $426,500
Now let us consider a 999-year leasehold landed property in district 19 close to Kovan. Based on the caveat lodged, an inter terrace with a land size of 1426 square feet was transacted for $1.55 million in May 2018.
5% Cash: $77,500
15% CPF: $232,500
Stamp Fee: $46,600
Total cash and CPF required: $356,600
Now let us consider the situation where the buyer of this particular landed property decides to rebuild the property into a 3 storey inter terrace with an attic. The zoning allows for this as this is a 3 storey mixed landed area.
The rebuild cost might cost in the region of about $900,000
However, the quotation from the builder should provide some allowance for variation orders. In some cases, the builder may provide a quotation with a larger amount so that when there are variation orders, the buyer will not have to fork out excess cash. Let us assume that the quotation is given as $1.2 million.
Construction loan to the bank: $1,200,000 (In case of variation orders)
Rebuild cost $900,000
80% loan $960,000
Thus the buyer may not have to fork out any cash for the rebuilding process if the cost if indeed kept to $900,000.
When completed, the 3-storey inter terrace with attic will have a built-up area of about 3500 square feet, possibly up to 7 bedrooms (1 on 1st level, 3 each on 2nd and 3rd level and 1 on the attic level). The valuation of the property should be in the region of about $3 million.
In my opinion, I would think that it would be better to go for the landed option. In terms of value for money, you are getting more space for your money. Moreover, you will own a 999-year leasehold property rather than a 99-year leasehold property. The cash and CPF outlay would still be less than purchasing the 99-year leasehold Park Place Residences. It would take perhaps a year or a year and a half for the landed property to be rebuilt but it would take a lot longer for an uncompleted condominium to be built especially if the property was purchased during the initial launch. There are a few factors to be considered when undertaking a construction loan. Most notably, the income of the buyer has to be able to support the construction loan and the eventual monthly instalments will be higher.
It would be wise to also note that rebuilding a landed property is not for everyone. The hassle is something that many people may not want and thus they may find that purchasing a brand new condominium would better suit them.
Yours Sincerely,
Daryl Lum
My other articles relating to landed properties
Why you should buy a landed property instead of a condominium
Factors that determine the price of a landed property in Singapore
Should you buy a condominium or a landed property in Singapore?
Buying a Landed Property and Rebuilding it. A Personal Experience.
Guide to landed property in Singapore
Buying a landed property: buy to rebuild, renovate or one that is ready to move in
