Buy Landed Property: Invest in the Blue Chips of Singapore Real Estate
Updated: Jul 19, 2022
With its origins from poker, where the blue-coloured chips have the highest value, the term "blue chip" is widely used by stock investors to describe large companies with a proven track record of success and stable growth. In Singapore, these include the likes of local banks DBS, OCBC, and UOB, telco SingTel, and property developer CapitaLand.
A common response to hearing these names is, "so boring!". But did you know, DBS for example provided average annual returns of 10% for the past 20 years? An approximation using the Rule of 72 tells us that shareholders doubled their investment every 7.2 years. Most would be happy with such returns, especially if they could be bored while doing it!
Blue chips may not always have the most exciting story, but their solid, steady growth makes them very attractive to long-term investors - "strong hands" who further help reduce downside volatility for these investments.
In this article, we will discuss the the following regarding investing in landed properties - the blue chips of Singapore's real estate:
*💡: The Rule of 72 is a nifty way to give you an idea of how long it will take for your money to double, given a fixed rate of return. Simply divide 72 by the annual rate of return, to get the approximate number of years it will take for your investment to double itself!
How are landed properties a "blue chip" investment?
(1) Landed properties in Singapore have enjoyed solid long-term price performance
Between 2000 to 2021, landed was the top performing residential asset class in Singapore, according to the URA's property price index (PPI). The private residential landed PPI rose 99.4% over this period, beating out inflation by a mile. The non-landed PPI was up 77.1%. Private landed properties rose by more than even the public housing resale market, where a pandemic-induced labour shortage has caused a supply crunch and the HDB Resale Price Index (RPI) to surge 16.3% over the past 1.5 years.
(2) Resilience in landed homes during downturns, providing good downside protection
Since 2000, a number of events have had a significant negative impact on asset prices in global markets, including the dot-com bust and the global financial crisis (GFC). During the GFC, the US S&P 500 fell 57% between October 2007 to March 2009. In Singapore, the local Straits Times Index too tumbled over 62% from peak to trough, with a follow-on impact on the Singapore private residential market. Property prices, however, rebounded swiftly and later surged to new highs. This led to the Singapore government putting in place a series of cooling measures, to prevent the formation of a property market bubble.
The peak-to-trough movements in the Singapore private residential landed and non-landed markets during these corrections show their resilience, and the value of holding property within your investment portfolio.
While global stock indices generally lost over half their value during the GFC, the Singapore landed price index fell just 19% (non-landed fell 26%). Indeed, over the past 20+ years, the landed property market in Singapore has actually not once fallen into "bear market" territory!
💡: A "bear market" is generally defined in investment as a price decline of 20% or more from the last high.
(3) Flight to quality? Strong landed property price growth post crises
Besides the downside protection, strong trough-to-peak movement in landed property prices post crises also suggests that the perceived attractiveness of landed property as an investment rose after downturns. This was particularly seen post-GFC.
Post-GFC, the Singapore landed price index had a breathtaking 88% run (non-landed was also up 56%). Other than the strength of the rebound, the short time to recover from GFC losses was notable as well. It took just 2 quarters for landed prices to recover in Singapore (non-landed prices also recovered in a year). In comparison, stock markets took around 4 years to recover from GFC losses.
💡: Want to learn more about what happened to Singapore's private residential market during the Asian Financial Crisis and Global Financial Crisis? Here's a great blog article!
Notable landed property transactions in Singapore
With a buoyant and active market for much of the year, 2021 was not short on high profile property transactions, many of which took place in the landed property market. In fact, it was a record year for the Good Class Bungalow (GCB) market, often considered to be the top end of Singapore's residential property market.
Nassim Road | $128.8 million | 32,159sqft ($4,005psf) | March 2021
Purchaser: Jin Xiao Qun, wife of Nanofilm Technologies founder Shi Xu. Dr Shi, an academic-turned-entrepreneur, joined the rank of billionaires when Nanofilm listed on the Singapore Stock Exchange in 2021.
Cluny Hill | $63.7 million | 14,843sqft ($4,291psf) | April 2021
Purchaser: Tommy Ong, founder of e-commerce marketing platform Stamped.io. The firm was sold in April 2021 for a reported US$110m.
Olive Road | $36 million | 23,423sqft ($1,537psf) | June 2021
Purchaser: Ian Ang, CEO and cofounder of gaming chair maker Secretlab. The firm was reported to have a valuation of $2bn in June 2021.
Bin Tong Park | $40 million | 21,637sqft ($1,849psf) | July 2021
Purchaser: Chloe Tong, wife of Grab cofounder Anthony Tan and daughter of The Edge Media Group owner Tong Kooi Ong
Queen Astrid Park | $86 million | 31,800sqft ($2,700psf) | July 2021
Purchaser: Chew Shou Zi, CEO of TikTok
Third Avenue | $52.8 million | 30,954sqft ($1,706psf) | November 2021
Purchaser: Tan Min Liang, CEO and co-founder of gaming devices firm Razer.
Interestingly, amongst buyers were many relatively young high net worth individuals. The enduring allure and timeless appeal of a prized piece of land!
💡: Good Class Bungalows are generally landed housing with a minimum plot size of 1,400 square meters, located within one of the 39 gazetted Good Class Bungalow Areas (GCBAs). Full development control guidelines and parameters for GCBs and other types of landed properties can be found here, at URA's website.
Should I buy a landed property in Singapore?
Landed properties in Singapore have strong investment characteristics. "Smart money" also continues to move into these landed assets.
There are definitely also many great reasons to live in a landed property. They tend to be quiet and tranquil, provide you more privacy and great space, as well as the flexibility to design your home to your own standards. (Read more: Perspective of a realtor-owner!)
Many affluent families choose landed homes for these reasons, with some buyers also seeing these properties as an important part of their legacy for the next generation.
In buying any property, it is important to assess your goals for the investment against your needs and preferences, as well as finances and timeline. Despite all of the above, there could still be reasons why a landed property may actually not be right for you, or at least not at the current time. Or, it may be! In that case, time to structure a financial plan and find your dream landed property!
Can I afford the landed property I want to buy?
The cost of buying a landed home can range widely, depending on a number of factors, including location, leasehold / freehold, size, and condition of the house. With each landed property being unique in its way, the lack of homogeneity compared to condominiums also means more subjective factors can play a larger role in the pricing.
In 2021, the lowest-priced landed property transaction recorded in Singapore was at $350,000, while the highest was a whopping $128.8m. The median transaction price was about $3.5m.
You should also consider the condition of the house you are buying and your plans for it, be it renovation, additions & alterations (AA) or rebuild. The size and features (e.g. pool, lift) will also impact your cost of upkeeping the property.
Review your finances, ideally together with your real estate advisor and a banker!
What are the opportunities available in the landed property market today?
If you are in the market for a new landed property, here are some developments worth taking a look at:
For cluster/strata-landed buyers, more interested in space and facilities at a more affordable quantum, Belgravia Ace and Kent Ridge Hill Residences are attractive projects worth looking at.
Just drop us a message for more on these and other brand new landed units!
The market for a resale landed property is more complicated. If you have already done some research into purchasing one, you might have experienced how difficult it can be to gather good information on market transactions and current listings.
Are you curious to know:
How landed prices have moved by region, district, or even a cluster of streets where you intend to make your property purchase?
For your intended investment size and requirements, what have the transactions been? Are they only rarely available?
What are the units available for sale?
We can help. With our comprehensive databases and analytics capabilities, we can answer your questions to help you make your purchase with more clarity and conviction.
For example, we can help you see easily at a glance what has transacted recently and what is being sold in the target area you are considering.
Google Maps and Streetview integration will allow you to virtually visit these homes and survey surroundings quickly.
Over 3,000 landed properties transactions recorded in 2021, meaning an average of more than 8 landed buyers found what they were looking for every day last year. What are you looking for?
Make an appointment with us to discuss!
About The Author
In her former life as an equity analyst, Evon analyzed companies and stocks to find the best ones for her investors to invest in, with over a decade of consistent outperformance. Now as a realtor, she enjoys using her analytical skills to help her client secure the best properties to invest in, and finds the greatest joy in journeying with clients towards their dream homes and ideal units.