Four reasons why you should buy a strata landed house
To a lot of Singaporeans, purchasing a landed home feels like an unattainable dream. Indeed, in land scarce Singapore, freehold landed homes are not only scarce but command a premium price especially in prime locations.
They are also a good hedge against inflation as there is very limited supply of these homes and they are almost certain to hold their value over the long run.
Only approximately 5 percent of Singaporeans stay in landed properties according to the Singapore Department of Statistics.
Is there a way of owning a landed home at a more affordable lower cost?
Actually there might be! Cluster housing which is strata landed housing is an attractive viable option. Aside from its lower cost, owners will have access to facilities such as a gym, swimming pools, 24-hr security and even a personal parking lot, usually underground, just like a condominium.
They can have freehold or leasehold tenure just like a traditional landed house. But unlike traditional landed houses, strata landed houses are strata-titled properties.
What does this mean?
According to URA, a strata landed housing comprises individual strata-titled landed housing which includes strata terrace houses, strata semi-detached houses and strata bungalow units occupying a common development site with shared facilities and a single vehicular access point.
This means that as an owner of a strata landed home, you do not actually own the land or the title deed of your house. You share the strata title of the plot of land that your home sits on with all your fellow neighbours.
Who can buy strata landed houses?
According to SLA (Singapore Land Authority), only Singaporeans can buy strata landed houses without seeking approval. Just like traditional landed houses, strata landed houses are classified as restricted properties in Singapore.
Any foreigners including Singapore Permanent Residents who are interested to buy a strata landed home (e.g town house or cluster home) which is not within an approved condominium development under the Planning Act will have to seek approval from the relevant authorities, in this case, the LDAU (Land Dealings Approval Unit) under SLA.
For those that are only interested in landed properties that have their own title deed and are considering buying one, do read this article (Four things to consider before buying a landed property) that I have written a while ago for the things you should look out for.
So, why should one buy a strata home over a traditional landed home when you do not actually own the title deed to the piece of land that your house sits on?
1). Strata landed homes are cheaper than a traditional landed property
The cost for a similar size property at the same location differs quite a bit for a traditional landed house with its own title deed and a strata landed house .
According to the Business times, in an article written by Orange Tee and Tie, the typical price of freehold strata terrace house was at S$817 psf as compared to S$1,417 psf for freehold land titled terrace dwellings.
There were more than 50 strata landed houses sold at prices of 2 million and below. In contrast, it is extremely difficult to find a freehold land titled property below 2 million in recent years.
Therefore, for those who want the space and feel of living in a landed property but do not want to pay the premium for a traditional landed house with a land title deed, they can consider strata landed houses which are substantially cheaper than land titled houses.
For many condo upgraders and people who have successfully sold their homes via collective sale and are holding on to huge amount of cash, strata landed houses can be rather appealing.
For those who have aspirations to own landed properties, a strata landed might be a perfect way to achieve that dream without paying a huge amount of money!
Furthermore, not only are strata landed houses cheaper than traditional landed residential properties, they can fetch fairly high rentals with rental yields of about 4 percent or more for newer projects.
This rental yield can be even more than what a traditional landed house can fetch especially if the traditional landed house is in the original condition or not renovated.
There is always a strong rental demand for strata landed houses as a lot of expatriates and families like the idea of a spacious landed home with facilities that is within a gated community with 24 hour security.
2). A landed home with space and facilities
Strata landed houses come with condo facilities yet incorporating the privacy of landed housing. For those that enjoy the space and privacy of living in a landed residence, a strata landed house also ensures that you will get to enjoy amenities and facilities that most traditional landed homes do not come with unless it is a large bungalow with their own pool!
To some, this could be having best of both worlds!
These condo-like facilities such as swimming pool, gym, sauna rooms, etc. are shared among the residents of the strata landed development. There is also the presence of 24 hour security and surveillance cameras to ensure the safety of you and your family.
Also, as compared to larger condominiums with thousands of units, where many residents share the common facilities, strata landed housing projects are smaller and the number of homes seldom exceed 150 units.
This means that the facilities are more exclusive as less people will be making use of it. However, do note that the monthly maintenance fees are likely to be higher in strata landed homes as there are fewer people sharing the maintenance costs unlike in large condominiums.
3). You do not have to worry about the maintenance of the facilities and facade of the house
For those with young children, the most important thing is the presence of facilities such as a pool, garden area and playground. The best part is you won’t need to worry about installing such facilities yourself or maintaining it like those who have a traditional landed house.
By purchasing a cluster house, you do not need to worry about maintaining the facade of your home such as painting it because the facilities are within the development. There is also no need to engage a gardener to maintain the garden and surrounding greenery.
Each development’s Management Corporation Strata Title (MCST) will oversee the regular maintenance of the whole development including maintaining the pool and gym, hiring and managing the cleaners and security guards, coordinating the repairs and repainting the facade of your home when the need arises.
For a typical landed house owner, you have to maintain your own house. Sometimes the sums can add up especially if you have not been setting aside a pool of "ready funds" for the maintenance of the house. Just painting of the exterior of the house can add up to thousands of dollars.
For a strata landed house, as in the case of a condominium, upkeep expenses are already accounted for as the residents of the development contribute a monthly maintainence fee and sinking fund for the upkeep and maintenance of the whole development.
4). Strata landed houses are rare and have limited supply
Sales of strata landed homes was approximately at the peak in 2011 but began to decline after that. After hitting rock-bottom in 2014 based on URA records, the transaction volume began to rebound steadily.
Then, between 2014 to 2017, transactions of such properties surged by 168 percent surpassing the 141 percent growth for sales of traditional landed homes. In 2017, sales of strata landed houses also reached 394 units which is the highest level since the implementation of the total debt servicing ratio (TDSR) framework in June 2013.
From the last half of 2017 to Q1 2018, over 100 strata landed homes were sold.
The monthly sales of cluster houses also sharply increased from June 2017 to March 2018, suggesting that there is a strong demand for such properties and the demand might slowly exceed the available supply.
In 2014, URA changed the guidelines for strata landed housing , requiring developers to increase the minimum site area for communal open space from 30 percent to 45 percent.
A maximum 20 percent of the 45 percent are usually used for communal facilities like playgrounds and swimming pools, while a minimum of 25 percent have to be be allocated for foliage and greenery.
This change in guidelines should result in fewer strata landed homes being developed. As lesser units can be built due to these regulations, developer's overall profit margin will be affected and some developers might turn to other more lucrative options.
Therefore, due to their limited supply, the capital values of freehold strata landed homes are most likely looking to trend upwards in the long run.
Their prices are likely to be more resilient than private condos, as a greater amount of precious space in land-scarce Singapore are put aside for high-rise non-landed strata homes. Thus there will be much less supply of these strata landed housing, making them more exclusive.
CONCLUSION
Like traditional landed houses, strata landed houses are also considered rare. With limited stock, freehold strata landed houses should hold their prices. Yet, as they are still more affordable as compared to the usual landed homes, demand for such properties should still be healthy. For those of you that are considering the option of upgrading to a strata landed house and would like to find out more, please feel free to contact me for a non obligatory 30 min free consultation at 96658596 or schedule an appointment right away with me!
Having a keen interest and passion in real estate led Caroline to join the real estate industry. An investor herself since 2006, Caroline is constantly learning and upgrading herself through courses and seminars so that she is able to provide meaningful insights to her clients and to help them successfully manage and restructure their portfolios in the ever- changing market conditions.
Caroline strives to be honest, transparent and professional in all her real estate dealings with her clients. She understands that clients need to work with someone they trust, as they will be entrusting their valuable assets to that person. She is known to be trustworthy and reliable and will ensure that her clients’ interests are protected always.
With a strong commitment to client satisfaction and with the support of her teammates from Navis Living Group (Orange Tee and Tie) , she is confident that she will be able to share her experiences and knowledge to assist her clients in making the best decisions for their real estate needs so that they can achieve their desired real estate goals.
In her free time, Caroline enjoys all kinds of sports including running and playing golf. She also enjoys spending time and playing with her white miniature schnauzer, Evie!