Strata Cluster Homes: What are they and how can they fit in your real estate portfolio?
Landed properties seem to be the blue chip for 2021 with its stellar performance and rise in prices over the past 18 months. In this article, we share how Strata Landed homes have risen in terms of popularity since the early phase of 2021 and how it fits in between the condos and landed homes niche.
Should you buy a Pure Landed? Or a Strata Landed Home? Or a 4-5 Bedder Condo/Apartment? What is Future Proofing? And what is the Disparity Effect? Read on to find out!
What are Strata Landed homes?
Strata Landed Homes and 99 years landed property – two kinds of properties that are often misunderstood but we think should be given more attention.
In the past, people used the term ‘landed’ to refer to Pure Landed properties that were freehold or 999-year lease. Strata Landed homes became popular about 10 to 15 years ago when property developers started buying up rows of older landed units or so-called bungalows for redevelopment. They then built boutique projects and clusters of strata houses on these plots of land – hence the name. As an estimate, two plots of bungalow land can fit about 10 to 20 Strata Landed homes. There are also many types of Strata Landed homes, ranging from pure Landed home projects on huge plots on land to strata homes within Apartment or Condo status projects
Teresa 8 (photo credits: PropertyLimBrothers)
Which Strata Landed homes suits you best?
With so many types of Strata Landed homes to choose from, it can be confusing to pick the best one for your needs. While it can be difficult to classify Landed houses because of their wide variety of layouts and land tenures, they tend to follow 4 distinct patterns. We provide some examples of these properties which we have featured in our Home Tour series!
Type 1: Large Landed house developments which tend to have a 99 years lease although some of these can be 999 year lease or even freehold. The defining feature is that they are built on a large plot of land which houses many Landed houses. The Greenwood at Bukit Timah is one such example.
Type 2: Boutique Freeholds which are usually formed when a developer buys over a few landed properties in an enclave and redevelops them into a Landed Strata project. Examples of these include the Teresa 8 and the Infinium.
Type 3: Strata Landed located within a Condo status project. The key feature is that foreigners can purchase such Strata Landed homes without seeking approval from the Land Dealings Approval Unit (LDAU). One such example is the Paterson Residence located in Orchard.
Type 4: Strata Landed located within an Apartment status project.
These developments do not have a specific lease duration – they can be 99 years/ 999 years/ or freehold. Some of these Strata Landed homes may be in large scale projects that look like condo projects with full facilities, but they do not fall under the requirements to be considered as a Condo and are considered as having Apartment status. This is due to a measure by the Urban Redevelopment Authority (URA) enacted in April 2012 that stopped allowing such projects to be granted Condo status.
On a practical level, there is little impact on the price performance of such properties when compared to Condo status projects. However, foreigners should note that approval from the LDAU is required for the purchase of Strata Landed homes located within apartment projects. An example of this is the Kingsford Waterbay located in District 19.
On the other hand, Foreigners can buy Strata landed homes in Condo status projects which are only a handful in singapore as stated in Type 3 above.
We will explore this in detail in the next article.
Strata Landed homes pros and cons
Strata Landed homes may not be as attractive compared to freehold neighbours around it but they do have benefits that should not be ignored. Strata Landed homes offer you the feel of a Landed property without the freehold status. They have important features like a large area and over three and a half storey units which cannot be found in similar 99-year condominium or apartment units.
Most Strata Landed homes also come with facilities such as pools, gyms, and dedicated basement parking spaces. Depending on the size and age of the development, the facilities can range from basic to luxurious. There are also different configurations of Strata Landed homes, some older Strata Landed homes are townhouses located inside a larger condominium project, while others are standalone developments.
MCST Fees and Maintenance in Strata Landed Homes vs. Pure Landed Homes
Something that many people may not realise is that when you purchase a Strata Landed home, you are purchasing the strata space, similar to buying a condo or apartment, rather than the entire land on it. This means that the strata owner is responsible only for the maintenance of the interior space while all exteriors such as facilities, parking spaces, and facades, are maintained by the MCST for a monthly fee.
On the other hand, there are no MCST fees payable for Pure Landed properties. Pure Landed homeowners own the land as well as the structure sitting on the land, meaning that extra effort is needed to maintain the property. As an example, a strata home in the Infinium priced at $3.7 million comes with a monthly fee of only $515, which is a very reasonable price for the luxury of facilities such as gym, basement parking, security, lap pool without worrying about maintenance work on these shared common facilities.
This is another consideration that you may have while choosing between the different types of Landed Homes.
Pricing and Comparative Analysis between Pure Landed and Strata Landed
Pure Landed homes benefit from 2 forms of appreciation: (1) appreciation in land value reflected by constant growth in land PSF values and (2) construction cost of the house structure sitting on the land.
On the other hand, Strata Landed homes are similar to condos and apartments in that we only look at the value of the strata space, usually the PSF value of the strata space, when doing price comparisons.
More importantly, buyers tend to look at the overall price quantum to make a decision. Sometimes, when the overall price quantum of a Strata Landed is too close to a Pure Landed (an inter-terrace for example). Buyers might swing over to choose the Pure Landed property instead.
For example, compare a Freehold Strata Landed with 6 bedrooms at 4000 sqft strata space asking at $3 million versus a Freehold Pure Landed with 4-5 Bedrooms (with land size 1600 sqft, built up 3500 sqft) at $3.5 million. Buyers might be contemplating paying a bit more for the Pure Land option.
For this same reason, 4-5 bedder apartments and condos, some of which have overall price quantums very close to Strata Landed homes, tend to cause buyers to contemplate the slightly more expensive Strata Landed option. For example, compare a Freehold 4 bedder 1500 sqft Condo at $2.5 million versus a Freehold Strata Landed with 6 bedrooms 3500 sqft at $3 million. Buyers that are looking out for a high number of bedrooms see that the prices are close and may go for the Strata Landed with much more space for a similar price.
This behaviour is what we call the disparity effect which we expand on later in the article.
What is the market trend?
These days, Strata Landed homes are becoming even more popular than ever. The demand and activity around for Strata Landed homes and 99 years Pure Landed property have increased ever since the start of 2021. Buyers have been snapping up those properties in the range of 2 to 2.6 million dollars.
There is a good reason for all this attention on what used to be a less-popular option for landed property buyers. Let’s start with the macro trends that we observe in the landed market.
The core driver behind all of this is the significant increase of freehold and 999 years Pure Landed property prices. From our experience with one of clients, Daniel, we know that freehold 3.5 storey inter-terrace that used to cost $2.5 million about a year ago in Jun 2020 would now be going at $3.2 million right now as we speak. In fact, if you had tried to look for a similar house right now at a price of 2.5 million in the last quarter of 2021, you would be unlikely to find available listings on the market.
What we have observed with the market trend and ground signals is that the pandemic has changed a lot of our buying preferences – something we will talk about in coming episodes. Buyers want more space and they will buy a larger space if they can afford it. This can include more expensive features like ground-floor property, roof terraces, patio space, and penthouses. Ultimately, this demand for space ended up concentrating interest on Pure Landed properties and strata homes. More generally, we attribute the price increase of freehold landed properties to people wanting a larger property to park money and enjoying more space.
The disparity effect
This brings us to the disparity effect: when the price of a property category increases beyond the reach of buyers, they will seek out the next available category in their budget.
In this case, entry-level landed properties like freehold inter-terrace (now above $3 million in District 19, 28, 23) often end up in the $3.5 to $4 million range due to extensive Addition and Alteration (A&A) as well as renovation costs. As this price range may be out of reach for specific buyers, they then turn to Strata Landed homes in the range of $2.5-$3 million. With increased demand, even the older Strata Landed homes like townhouse developments are being snapped up by buyers. We also observe the same trend for smaller 4-bedroom properties in the Outer-Core region (OCR) where prices range from $1.6 – 2 million. This includes the rise in popularity in 99 years resale Pure Inter Terraces in the range of $1.8 to $2 million.
Generally, the disparity effect occurs in an uptrend or flat market. The price action that occurs in a certain asset type across the real estate market is interesting to look at so that you know what type of real estate to purchase at the right season.
Future-proofing your purchase
With all these shifts in the Strata Landed homes market, it is even more important to plan to future-proof your home purchases. Knowing how the market will be like in the next five to ten years can determine if the entry price now is reasonable. You can then try to forecast how easily you can sell off the property you just bought in 3, 5, or even 8 years time. We recommend thinking about the following things before buying a Strata Landed home:
The PLB Checklist for Selecting a Strata Landed Home
1) What is the Built Up Strata Area?
Is it of a sizeable sqft that is able to compete with other Strata Landed homes within a 1km radius?
2) How many bedrooms does it have?
The number of bedrooms is extremely important, and we suggest buying a home with at least 4-6 bedrooms,
3) Is there a lift?
Having a lift is a bonus as it serves as future proofing for Singapore’s aging population.
4) Is there a basement?
Having a basement is common for Strata Landed homes and you should ensure that you do not miss out.
5) How many parking spaces does it have?
Generally 1 or 2 parking spaces are expected, but the more the merrier!
6) How high is the maintenance fee?
You should ensure that maintenance fees are decent as too high fees may be an issue to exit in future.
7) How dense is the project? Is this a boutique Strata Landed or a large scale Strata project?
Large scale projects tend to be more busy with more facilities and transaction volume while boutique projects provide more privacy.
On the pricing aspect, the Strata Landed home should also be competitive with surrounding Pure Landed properties in terms of transaction volume, price quantum, and the profile of future buyers. For example, try to ensure the overall quantum of your Strata Landed is not too close to like the renovated or brand new type of Pure Landed around you, it might be an issue if you want to exit in future as buyers will be confused about buying your Strata Landed or the Pure Landed next door since the overall price quantum is too close. These are just some of the things that buyers should do to ensure that they have a larger audience when it comes time to sell.
In summary
Strata Landed homes are a great option for those looking to enjoy the benefits of a Landed property and common facilities like a pool and gym, while not having the hassle of maintaining the surrounding structure of the house unlike a Pure Landed Home. They also offer an attractive investment opportunity given the overall rise in landed property prices and increased demand for entry-level landed homes. Nevertheless, buyers should look to future-proof their properties and consider market trends for the next five to ten years.
Conclusion
Now you know what to look out for no matter if you are a buyer or seller of such properties! If you are keen on buying or selling your own property but still have uncertainties, don’t fret because we are here to help. Get in touch with us here and the team will get back to you shortly!
This article is written in conjunction with our #NOTG Series on Youtube. We drop nuggets of wisdom for you to learn more about Singapore’s property market! From frequently asked questions to market analysis, we’ll take you through them all with the PropertyLimBrothers team.
