Leasehold projects prove their mettle with majority of the highest rental yields in 2017
By EdgeProp Singapore
/ EdgeProp |
Overall gross rental yields in Singapore for non-landed private homes are around 3.2%, the lowest in a decade. Low interest rates, a tightening labour market and a large housing supply are possible reasons. However, there were projects that managed to command attractive rental yields of 4% and above in 2017.
In our analysis, we have identified apartments and condominiums with the highest gross rental yields in the Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR).
Current gross rental yields are calculated by taking the annual rental income of the development and dividing it by recent resale prices of the corresponding project. To mitigate the effects of outliers which may skew rental yields, we only considered major projects with 100 units and above, and projects with at least five sales and five rental transactions in 2H2017.
However, it is important to note that these are gross rental yields, and do not include other costs such as vacancy costs and maintenance fees, etc.
These are the top 10 results for each market segment in 2017:
1) Prime district properties (CCR)
Suites at Orchard is among the highest-yielding properties in the prime districts.
Project Name | District | Planning Area | Within500m from MRT station | Completion Date | Tenure | No. of units | Avg. Rental $PSF | Avg. Sale Price $PSF | Est. Gross Rental Yield |
|---|---|---|---|---|---|---|---|---|---|
Suites at Orchard | 9 | Museum | Yes | 2014 | 99 yr | 118 | 6.27 | 1,426 | 5.28% |
76 Shenton | 2 | Downtown Core | Yes | 2014 | 99 yr | 202 | 5.60 | 1,777 | 3.78% |
Icon | 2 | Downtown Core | Yes | 2007 | FH | 646 | 5.26 | 1,681 | 3.75% |
The Clift | 1 | Downtown Core | Yes | 2011 | 99 yr | 312 | 5.81 | 1,880 | 3.71% |
Skysuites@Anson | 2 | Downtown Core | Yes | 2014 | 99 yr | 360 | 6.97 | 2,284 | 3.66% |
One Shenton | 1 | Downtown Core | Yes | 2011 | 99 yr | 341 | 4.95 | 1,652 | 3.60% |
RV Residences | 10 | Tanglin | No | 2015 | 999 yr | 248 | 5.73 | 1,966 | 3.50% |
Soleil@Sinaran | 11 | Novena | Yes | 2011 | 99 yr | 417 | 5.17 | 1,779 | 3.49% |
Hillcrest Arcadia | 11 | Bukit Timah | No | 1980 | 99 yr | 272 | 2.38 | 831 | 3.44% |
Espada | 9 | River Valley | Yes | 2013 | FH | 232 | 6.60 | 2,307 | 3.43% |
2) City fringe properties (RCR)
The Interlace tops the list as the highest-yielding project in the city-fringes.
Project Name | District | Planning Area | Within500m from MRT station | Completion Date | Tenure | No. of units | Avg. Rental $PSF | Avg. Sale Price $PSF | Est. Gross Rental Yield |
|---|---|---|---|---|---|---|---|---|---|
The Interlace | 4 | Bukit Merah | No | 2013 | 99 yr | 1,040 | 3.30 | 954 | 4.15% |
Prestige Heights | 12 | Novena | No | 2011 | FH | 154 | 4.65 | 1,406 | 3.97% |
Sims Green | 14 | Geylang | Yes | 2003 | 99 yr | 108 | 2.40 | 739 | 3.89% |
Heritage View | 5 | Queenstown | No | 2000 | 99 yr | 618 | 3.66 | 1,144 | 3.84% |
Riverbay | 12 | Kallang | No | 2014 | 999 yr | 147 | 3.77 | 1,209 | 3.74% |
Dover Parkview | 5 | Queenstown | No | 1997 | 99 yr | 686 | 3.07 | 989 | 3.72% |
Simsville | 14 | Geylang | Yes | 1998 | 99 yr | 522 | 2.77 | 895 | 3.72% |
One-North Residences | 5 | Queenstown | Yes | 2009 | 99 yr | 405 | 4.26 | 1,407 | 3.63% |
Queens | 3 | Queenstown | Yes | 2002 | 99 yr | 722 | 3.47 | 1,157 | 3.60% |
Citylights | 8 | Kallang | Yes | 2007 | 99 yr | 600 | 4.50 | 1,509 | 3.58% |
3) Suburb properties (OCR)
Melville Park has an estimated gross rental yield of 4.29%, the highest in the Outside Central Region.
Project Name | District | Planning Area | Within500m from MRT station | Completion Date | Tenure | No. of units | Avg. Rental $PSF | Avg. Sale Price $PSF | Est. Gross Rental Yield |
|---|---|---|---|---|---|---|---|---|---|
Melville Park | 18 | Tampines | No | 1996 | 99 yr | 1,232 | 2.30 | 643 | 4.29% |
Clementiwoods Condominium | 5 | Clementi | No | 2010 | 99 yr | 240 | 3.25 | 1,013 | 3.85% |
Astoria Park | 14 | Bedok | Yes | 1995 | 99 yr | 354 | 2.90 | 907 | 3.83% |
Northvale | 23 | Choa Chu Kang | Yes | 1998 | 99 yr | 762 | 2.16 | 679 | 3.82% |
Regentville | 19 | Hougang | No | 1999 | 99 yr | 580 | 2.25 | 709 | 3.81% |
The Mayfair | 22 | Jurong East | Yes | 2000 | 99 yr | 452 | 2.78 | 875 | 3.81% |
Orchid Park Condominium | 27 | Yishun | No | 1994 | 99 yr | 615 | 2.11 | 672 | 3.77% |
Eastpoint Green | 18 | Tampines | No | 1999 | 99 yr | 646 | 2.42 | 772 | 3.76% |
Euphony Gardens | 27 | Mandai | No | 2001 | 99 yr | 304 | 1.95 | 623 | 3.76% |
The Santorini | 18 | Tampines | No | 2017 | 99 yr | 597 | 3.22 | 1,033 | 3.75% |
Observations
High-yielding properties are mostly 99-year leasehold projects
Leasehold properties are typically considered to be more attractive when comparing rental yields. This is due to a lower relative $ psf when buying a 99-year leasehold property compared to freehold, assuming that all other things are equal.
In general, tenants are not concerned about the tenure of a property, so leasehold properties do tend to have an advantage over their freehold counterparts when looking purely at rental yields.
Distance from MRT matters more for prime district rental properties
Notably, prime district properties located within walking distance to a MRT station commanded higher rental yields (we define walking distance as 500m, which should be roughly within five minutes walking time). This is understandable, as tenants could be foreigners or expats who do not own a car, and who are working in vicinity of the central business district (CBD).
At the end of the day, it is important to note that rental yield is just one part of the total return of investment equation. When considering real estate investment, it pays also to look at capital growth potential. For instance, the lower the purchase price, the higher the potential for upside, and the higher the likelihood that rental yields will be favourable - such as this list of winning developments that took home the EdgeProp Value Creation Award based on capital appreciation and rental returns. Read on for more!
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