Leasehold projects prove their mettle with majority of the highest rental yields in 2017

By EdgeProp Singapore

/ EdgeProp |

January 8, 2018 8:40 AM SGT

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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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