Recently, I encountered a situation when selling a landed home to a young family accompanied by their parents, who expressed their lack of enthusiasm for the landed home due to its original condition. I don’t blame them – one would need to be quite imaginative to see its potential. Their elderly mother stood by the main door. gazing, and questioned her son why he wouldn't consider purchasing the cluster home across the street instead. “Just buy that lah, it’s the same mah. Also a landed house, and got facilities like sheltered parking.”
Recognising this lack of differentiation between the two products in the market, I took the next 10 minutes to explain the unique qualities of the landed home. However, it didn't prove very convincing to them, given that I am a realtor representing the landed property. That's precisely why I'm using this article and podcast episode to share my unbiased perspective.
Cluster homes vs landed homes
It's actually pretty simple: if you find yourself having to pay a maintenance fee, then it's a clear sign that it's not a landed home but rather a cluster home. Also, the pricing of cluster homes is usually based on the per square foot (psf) measurement, whereas for landed homes, it's all about the land itself.
Now, here's how I like to think of cluster homes: they're like a vertical version of condo living. Imagine taking a flat with four rooms and giving it a twist. It's somewhat similar to buying a maisonette instead of an executive apartment (EA) in public housing terms. The square footage may be around the same, but having a staircase in your house might just bring that extra touch of joy and satisfaction. It's the little things that can make a difference, right?
The unpopularity of cluster homes
Historically, cluster homes haven't been the most sought-after option, mainly due to their less efficient floor plans. These homes need to allocate space for facilities and stairways, which often results in narrower walkways. Simply put, you don’t have the freedom to make many modifications. An interior designer would more than suffice.
However, despite their drawbacks, cluster homes have found a niche and appeal to a specific group of buyers for various reasons. Of course, budget plays a significant role, as cluster homes tend to be more affordable.
Additionally, they offer the advantage of being located within a secure and guarded compound, and more often than not, they come with a freehold tenure. Moreover, these homes are move-in ready, and we can't underestimate the allure of instant gratification for today's young buyers. To shed more light on this particular segment of the property market, my colleagues from SRI, Jackie and Rama, and I have dedicated a podcast episode to exploring why some clients choose cluster homes over traditional landed properties.
Why clients buy cluster homes anyway
Facilities
There's a significant group of buyers who value the facilities that come with cluster homes, similar to those found in condominiums. Families with young children, for instance, appreciate the activities that can keep their kids occupied and the peace of mind that a gated compound provides. Additionally, having sheltered parking spaces is a notable advantage. In contrast, when it comes to landed homes, there can often be disputes and conflicts over parking spaces, as you may have seen in those popular TikTok videos. Given these attractive amenities, our clients are willing to pay maintenance fees, understanding that even owning a landed home doesn't exempt them from maintenance responsibilities. Imagine the hassle if the roof starts leaking!
However, there are a few key points to keep in mind. Due to the smaller population in strata living, maintenance fees can be quite costly, sometimes reaching four figures a month. It’s also important to note this figure typically excludes lift maintenance. Operating a lift requires a licence, which comes at an additional cost of around S$2,000 per year, equivalent to approximately S$160 per month on top of your usual maintenance fees.
Prestige
But why not simply purchase a condominium instead? Well, one of our clients, who has resided in a cluster home in Telok Kurau for quite some time, shared an interesting perspective. Candidly, he said that he deliberately opted for the cluster home over a penthouse because of the landed address it provided.
In the world of property, the allure of prestige should not be underestimated. It holds a certain cachet and can be a defining factor in the decision-making process for discerning buyers. It's about more than just having a place to live; it's about making a statement and attaining a certain level of social standing.
Multigenerational living
Cluster homes are particularly well-suited for multigenerational households who may find 4- and 5-room condominiums to be a squeeze. While an excess of vertical space may not be practical for couples or small families, as it can lead to additional cleaning and maintenance needs, cluster homes offer a perfect solution for accommodating three generations under one roof. Among the various options available, middle-end strata homes tend to be the preferred choice for these families, as they strike the right balance between space, affordability, and comfort.
Investment
It's worth noting that some individuals also view cluster homes as a viable investment opportunity. In addition to the attractive amenities they offer, cluster homes often come with multiple rooms, which translates to higher rental yields for landlords. However, it's important to keep in mind that there are regulations governing the maximum number of occupants that can be leased out to. Landlords should also be prepared to cover maintenance costs since tenants typically do not pay for the facilities.
Lifestyle and estate
We had a client who chose a cluster home over a landed home because of its proximity to the primary school where all their children are enrolled. Given the young age of their kids, ranging from primary one to four, the convenience of living close to the school made the cluster home the most practical choice. While landed homes are often seen as a wiser option for wealth preservation, it's hard to argue against lifestyle needs.
If you find yourself in a similar situation, consider the prices of landed homes in your preferred estate. For example, in District 10, known for its excellent schools, purchasing a cluster home can cost around S$5 million. These homes come with attractive features such as a lift, stairway, multiple parking lots, an EV charging point, and 4-5 rooms. They are move-in ready and located within a 1km radius of the desired school.
On the other hand, the price of a landed home in the same area can easily exceed S$8 million, if not more. The price gap is substantial. In such cases, the cluster home, with its prestigious address and potential as an investment, provides immediate satisfaction and fulfils your lifestyle needs. Even if its value does not appreciate significantly, it still caters to your requirements while you reside there.
However, if you find yourself in an estate that is not within 1km of a reputable school, it might be worth considering buying pure land, as it is a sought-after commodity.
Favouring a landed home
When faced with a choice between a newly built cluster house and an old inter-terrace, both priced at S$3.5 million in District 19, as realtors, we unanimously lean towards the landed home. Here are three key reasons behind our preference:
Rising Demand
The demand for landed homes tends to outstrip that of cluster homes, especially considering the limited inventory available. Additionally, the ongoing construction of new condominiums may result in an oversupply of cluster homes in certain areas.
Build-Up Space
Landed homes offer the advantage of ample build-up space, allowing homeowners to customise and personalise their living environment according to their preferences. Whether you choose to renovate or rebuild, you have the freedom to tailor the property to suit your lifestyle and express your unique style. This flexibility opens up opportunities for significant appreciation in value when the property is transformed to meet modern standards.
Legacy
One of the major driving factors for choosing a landed home is the desire to own a piece of land, providing a sense of long-term wealth preservation. With land ownership comes the ability to pass down the property to future generations, who can then rebuild and create their own legacy.
If you find yourself still undecided despite considering these factors, it's perfectly normal. Making such a significant decision requires thorough research and access to relevant data. If you need further information or data to support your decision and provide peace of mind for the next decade, reach out to me (Harvey Chia) for a non-obligatory chat at 9199 9141.
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