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Land-banking in Singapore? Make sure you check these boxes.

You might be familiar with the term "land-banking," especially if you're contemplating investments in landed property in Singapore beyond the usual rental income. You acquire a piece of land, hold onto it for a while, and hope that its value appreciates – not too different from the way you might approach traditional banking or hedging investments.

How developers do it

It's a common practice among developers and private institutions: obtaining a piece of land with the goal of demolishing, reconstructing, and eventually reintroducing it to the market.

In Singapore, prominent developers employ land-banking as a strategic approach to securing cluster plots at favourable prices, strategically biding their time for the opportune moment.

While some developers prefer building and selling properties on these acquired lands, others opt to retain the original structures. Observing developers making astute moves, like consolidating adjacent plots to bolster their resource base, is not uncommon.

How individuals can do it

While building and selling properties is the bread and butter for developers, savvy individuals have also wielded this game-changing strategy in the dynamic real estate scene of Singapore. This prospect if particularly enticing if you:

  • Are eligible to acquire a landed property without paying ABSD

  • Have the financial means to take a position in the landed property segment

  • Have no immediate need to move into said property

If you already have a roof over your head that your family is unlikely to outgrow any time soon, congratulations – you’re in the perfect position to land-bank in Singapore. Now, you might wonder, what if you’ve got just enough in the piggy bank to purchase the property but lack the extra budget for a full-scale rebuild? Fear not. Owning a plot of land in Singapore always opens up a realm of possibilities. While you mull over your next moves in the coming years, you could throw it into the rental ring or seize the chance to flip it if the market taps you on the shoulder. Remember, the land supply in Singapore is fixed and prices are bound to rise. If you’ve got the capability, why not play the smart card and hedge those prices while they’re at their most affordable?

What should you look out for?

Let's say you're now fully convinced that you've overlooked the potential of land-banking. But where do you begin in identifying the perfect plot of land? Take a cue from the seasoned players in the game.

1. Opt for a blank canvas, especially if it's a Government Land Sales (GLS) site. This provides a pristine starting point for your development ambitions.

2. Size and shape matter. Pay meticulous attention to these aspects, as they hold significant sway when appealing to developers who prioritise these characteristics. That said, there are ways to work around irregular land shapes. Learn more about that here or watch the video below.

3. Unleash the full potential with a rundown piece of land. Focus on the land size without splurging on accompanying structures. Remember, the goal is to step into the market with the lowest price per square foot possible.

If budget constraints are on your mind, consider purchasing a property with basic amenities. This wise move allows you to generate extra income by renting it out while navigating the tedious rebuilding process or awaiting the opportune time to revamp and make your exit.

Here's a real-life example: During the permit application stage for rebuilding, Jackie decided to rent out his property for a solid six months, raking in a monthly rental fee of S$3,200. Smart moves can indeed turn delays into income opportunities. Learn more about Jackie’s rebuilding journey here:

In which districts and enclaves should you look?

1. Freehold: Nobody's stopping you from land-banking on a 99-year leasehold plot, but it might not be the most sensible choice. While 99-year leasehold landed properties in Singapore are the sweet spot for investors, given their tendency to churn out higher rental revenue over the years, the land-banking objective takes a backseat.

2. Undervalued: With most houses transacting at a cool S$1,800 per square foot, we would jump on any opportunity to snag an undervalued property in these sought-after districts regardless of its condition. Whether you decide to hold onto it or lease it out for a decent rental income, it's a win-win. 3. Sizeable: If you've been keeping up with our content, you know that the size of a landed enclave is a direct indicator of its transactional activity. Take, for instance, the sprawling Opera Estate and Teachers Estate – not just massive but also boasting an inventory of matured houses in their original charm. These serve as ideal entry points for potential land-bankers eyeing both purchase and eventual rebuilding.

And last but certainly not least, explore opportunities on the outskirts of popular estates. If District 15 and District 19 seem a tad out of reach, consider the promising territories of 12, 13, and 16, potentially serving as complementary locations if you have difficulties acquiring properties in the former. (Read our article on landed properties in Singapore that are both affordable and decently located.)

Transitioning from condo ownership to land-banking

Recently, we tackled a burning question from our viewers – the age-old debate of decoupling to grab another condo for that sweet rental yield or making the grand leap into the alluring realm of landed properties. (Intrigued? Read our responses here or watch the video below.)

Based on our experience, another dilemma among condo owners is whether they should ditch the condo scene altogether for the prospect of a landed property. Sometimes, after crunching the numbers, we discover that either the husband or wife has the means to take the plunge independently without relinquishing all their condo units. When that happens, we typically encourage them to land-bank, albeit with an entry-level landed property. It all boils down to the magic word – diversification. When you dive into the land-banking game, sure, there’s a bit of opportunity cost dancing around as you juggle mortgage payments and await that sweet rental cash flow. This is where holding positions in different segments of the property market helps. You can tap that condo of yours for passive income during this window of time, and you’d thank yourself for not consolidating the entire portfolio. If the prospect of land-banking in Singapore interests you, I’m happy to discuss how we may restructure your portfolio to make that happen. Reach out to me (Harvey Chia) at 9199 9141 for a non-obligatory chat.


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