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How to unlock the value of your landed home: Tips I shared at a private HSBC event

For youngsters these days, property is always going to feel a little out of reach, thanks to those pesky skyrocketing prices. Gone are the days when you could own multiple properties under your name and leverage them. Additional buyer’s stamp duty has become the public enemy among Singaporean homeowners. Against this backdrop, is property still the holy grail of legacy planning? Well, I dare say there's no one-size-fits-all answer to that. We need a balanced approach, like a well-curated portfolio of assets. However, let's face it, most Singaporeans gravitate towards property like a moth to a flame. Landed homes in particular are a tried and true method of preserving wealth, since it’s highly protected for Singaporeans and typically undisturbed by new policies. What better basket is there to put your eggs in?

But the brutal truth is it's never been tougher to amass that elusive next property, let alone pass one down to the next generation. If you’re sitting on a landed home, what can you do to maximise its value?

First, let’s look at how the segment has fared in the last ten years.

How’s the landed homes segment performing?

In general, the property market has been on a wild roller coaster ride since 2020. When the borders finally opened in 2022, Singapore's interest rates soared from nearly 0% to over 4%. Despite this sudden spike, property prices have defied gravity and continued their upward trajectory. It turns out the price of construction has skyrocketed thanks to global events like the Ukraine war, causing a ripple effect across various sectors, including the cost of new shiny things like cars.

Now, let's zoom out and take a look at the market's growth over the past decade. You’d then realise that a significant chunk of this growth has happened only recently, like a sudden growth spurt during puberty. The last two years were accountable for

  • 33% of the 10-year growth in new launches

  • 16% of the 10-year growth in resale condominium

  • 47% of the 10-year-growth (a jaw-dropping 108%) in the landed homes segment

What can we glean from all this data? Well, it seems like buyers are discovering that landed homes have been quietly undervalued. Likewise, in 2021, I sold out and traded into a bigger piece of land. Demand and supply equations aside, the smart move in a low-interest-rate environment where everything is scaling up is obvious: trade up.

Just how scarce are landed homes today?

It’s time for some quick maths. There are only 73,356 landed homes in Singapore, of which 2,700 are GCBs. After subtracting leasehold landed properties and bungalows that cost above S$10 million, we’re left with an inventory of around 50,000 semi-detached homes, inter-terraces, and corner terraces. And no, cluster homes aren't part of the equation.

If you happen to be the proud owner of one of these prized landed homes, congratulations. You hold in your hands a golden ticket, a truly coveted possession. It's like owning a limited edition Patek Philippe watch or a rare collaboration piece by Tiffany & Co. Now, brace yourself for a dash of reality. Accessing this prestigious market is becoming tougher than ever. Today, in a decent district, a freehold inter-terrace will easily set you back a cool S$3.5 to 4 million. Just a year and a half ago, that same amount of money could have gotten you a luxurious corner terrace or a spacious semi-detached home. Times have changed.

So, if you're currently nestled comfortably in a landed home, how can you unlock its true value?

Strategy 1: Gearing up

Despite all the quantitative easing measures in the past few years, the property market has stubbornly continued its upward climb. It seems like not many people are leveraging their properties, but those newbies entering the market today might be gearing up for some leverage action tomorrow. I mean, think about it. If you've already paid off your home in full, why not take a loan against it? For a swanky S$10 million home, you could easily extract S$3 million without even selling the house, and use that money to diversify your portfolio. Of course, you'd have to take out a mortgage to make this happen, but there are ways to be clever about it. Back in 2019, when I had the pleasure of speaking at a similar event in the glamorous Four Seasons Hotel, I emphasised the importance of reviewing your mortgages. Just recently, I had a conversation with a client who confessed that she hadn't given her mortgage a second thought in the past 13 years of living in her home. Can you guess what her mortgage rate was? A whopping 5.8%. I was left speechless, to say the least.

Remember, my friend, savings are victories too. If interest rates start to climb and you sit back, doing nothing about it, you could find yourself on the losing end.

Strategy 2: Recycle

I've got to admit, I've had my fair share of real estate education and 16 years of corporate training in the field. But let me make one thing clear: I'm not here to chant "the more, the merrier" when it comes to property. Sometimes, too much of a good thing can turn sour. It's all about finding that delicate balance.

In your portfolio, that means evaluating whether your assets are pulling their weight. It's about learning to recycle those underperforming properties by putting them up for sale and giving your portfolio a good old restructuring. Instead of holding onto that extravagant S$15 million mansion, a balanced portfolio might involve selling it and using the funds to purchase three separate landed homes for your children. It’s like solving a jigsaw puzzle of estate planning in advance, ensuring everyone has their own roof to call home. Sounds a bit morbid, but it's about dividing your estate wisely.

Interestingly enough, many young couples in the "new rich" category are already embracing this approach to enter the coveted landed homes segment. Read more about that here.

Strategy 3: Legacy planning

Another avenue to unlock the true value of your cherished landed home is through the art of legacy planning, and it's not always about cold, hard cash.

Picture this: You realise that your children or grandchildren are facing an uphill battle in affording their own property. You offer them the shelter of your own roof, allowing them to use their initial years to hedge their bets. They can buy a condominium and lease it out for a couple of years before making it their own cosy abode. By providing them with this buffer period to save up before diving headfirst into the tumultuous world of adulthood, you're giving them a valuable head start in building their own portfolio.

See, legacy planning isn't just about passing on stacks of money. It’s about giving them a known outcome in times of uncertainty, and setting them up for success.

Strategy 4: Rebuilding

And now, my friend, we arrive at the final piece of this captivating puzzle. As someone who embarked on this journey personally in 2022, I can't stress enough the importance of rebuilding. It's the key reason why I wholeheartedly advocate for clients to consider investing in landed properties rather than settling for a condominium penthouse.

You see, unlike condominiums that are limited to upward construction and have restrictions on modifications, owning land gives you the freedom to stretch your imagination. With the right zoning, you can build up to three storeys and beyond. When it comes to maximising the potential of the space you currently own, nothing beats the efficiency and effectiveness of rebuilding. When it comes to optimising the space you currently own, it does not get more efficient than rebuilding.

Moreover, with homeowners eagerly jumping on the bandwagon of extravagant makeovers showcased on social media, we can expect the renovation industry to boom. The interior design firms that excel in their craft will thrive, and the prices of renovations will soar to new heights.

Picture this scenario: A savvy individual buys a house for S$500,000 and invests an additional S$150,000 in renovations. It's highly unlikely that they would sell the house for anything less than S$650,000, as it would require some serious psychological hurdles to overcome. In the future, we can anticipate that beautifully renovated homes will command a premium price, and landed properties are certainly no exception.

Maximise the potential of your landed home today

From an economic perspective, it's simply not feasible for the inventory of landed properties to grow exponentially. It's a limited and finite resource. If you find yourself in possession of one of these highly coveted properties and suspect that you're missing out on the potential opportunities the market has to offer, fear not. There are strategic manoeuvres you can make to seize those opportunities and make the most of your prized asset.

If you're curious and want to explore your options further, don't hesitate to reach out to me (Harvey Chia) for a non-obligatory chat at 9199 9141. If you enjoyed this article, you may also like: My predictions for the landed segment beyond 2023, based on 16 years of experience Buying landed property in 2023: How I help clients navigate the hard truths Been there, done that: Pro-tips on rebuilding a landed home in Singapore


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