The coronavirus (‘COVID-19’) has already wrought havoc and extreme volatility to the equities market, with the Straits Times Index (‘STI’) declining more than 20% from its highest peak in 2020. Likewise, property investors are also looking for similar signs to emerge in the Singapore residential market. Therefore, when EdgeProp ran an article “Freehold duplex at Palmera Residence going for $1.38 mil” last month, it inevitably attracted the attention of plenty of bargain hunters. Such a title is definitely click-baity and eye-catching, because it translates to only $922 psf for a freehold property built in 2011 and located in District 15. With a cheap freehold condominium for sale at $922 psf, what’s the catch? Since the Circuit Breaker is still in place, Heartland Boy could only perform a desktop analysis. Here is his review of why this cheap freehold condominium is not exactly cheap.
Looks Cheap On The Surface
Boasting 1,496 sqft, the bank is offering that particular unit at $1.38 million ($922 psf) via private treaty. At $922 psf for a freehold condominium located in District 15 (probably the most prized region in the east of Singapore), it is almost selling at fire sale price on all counts considering that:
- New launches such as Meyer Mansion are going at $2,700 psf
- Resale units at neighbouring Prestige Loft and Saint Patrick’s Court also fetched prices in the region of $1,100 to $1,300
- Within Palmera Residence, 2BR transacted at a range of $1,100- $1,200 psf in the past 2 years as shown in Diagram 2
Note that all comparables used are freehold condominiums as well. However, upon further analysis, there is a reason why this cheap freehold condominium appears cheap on a psf basis.
Usable Space Is Not Truly 1,496 sqft
A major reason why this particular unit appears cheap is because the Private Enclosed Space (‘PES’)* and private pool are included in the net saleable area of 1,496 sqft. As a duplex apartment, the PES and private pool are located on the first floor, together with the kitchen, dining, study and utility room. The second floor consists of the living room and the master bedroom.
*For those that are not familiar with this technical term, kindly refer to the definition provided by URA
Since amenities such as PES and private pool do not fully translate into liveable space, the nett usable area is a much smaller area than the 1,496 sqft presented. By referring to its floor plan as shown in Diagram 3, here is a guesstimate on how much actual usable area is left after deducting the private pool and private enclosed space.
1) Private Pool
According to the EdgeProp article, the private pool is estimated to be around 2.5m by 4m in size. That takes away approximately 8% of the saleable area. Since the article did not cite the dimensions of the pool deck, it can be estimated at approximately ~5% of the saleable area. Therefore, the existence of a private pool removed about 13% of the usable space.
2) Private Enclosed Space
Once again, from a desktop inspection, it appears that the PES occupies 4% of the saleable area. Heartland Boy acknowledged that it is probably too dismissive to discount the utility of a PES completely because some homeowners take it as an opportunity to set up a home garden, outdoor dining etc. However, one must realise that a PES in a strata condominium needs to comply with both Building and Construction Authority (‘BCA’) regulation as well as Management Corporation Strata Title (‘MCST’) guidelines. This somewhat limits the full potential of what a homeowner can do with his/her PES as compared to the interior of the house.
Finally, from the listing on PropertyGuru, it is likely that there would be balcony adjoining the living and master bedroom on the second floor. That could be another 5% of the saleable area. All in, Heartland Boy thinks that up to 22% of the saleable area (1,496sqft) belonged to PES, Swimming Pool and Deck, Balcony and aircon ledge. If one applies a 50% discount to the price of such non-usable area, it would reflect approximately $1040 psf for this unit. It is still a tad lower than the recent transactions, but definitely not screaming cheap.
Limited Resale Liquidity
The layout of this ground floor duplex is undoubtedly unconventional. A private pool within a condominium development- well, you either love it or hate it. The “hate it” group will baulk at the $100 and upwards expenditure per month to maintain a private pool. Note that this does not include the usual maintenance fees paid to the MCST. This is a maintenance task that not many homebuyers are prepared to pay. Therefore, the cost and hassle of upkeeping a private pool will turn some homebuyers away immediately.
Bargain hunters might also be turned off by the fact that up to 22% of the saleable area (for emphasis, this is a desktop examination of the ground floor floor plan and photos online) cannot be used as living space. Finally, it is not near the upcoming Thomson East Coast Line MRT either. What these add up to is that its resale liquidity is likely to be limited as its pool of interested and genuine buyers shrink considerably, freehold condominium or not.
What Heartland Boy is certain is that property prices will fall and are probably falling already as sellers adjust to the new reality. However, more due diligence has to be applied in ascertaining whether one is presented with a good deal as the devil always lies in the details.
For prospective home-owners who need help on choosing your property, here’s my experience of how I analyzed and selected my HDB BTO unit.