Overall gross rental yields of non-landed private homes in Singapore range from 2.7 percent to 3.9 percent, according to an OrangeTee report.
Based on developments tracked by the consultancy, average rental yields in the Core Central Region (CCR) are about 2.7 percent to 3.5 percent, while the Rest of Central Region (RCR) are around 2.8 percent to 3.6 percent. But projects in the Outside Central Region (OCR) command the highest rental yields of between 3.2 percent and 3.9 percent.
In addition, there are 34 non-landed developments in the city-state that have rental yields of at least four percent and these rental gems have common characteristics. First, the majority (19) are located in the OCR, given the lower prices of suburban properties.
“As prices are one of the main determinants for rental yields, and since prices in the suburbs are usually relatively lower compared to the central region, the rental yields for suburban projects tend to be higher,” noted OrangeTee.
Second, 29 or 85 percent of them are 99-year leasehold projects due to the relatively lower psf price versus freehold homes.
“As tenants are generally not concerned about the tenure of the property, leasehold properties tend to have an advantage as compared to freehold when looking purely at rental yields,” shared the consultancy.
Developments with a large proportion of shoebox units also have higher gross rental yields. Suites @ East Coast has a large proportion of units under 50 sqm and has the highest rental yield of 5.7 percent among the 34 non-landed projects.
“However, one should not blindly jump onto the shoebox bandwagon. The performance of shoebox units is not homogeneous across the market, one should consider the rental demand and available supply of such units in the vicinity,” stated the report.
Interestingly, 20 of the 34 non-landed private residential projects are not within walking distance of 400 metres or less from an MRT station.
“This is understandable because projects located near MRT stations command a premium over projects located further away,” said OrangeTee. Although some tenants are willing to pay higher rents for a convenient location, there may be differences in rental and sale premiums.
“This would explain why projects that are relatively inaccessible are still able to command high rental yields,” added the report.
The non-landed developments studied have more than 100 units, while the resale prices span from Q2 2014 to Q1 2015. To mitigate the effects of outliers that could skew rental yields, projects with fewer than 20 rental transactions and five resale deals were excluded. Privatised HUDCs and executive condominiums (ECs) were also omitted. Consumers should note that gross yields do not include other costs, such as maintenance fees and vacancy costs.
Below are the top five non-landed private residential projects with the highest gross rental yields.
1. Suites @ East Coast
Region: OCR
District: 15
Close to MRT: No
Tenure: Freehold
Average Rent: $5.42 psf
Sales Price: $1,140 psf
Estimated Gross Yield: 5.7 percent
2. The Clift
Region: CCR
District: 1
Close to MRT: Yes (Tanjong Pagar)
Tenure: 99-Year
Average Rent: $7.36 psf
Sales Price: $1,858 psf
Estimated Gross Yield: 4.8 percent
3. Vista Park
Region: RCR
District: 5
Close to MRT: No
Tenure: 99-Year
Average Rent: $3.44 psf
Sales Price: $886 psf
Estimated Gross Yield: 4.7 percent
4. Park West
Region: OCR
District: 5
Close to MRT: No
Tenure: 99-Year
Average Rent: $2.87 psf
Sales Price: $745 psf
Estimated Gross Yield: 4.6 percent
5. Rivervale Crest
Region: OCR
District: 19
Close to MRT: No
Tenure: 99-Year
Average Rent: $2.81 psf
Sales Price: $759 psf
Estimated Gross Yield: 4.4 percent
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