Here’s a quick review on Leedon Green and how you would apply real estate investing research, principles and calculations before buying a unit in Leedon Green for homestay and/or real estate investment purposes.
The unit we will be analysing will be a 2 bedroom Unit, preferably mid-floor (4th – 8th floor) and also be comparing it with Leedon Residence which is 450m away.
This is not a review to tell you how awesome this development is, I will be doing this on a separate page of my website, under the listing section, and I’m sure that by now there are many other websites that are covering it and also not to mention the real estate agents that are stationed at the Leedon Green’s show flat who will have that information readily available for you to look through.
Also, I will only be comparing only one unit from Leedon Residence, which is not the usual practice. For my clients, I will usually compare 3 to 4 units based on what my clients want to compare with or based on the vicinity where the new unit is located (< 1km)
So what we will do here is a quick overview of Leedon Green before proceeding with the financial calculations which will compare closely with other developments (only Leedon Residence for this case study) and this will determine for you if it’s a worthwhile purchase that you should consider.
|Previously known as||Tulip Garden|
|Expected TOP||31st December 2023|
|Address||1 Farrer Road|
|Number of Units||638|
|Bedroom(s) Type||1 – 4 Bedrooms Available|
MCL Land and Yanlord Land Group bought the former Tulip Gardens for SGD 906.9 Million which works out to be around 1790 PSF. An interesting note is that this will be Yanlord’s (first established in 1993) first foray into Singapore’s residential market, all of their previous residential projects have been in China, most notably in Shanghai. MCL Land is a veteran real estate development company in Singapore which entered in 1969 and has been involved in multiple residential properties in Singapore. They are also the same developers behind Parc Esta near Eunos, which has been one of the best selling development for 2019.
|Developers Involved||MCL Land||Yanlord Land Group|
|Number of Residential Developments in Singapore (Previous)||10||0|
|No of Residential Developments in Singapore (Current)||3||0|
|No of Previous Residential Developments in Singapore (Future)||1||0|
|No of Overseas Residential Developments||2||Over 70|
Comparison between Leedon Green and Leedon Residence
|Development||Leedon Residence||Leedon Green|
|Launch Sales Price (psf)||2349||2802|
|Present Transacted Price (psf)||2682||2802|
This particular unit (#05-XX) for Leedon Green is selling at an indicative price of 1,961,100 SGD. Do enquire further if it’s still available if you are reading this after January 17 2019.
Calculation of Growth Rate (For Leedon Residence and General)
My research shows that in 2012, Leedon Residence was transacting for the following 2-bedroom unit at 8 Leedon Heights (#05-XX), 1044 sq ft
Transacting at 23 November 2012 – 2349 psf
Transacting at 8 Feb 2019 – 2682 psf
Time Period: 74 Months 15 Days (To be rounded down for calculation purposes)
The annual growth rate for Leedon Residence would be estimated to be around 2.15%. Naturally, the more units you use, the more data you have and the more accurate you will get. And as mentioned, I usually use 3 units from 3 different developments surrounding the unit I’m planning to buy to have a better estimate of the growth rate in that area.
The annual growth rate for CCR Region based on stats from December 2009 to December 2019 is 4.6%
Let’s just take this at face value. There are many ways we can discuss if we meet why the growth rate should be higher or lower.
Real Estate Investing Formulas used
Before we begin, note that these formulas are usually used for properties which are already existing, similar in age and size. Leedon Green will only be completed in 2023 and will be 8 years newer than Leedon Residence by then. See more in the conclusion section.
Gross Rent Multiplier
The Gross Rent Multiplier Formula for Leedon Residence for a 2-bedroom/ 2-bathroom unit is as follows
GRM = 2,800,000 /(5500 x 12)
= 42.4242 (Rounded to 4 decimal space)
With the following assumptions taken
- Sales Price of 2,800,000 SGD taken for 2 room for the only unit sold (#05-XX) for the year 2019 on 8 Feb
- Assumption of Annual Rent of 5500 SGD taken as an average for the year 2019 (No stats given for the floor level, lowest was 5000 SGD/ Month and highest was 6000 SGD/Month, both rented coincidentally on the same date 1 Jul 2019).
Income Capitalisation Method (Modified)
Using the Income Capitalisation Method Formula, the Cap Rate for Leedon Residence is calculated as follows
Cap rate = Annual Net Operating Income / Market Value
= (Rent Income – Property Tax – Property Insurance – Annual Maintenance Fees – expected Maintenance and Repair – Vacancies Loss) / Market Value
= (66,000 – 7860 – 120 – (492 * 12) – (2 * 5500)) / 2,800,000
Assuming the following
- Expected Maintenance and Repair is 0
- Maintenance Fee for Leedon Residence is assumed to be 492 SGD
- Vacancy Loss is assumed to be 2 months
Calculation for Leedon Green using Cap Rate and Gross Rent Multiplier
Using Gross Rent Multiplier for Leedon Green
For the assumption of rent for Leedon Green, there are 2 ways to go about it.
- Leedon Green 2 Bedroom unit is 700 sqft. Using 700/1044 x 5500 = 3687.74 SGD
- Using Property Guru and finding out the average rent for a 2 bedroom with the following filters used
- Residential Type Condo
- Within 1km to Farrer Road MRT (CC20)
- Less than 750 sqft
- 2 Bedroom
We get an average of 3500 SGD
(3200 SGD/Month for the Siena (678 sqft) and 3800 SGD/Month for The Asana (635 sqft))
For the worst-case scenario, let’s use 3500 SGD/Month
Using the GRM of 42.4242 to find the sales price for Leedon Green
Sales Price = 42.4242 * (3500 * 12)
= 1,781,816 SGD
Using Income Capitalisation Method for Leedon Green
Market Value for Leedon Green = Net Operating Income / Cap Rate
= (42000 – (290*12) – 4800 – 120 – 7000) / 0.0147
= 1,809,528 SGD
So judging from the calculations above, is Leedon Green, not a good buy considering the indicative pricing is at 1,961,100 SGD? Not necessarily because as mentioned, the formulas we are using are originally used for existing properties which are similar in age and with rental prices already available. We know this is not the case as Leedon Green will only be ready in 2023
In addition, we need to also consider the following points
- Leedon Green will be 8 years newer (2023 – 2015) than Leedon Residence.
- Leedon Green will be using smart home technology 8 years newer than Leedon Residence.
- The floor plans from Leedon Green and Leedon Residence are different. A quick google search shows that Leedon Residence floor plan includes large bay windows and planter boxes, both of which you are paying for but will be unable to use.
- Buying a unit at Leedon Residence instead would require renovation cost which can cost upwards of 50,000 SGD to 100,000 SGD and equipment/ appliance cost of 25,000 SGD to 50,000 SGD. If you will be taking the upper end of the renovation cost and equipment cost of buying a unit at Leedon Residence, then the price will be similar to what you will be paying for at Leedon Green launch price now
- The estimated rent we are using is of the worst-case scenario at 3500 SGD. What do you estimate the rent will be in 2023 for this area? If we use the growth rate of 2.15%, we can estimate that the future value of the rent price for a 2-bedroom 2-bathroom unit at Leedon Green to be around 3,733 which will further narrow the gap between how much the developer is charging now and the price we have calculated using the gross rent multiplier and income capitalisation method.
Congratulations! If you’ve read to this point, you are probably really looking at buying a unit at Leedon Green.
This is just a brief thought process on how I would go through with clients who are interested in buying a unit in Leedon Green.
If you are looking at buying a 2-bedroom/ 2-bathroom unit, I’ve already done for you 33% of the work. You can find out and do the same calculations for 2 other developments which are close to Leedon Green with similar facilities to get a more accurate Gross Rent Multiplier and Cap Rate for Leedon Green.
If you are looking at buying a 1-bedroom, 2-bedroom (other layouts), 3-bedroom or a 4-bedroom unit, why not send me a WhatsApp message (located bottom right) or a quick email via the contact form below and let me represent you in buying a unit
There are several advantages when I represent you in buying a new launch
- NO COMMISSION REQUIRED. Probably the biggest advantage. If I sell this development, the developer pays me the commission, not you.
- I do the real estate investing calculations for you. Not only will you have all the necessary information, the floor plans, the images, the pricing and discounts (if any), I will also show, explain and give you my professional opinion (good and bad), on whether you should buy this unit based on your requirements (either for homestay or for investment purposes)
- My obligation is only to you. You can look for me for advice for anything real estate related, any time and any day. I don’t work for Leedon Green. I have no obligation to sell this development for them and therefore, I have no need to pressure you to buy this unit. If you want to buy, buy, otherwise, we move on and will look out for another unit that is more suited for your needs.
- I am part of a team that is very strong in the financial calculation for buying a home in Singapore. If you are really looking to buy, my team will find different ways and different means to make sure you will be able to afford it. Throw us questions and problems you are currently facing and which your previous agents are unable to answer, let us impress you with what we can do to get you your unit.
Buying a condominium (especially for a new launch) for anyone is most probably one of the biggest ticket purchase in their lifetime
Think of me as your friendly real estate investor friend who’s doing you a favour to make sure the purchase of your new condo is really something worthwhile to purchase or at the very least, something that won’t lose you money in the future.
What are you waiting for? Let’s start!
The information provided on this Datacrunch Real Estate website has been compiled for your convenience. All information (including but not limited to the property area, floor size, price, address and general property description) on the Datacrunch Real Estate website is provided as a convenience to you.
This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.
Datacrunch Real Estate does not accept liability for any investment decision made on the basis of this information. This website does not constitute financial advice and should not be taken as such.