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Rental yield analysis (Singapore Private Condominium)

I wrote two articles on the Singapore rental market situation in November last year. You may refer to the articles here and here. After these articles were published, one of the readers approached me and asked if I had any analysis on the rental yield situation for Singapore private condominiums. This prompts me to research a bit deeper and this article will seek to shed some light on the rental yield situation.

It's actually not very straightforward to get rental yield information from the raw data available on the URA website. While it is easy to get transactional information such as $psf, rental yield is a processed data category which requires some manipulation of the raw data available from various data sources in URA website and I believe it is not easy for retail buyers/investors like us who did not register for paid services/data from URA website to obtain the rental yield information.

Fortunately, you are able to find rental yield information for quite a number of Singapore Private Condominium from squarefoot. In the list they provided, they highlight the rental yield for various projects based on transactions in the past 12 months and exclude any projects with 3 or fewer transactions. I think this is a good list for anyone who wanted to understand the rental yield of any specific project they have in mind.

Based on the list they provided, I went to do some analysis on the general rental yield situation for the private condominium market in Singapore.

Firstly, I'm interested to find out what's the median rental yield for Singapore Private Condominium. With initial analysis, the median rental yield value derived is 2.9%. If your unit is renting out at a yield higher than this value, then congratulations to you. You are getting a rental yield higher than 50% of the rental units for private condominiums in Singapore.

With this information, I am now curious to understand how individual districts perform in terms of rental yield. Do we have specific districts which are more likely to have more units renting at a value above the median rental yield?

Eager to find out more, I went on to find the percentage of units who are renting out at a value above the median rental yield (which is 2.9%) in the individual districts.

Here is the graph plotted.

The y axis represents the percentage (with 1 being 100%). If 8 out of 10 projects in a particular district enjoys a rental yield above 2.9%, the percentage is then 0.8 (representing 80%).

At the first glance, you will almost notice that the very popular districts (eg. districts in Core Central Region (CCR) such as D9, D10, D11 and D15) have pretty poor percentages of units in their area which are renting above the median rental yield of 2.9%. This is probably due to the high quantum of the units transacted in these areas and hence it's hard to be getting a decent rental yield in these districts. So, you will know that these districts are those which you should be avoiding if you are looking to buy/invest in a private condominium unit for rental income. (more information on specific projects which have positive $psf growth and above median rental yield will be published on my Patreon page)

Now, let's sort the graph a bit to see which are the top few districts with a high percentage of units in their area renting out at a value above the median rental yield of 2.9%.

The top few districts are those which belong to the Outside of Central Region (OCR). They are namely D25 (Admiralty, Woodlands), D27 (Admiralty, Sembawang and Yishun) and D18 (Pasir Ris, Simei and Tampines). This is no surprise as the quantum of the private condominiums in these districts are relatively low compared to the other districts and hence they enjoyed a high rental yield. In the recent analysis on the growth of $psf in the various districts in Singapore, D18 (Pasir Ris, Simei and Tampines) came out as one of the districts with the highest $psf growth in the past 3 years. Given that D18 also appears as one of the top few districts in the graph above, I think that buyers/investors of private condominiums in this area have many reasons to be happy as they are holding on to units which enjoy both high rental yield and high $psf growth in the recent years.

Generally, you have most of the districts having more than half of their units renting above the median rental yield of 2.9% as shown in the graph above. There is a sharp drop in the percentage when we move towards the end of the graph as the last few districts have really low percentages of units renting above the median rental yield of 2.9%.

Besides districts, I'm also curious to understand if the number of yields since completion of the project has an impact on the rental yield. And here is the graph.

This is a breakdown of the same metric (percentage of units renting above the median rental yield of 2.9%) compared against the number of years since TOP. It's probably a bit hard to make sense out of the data available here. So, let's organise it a bit more into various categories.

When we sort out the years into various categories (eg. 0 to 5, 6 to 10 etc), the trend seems to be more obvious. Units which are newer (lesser number of years since TOP) tend to have a higher tendency to warrant a rental yield above the median value. I believe this is probably due to the fact that the newer units are generally more attractive to the tenants and hence warrant a higher rental price which then results in a higher rental yield despite the higher quantum of the newer units.

As the number of years since TOP increases, the percentage of units having an above median rental yield tends to go down (with two outliers- 11 to 15 and 26 to 30 dipping more than the general trend).

So if you are looking to buy/invest in a private condominium for rental income, it might be worthwhile to consider the newer units instead.

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