True Case: People’s Park Complex | Condo@$1m, 6% Yield

📌True Case Intro:

People’s Park Complex is a very rare gem that you should at least take a look. It was brought to my attention by a client, which made very good investment option: Good location, $1m prices, 6% rental yield and en bloc potential

As real estate agents, we will sometimes also miss out on unpolished gems. Without this client of mine, I don’t think this is a development that will come under my investment radar

3 key selling points

1. Good location: Near 3 MRT stations
2. Affordable Prices: About 1 million budget
3. High Rental Yield: 4.5 – 6 %

📌About People’s Park Complex

Located at the foot of Pearls hill. Formerly known as the people’s market with lots of outdoor stalls. The original market was destroyed by a fire in 1966. The new people’s park complex was rebuilt into one of the earliest mixed-use building of its own in Southeast Asia.

People’s Park Complex is near 3 MRT stations (Outram Park, Chinatown & Future Maxwell Station). The lease tenure is from 1968, with a remaining lease of less than 60 years. This is likely the biggest single factor why many people will avoid this development

📌Prices

On average, the per square foot prices is about $800+, based on 2021 transactions. If we zoom into the specific unit type with a size of 1,100-,1200 square foot, we are talking about an average of $9xxK+ or a little bit below a million. This amount is actually a very comfortable budget for many investors.

📌High Rental Yield

According to Square foot Research (updated Feb 2022), the average rental yield is about 4.5% (i.e., average of all unit types) In our case study, we will focus on the 1,100 to 1,200 square foot units only.

For this particular unit type, they are recorded as “three bedrooms” type. But in actual fact, many have been partitioned into units with five to six rooms or even more. The rental yield for such units can go as high as 6% (Refer recent listing in propertyguru).

In Singapore, by law, you’re not supposed to have more than 6 unrelated tenants for private property. So my client and I concluded that we should only look at the 1,100 to 1,200 square feet units that are already partitioned into five bedrooms, or max six bedrooms

The market rate for room rental is about $1,200/month for a unit in such prime location. If all 5 rooms are rented out, the total gross rental income will be $1,200 X5 = $6,000. Assuming that you have invested $1 million, the gross rental yield will be 6%. That’s why I say this rental yield is quite high.

📌Calculations

Assuming you can take 30 years maximum loan and the interest rate is currently about 1%, the monthly mortgage will be about $2,400+ per month. You will still have much spare case if all 5 rooms are rented out What if the interest rate increases?

Assuming that interest rates rise by double to 2%, your monthly mortgage will be about $2,700+, which is still very attractive

📌En Bloc Potential?

This is actually a very old-style architecture in Singapore, which was very popular in 1950s-1970s. The original people’s park complex had a very raw and cement-like outlook.

The current retro yellow and green retro colors were added later This building is very iconic and you can see it wherever you are in the Outram park area.

Although it’s very prominent, but it really never crossed my mind until my client mentioned this development to me. This is a True-case, Real-Story, which sounds like a brilliant investment.

📌This project might not be for everyone.

The remaining lease is less than sixty years and there is lease decaying factor. Also en bloc is not guaranteed. There have been a few attempts at collective sale, but they were blocked by the commercial owners, who do not want to vacate their shops.

Basically, it boils down to a case of residential owners versus the commercial owners. I think it is only a matter of time, especially as the building continue to age with much wear and tear.

For those who drive there, you will realize that the carpark lots are very narrow and unwelcoming. So given time, with more electric cars and new technology, the building maintenance will become a problem or hazard. All in all, this is a long-term investment, which may not be for everyone

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