Are condos near hospitals a good investment? A look at 66 condos near Tan Tock Seng Hospital

Most Singaporeans consider a hospital near their condo to be disadvantageous. As most realtors will tell you, this is something that they would prefer not to mention unless a prospective buyer asks.

However, that's for owner-occupiers — some landlords have a completely different point of view, and even favour condos near hospitals. Why are they supposedly good for rental, and is the theory true? Let's have a look:

Homebuyer versus landlord considerations for condos near hospitals

For most homebuyers, the preference is to be further from hospitals. Some have certain taboos (e.g. Feng Shui reasons, or a desire to live far from places of illness and death); others have more worldly reasons, such as not wanting to hear ambulance sirens late at night, or concerns over the traffic congestion that hospitals attract. 

To some degree, Covid has also affected homebuyers' perspectives — some now worry that, in the event of another outbreak, they will be living closer to large numbers of afflicted patients. 

(This being said, some homebuyers don't mind being near the hospital, such as those who work there or require frequent treatment).

For landlords though, the situation might be reversed. Singapore has a serious shortage of medical workers, and we need about 24,000 more nurses by the year 2030. Singapore is expected to employ 4,000 more nurses by end-2034, and 60 per cent of them will likely be foreigners; and you know there are accommodation issues when even recruitment agencies are excited about hostels or nurses (see the linked report).

Simply put, our healthcare system is understaffed and very dependent on foreign workers. Because of this, properties close to hospitals — both HDB and condos — are considered good catchment areas for securing a constant stream of tenants. 

But as always, the theory is hard to prove 

It'll take a lot of time to do a huge islandwide study, and to our knowledge, even the major real estate firms haven't looked into this. In the property industry, the idea of nearby hospitals being "good for rental" is mostly just accepted as conventional wisdom.

So the next closest thing we could do was to look at one specific hospital — Tan Tock Seng Hospital (TTSH) — and its surrounding condos.

This was purely because of the number of private developments surrounding it, as compared to most other hospitals. We then looked at the average rental yield of the condos, and how it changed based on distance from the hospital:

Source: Squarefoot Research

From what we could see, the numbers are not really conclusive; and there are a lot of different factors at play (e.g., if a condo is more expensive, the average rental yield will be lower, even if tenants are paying more for it). And of course, this is something hard to isolate down purely to just the hospital factor. We have a bit more to say on this when it comes to pricing, below.

Regardless, we can see that except for Balestier 288, yields don't really improve as one gets closer to TTSH (also, Balestier 288 has high yields because it's not really a condo, just an apartment with no facilities and is hence cheaper).

It's possible that the advantage is simply rentability, and not rental yield

The two are not similar, as rentability only refers to how easy it is to find tenants. This still does impact the bottom line, as high rentability translates to a lower risk of vacancies, and lower marketing costs. 

Highly rentable condos, such as those close to universities, hospitals, or train stations, may even save the landlord from having to pay commissions; for these properties, the landlord may just need to stick notices at a bus stop* to find a whole host of willing tenants.

One realtor, who has helped to lease units near TTSH, also commented that there's a natural succession of tenants: 

"They (the workers who rent the unit) tend to come as a group, so you don't need to find tenants one by one; and if the rate is good they will refer the unit to their colleagues, so when one leaves, there is always someone who is interested in taking their place. For around the past three years, we haven't had to put up a listing, because there's this natural succession of tenants." 

However, the same realtor cautioned that the situation may be changing, given the push for hostel-style accommodations. He cited a recent case of five sites being refurbished as hostels for medical workers. Besides this, he noted that the majority of medical workers may opt for HDB flats rather than condo units, unless the landlord is willing to depress rental rates. 

So despite the bigger influx of new medical workers, landlords with condos may not be the main ones to benefit; although condo rentals may still appeal to a smaller group of higher-paid, more affluent medical workers. 

*This may not technically be legal, we're not endorsing it

Another possible factor to consider is the theoretically lower price of condos near hospitals

We don't know for sure if condos near hospitals are a lot cheaper; after all, the inconclusive rental yields above may also suggest that's not the case. However, we'd be remiss not to point out another theory that — because homes near hospitals could be seen as less desirable — they may even be cheaper and could provide better yields. 

Certainly, proximity to a hospital is one of the reasons used by buyers to lowball some sellers; whether that pans out will boil down to negotiating skills. But if this is true, we'd say it's a net negative for condos near hospitals, as that should also result in weaker appreciation. 

So to conclude, the idea of condos near hospitals being good for rental — especially in light of surging medical worker numbers — is just that, an unproven idea. It makes sense on paper, but there are too many variables for an investor to really bank on it. When shortlisting a condo, we'd focus more on the other elements — such as public transport access — rather than the presence of a hospital. 

We also suspect the benefits of being near a hospital may become more prominent as the years wear on: Singapore is an ageing society, and as more of us get older and need constant healthcare, the demand for being near a hospital may rise. 

For conditions like stroke and heart disease, which are leading causes of death, the last thing you want is to be 30 minutes away and stuck in traffic. One day, a home across the road from a "noisy hospital" may literally save your life.

ALSO READ: Recently MOP-ed 4-room HDB in Kallang has capital gain of $500k

This article was first published in Stackedhomes.