How much would you have made if you invested $1m in Singapore property?

Yes, it is a very common question that's been used for clickbait, but this isn't another advertisement. Rather, it's a closer look at this topic, which rears its head once every few years (or when we've had a slow news week, which prompts some sites to bring up this question again.)

We want to take a deeper and more nuanced look at this question: would sinking $1 million into property a few years back actually make you money? Or would it have ended in a loss instead? Here's how the actual numbers and transactions have played out:

A look at average returns, based on the year you buy

Not all years in the Singapore property market are the same. There are years when there are little changes in the market; and there are weeks when the market sees more change than it has in decades. 

Cooling measures, which tend to take place overnight, are one of the main reasons. It was, for instance, the Additional Buyers Stamp Duty (ABSD) that abruptly robbed the property market of its momentum in 2013; and this means that buyers who bought close to the date saw weaker returns (i.e. they bought when prices were highest, and subsequently fell.)

Take a look at the difference in gains, for those who bought in 2013 and 2014:

Given average annual returns of 9.2 per cent, we can see that those who bought near the peak of a property cycle clearly fared worse. 

There are those who bought at the peak and still managed to see better returns; but these would be the ones with longer-than-average holding periods, such as those who waited till around the start of Covid-19 before selling.

That said, it is a bit surprising that those who bought in 2016 didn't see the highest average gains; this was close to the last trough, when prices had descended significantly from 2013. Returns from the pandemic period (2020) managed to surpass even 2016, with 17 per cent returns. 

If there's an important lesson to take away from the property cycle, it's that a good investment requires two correct consecutive decisions.

You don't just need to buy at the right time, you also need to sell at the right time. This is what makes timing the property market so difficult, and the reason so many realtors, analysts, financial advisors, etc. tend to recommend against market timing strategies. 

Even if you make one correct decision, there's a chance the subsequent one will be wrong (e.g., you wisely waited till 2016 to buy at a low, but then missed the pandemic peak, so now you have to sell when ABSD rates and replacement property costs are even higher.)

It also matters whether you buy new, instead of resale

One of the advantages of buying new (i.e. direct from the developer) is the potential to take advantage of early pricing. Assuming you buy in the earliest sale phases, your gains tend to be stronger. 

Developers usually* raise the prices in later phases, and units are at their most expensive after the Temporary Occupancy Permit (TOP).

Simply put: if you buy with an early bird discount of 10 per cent, you've already made a 10 per cent profit a few months or a year later, when the developer "normalises" the prices. That's the theory anyway… but is it true?

Here, we filtered the results to reflect only those who bought new, and sold later:

Year	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
2013	$44,927	6.6per cent	7.3	1,333
2014	$69,575	10.8per cent	6.7	617
2015	$107,863	16.4per cent	6.1	518
2016	$94,695	13.7per cent	5.7	391
2017	$88,870	12.2per cent	5.0	294
2018	$81,912	11.4per cent	4.7	60
2019	$82,427	11.2per cent	3.8	14
2020	$49,940	6.9per cent	3.3	2
Grand Total	$70,613	10.4per cent	6.5	3,229

Note that for 2020, there were only two units that were bought new and then resold. These units underperformed against the average, but we can't read too much into that, given they were the only two transactions. 

Besides that, do bear in mind there's one element not accounted for here: that's rental income. If you actually rent out the property, the new development can't be rented out until it's complete, which may take around three years. A resale unit, on the other hand, can be rented out immediately. This is something that's missed out if you only look at resale gains.

*This is not always guaranteed. Read here for details on how developer pricing tends to work. 

Next, we looked at resale-to-resale gains instead, to see how the whole "early bird discount" theory plays out.

Year	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
2013	-$43,453	-4.6per cent	6.8	309
2014	-$4,075	-0.2per cent	6.3	200
2015	$24,374	3.3per cent	5.6	190
2016	$63,284	8.8per cent	5.0	248
2017	$62,317	8.7per cent	4.2	384
2018	$63,967	8.9per cent	3.8	317
2019	$101,807	15.2per cent	3.4	137
2020	$120,163	18.6per cent	2.8	62
2021	$98,921	14.6per cent	2.0	14
Grand Total	$39,266	5.9per cent	4.9	1,861

The first thing we notice is that most transactions are resale-to-resale. These account for the bulk of the price movements in the market. 

Some of the resale-to-resale transactions saw greater gains than new-to-resale transactions; but on average, the returns for resale-to-resale were lower between 2013 to 2018.

Year	New to Resale	Resale To Resale
2013	6.6per cent	-4.6per cent
2014	10.8per cent	-0.2per cent
2015	16.4per cent	3.3per cent
2016	13.7per cent	8.8per cent
2017	12.2per cent	8.7per cent
2018	11.4per cent	8.9per cent
2019	11.2per cent	15.2per cent
2020	6.9per cent	18.6per cent

There doesn’t seem to be a clear answer, as to whether buying new or resale is better. Narrowed to transactions of $1 million or below:

• Those who bought new launches prior to 2019 saw higher gains. but
• Those who bought resale units in 2019 or later saw higher gains

Besides this, the disparity in volume of transactions, between those who bought new versus resale, is very large. This adds to our inability to draw any clear conclusion. 

Comparing based on size

With your budget of $1 million, would you have been better off buying a bigger unit, or a smaller one? Let’s have a look, starting with those who bought new launches:

Size	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
500 sq ft or less	$73,159	11.9per cent	6.5	1374
500 – 1,000 sq ft	$69,654	9.5per cent	6.6	1822
1,000 sq ft or more	$17,572	1.9per cent	6.2	33
Grand Total	$70,613	10.4per cent	6.5	3229

For new launch buyers, it seems that units that are 500 sq ft or less (one-bedders and shoebox units) saw higher average returns of 11.9 per cent.

Note that the number of transactions for above 1,000 sq ft and more only recorded 33 transactions, which is understandable given the quantum, but makes it hard to draw any meaningful comparisons.

Next, we look at those who bought resale units:

Size	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
500 sqft or less	$39,870	6.8per cent	4.8	513
500 – 1,000 sqft	$52,602	7.3per cent	4.9	902
1,000 sqft or more	$11,599	2.0per cent	5.1	446
Grand Total	$39,266	5.9per cent	4.9	1861

The results are broadly similar, with smaller units seeming to attain higher average returns. This is, again, likely due to their lower initial quantum to begin with. It’s worth noting however, that at 1,000+ sq ft (the size of 3-bedders in many older condos, or four-bedders in newer ones), there is little difference in gains.

This may be due to the buyer demographic involved. Purchasers of single-bedders are more likely to be investors, looking to rent out the unit; but buyers of larger units tend to be families, as well as HDB upgraders. 

Prices may be less flexible when dealing with family buyers and HDB upgraders, who aren’t going to pay more even if the rental market is strong (unlike a landlord, who might just do that for a one-bedder in a highly rentable location).

Going by freehold versus leasehold properties

If you had bought at a $1 million budget, would you have done better with a leasehold or freehold property? 

Tenure	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
Freehold	$26,076	3.9per cent	5.9	1,288
Leasehold	$71,498	10.5per cent	5.6	4,954
Grand Total	$61,835	9.2per cent	5.7	6,373

Leasehold developments saw better returns. It’s perhaps unsurprising, as freehold projects generally have a premium of up to 20 per cent over leasehold counterparts; and given the holding periods of ages of the projects, there hasn’t been sufficient time for lease decay to impact resale gains (so freehold “immunity” hasn’t helped with gains).

Next, we looked at new-to-resale transactions:

Tenure	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
Freehold	$14,422	2.1per cent	7.1	469
Leasehold	$81,635	11.9per cent	6.5	2,642
Grand Total	$70,613	10.4per cent	6.5	3,229

There were a lot more leasehold transactions, since most new launches are leasehold. The results are consistent with the wider average though, with leasehold outperforming freehold counterparts if bought new.

Next, we look at resale-to-resale transactions:

Tenure	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
Freehold	$41,959	6.3per cent	4.9	676
Leasehold	$37,565	5.6per cent	4.9	1,174
Grand Total	$39,266	5.9per cent	4.9	1,861

There’s much less disparity between freehold and leasehold performance, if the property was bought as a resale unit. 

Based on all the above, we could see that — if you had invested $1 million in the past years — the best results would likely have come from buying a smaller unit, leasehold new launch property.

Finally, we'll look at which district would have given you the best return on your $1 million. 

Again, we’ll divide this between new launch and resale, as the results can be quite different:

New to resale

District	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
28	$128,336	20.4per cent	6.3	263
18	$92,459	13.7per cent	6.8	467
5	$96,994	13.6per cent	5.4	138
22	$99,731	13.2per cent	6.9	97
20	$86,345	12.4per cent	6.4	125
13	$79,327	11.6per cent	6.7	189
3	$87,263	11.0per cent	6.2	160
19	$73,117	10.3per cent	6.6	478
27	$70,771	9.9per cent	6.4	132
10	$78,787	9.0per cent	7.3	11
17	$48,243	9.0per cent	6.8	163
21	$39,851	8.9per cent	6.4	133
7	$74,450	8.8per cent	7.5	5
8	$63,105	8.7per cent	7.4	19
23	$51,918	7.4per cent	6.5	235
14	$39,087	5.5per cent	6.3	308
9	$30,675	3.6per cent	6.6	12
12	$21,590	3.6per cent	7.1	80
15	$9,080	1.7per cent	6.9	29
16	$10,955	1.7per cent	7.0	178
25	-$9,150	-1.4per cent	6.1	1
2	-$16,050	-1.6per cent	7.5	4
11	-$47,500	-4.7per cent	5.2	2

Resale to resale

District	Avg $ Returns	Avg per cent Returns	Avg Holding Period	No. of transactions
1	$33,750	9.8per cent	4.4	4
21	$59,714	9.8per cent	4.1	21
17	$56,304	9.3per cent	4.7	101
15	$59,595	8.7per cent	5.1	144
28	$60,092	8.3per cent	4.7	33
2	$63,072	8.2per cent	4.6	18
13	$57,442	8.0per cent	4.2	19
7	$52,769	7.8per cent	4.7	13
20	$58,720	7.8per cent	5.0	25
14	$49,929	7.6per cent	4.5	197
16	$46,451	7.4per cent	4.8	69
19	$52,625	7.4per cent	4.5	220
3	$42,500	6.5per cent	4.1	8
27	$44,638	6.5per cent	4.8	113
18	$41,182	6.0per cent	4.8	186
10	$45,797	5.7per cent	4.7	29
9	$46,263	5.7per cent	5.2	19
22	$34,916	4.8per cent	5.1	32
12	$24,430	3.8per cent	5.2	110
26	$27,397	3.4per cent	5.6	19
23	$20,908	3.4per cent	5.2	189
25	$14,314	2.8per cent	5.7	184
4	$24,000	2.7per cent	4.8	2
8	$1,182	1.0per cent	4.9	42
5	$3,488	0.8per cent	5.4	42
11	$1,264	-0.3per cent	5.6	22

District 28 (Seletar and Yio Chu Kang) is the best performer, topping the list for those who bought new launches, and being at least in the top five for those who bought resale. 

This is broadly consistent with what we've seen over the last few years, as the OCR areas have been rising in price (and also due to more new projects being launched in these areas).

Some examples include the very successful High Park Residences and Parc Botannia. So although these are the results, we wouldn't jump to any conclusions; this isn't an endorsement of District 28 as having the best properties, by any stretch.

Overall, you can see that most people who invested $1 million into properties would have seen positive returns; but whether those returns are sufficiently high, is a matter for them to compare against the rest of their portfolio. 

ALSO READ: Can shoebox units see strong capital appreciation? Here's where the most profitable ones are

This article was first published in Stackedhomes.