Inter-Terrace fully maximize GFA or just Reno? Which make more sense?

[DaddyJP 1]

Hi all, 

Just bought an inter-terrace 2 levels.

Land size 1900 sqf, build-up 2400 sqf which is  quite sufficient for my family of 5. 

Although the house is in original, but condition is quite ok as the current owner take very good care of it. Regular maintenance and upgrades were done along the years.

Now, I am at the cross-road to decide between (a) just a Reno, which cost about $350k~$450k (b) rebuild to maximize the GFA, which cost about $1.4m or maybe more. 

Pros and Cons have been assessed, they are pretty balance at this point... thus it all come down to this - will the $1.4m spend retained as the value of the property? 

 

I have been reading this forum for quite some time, found that there are a good spread of participants... investors, home owners, contractors, passionate people... 

Hope to gather opinions and experiences here to help me to decide.  Thanks much! 

[snoozee 97]

it seems that many people who buys a landed house wants to rebuilt to maximise the GFA.

a landed house provides the owners the opportunity of having a private outdoor space which most apartments would not have. my personal opinion is that if the owners are not going to make use of this outdoor space, then might as well buy a condo which saves the headache of home maintenance. most older houses would have been built without the GFA being maximised so as to provide a balance between indoor and outdoor space. of cos an architect could design a new house with this in mind as well to maximise the upper storeys while still providing enough outdoor space for the 1st storey.

my suggestion is for you not to be fixated on the GFA but focus on what you plan to do while staying in the house and your lifestyle. also think about how long you are planning to stay in this house. if this is going to be your retirement home, then it might be better to just rebuilt it now and then provision for a home lift and spaces which allows for unobstructed movement. if it's just going to be short term (5 or 10 years) then maybe just do a simple renovation would be enough.

[DaddyJP 1]

Hi Snoozee, Thanks for your input. Understand where you are coming from. However would like to push this discuss towards the perspective of investment. 

Say, the current purchase price is $2.3m, rebuild (max GFA) cost of $1.4m. If I were to sell in 5 to 10 years time and assuming the market remains constant, would the selling price now be $ 3.7m +/- $150k?  Sorry about the novice question... 

 

[snoozee 97]

If your purchase price is 2.3M now and you rebuilt it at 1.4M then sell at 3.7M you will still lose money due to stamp duties and bank interest. 
 

a simple way to see if your “investment” is sound or not is just check how much are the brand new houses around your area is being sold at today. If the transacted prices are more than 3.8M, then you are unlikely to lose $$$. But what will happen in 10 years time no one will know or can predict. 
 

singapore has less than 80,000 landed houses. So the land price for freehold land would most likely increase over time. But I don’t think we will see a 60 percent increase like what we saw from 2009 to 2014. The housing prices today are similar to the levels of 2014 after seeing a small 10 percent dip from 2014 to early 2017. 
 

if you look further back, landed house prices was at a peak in 1997/1998 before dropping drastically over the next few years and then being stagnant before rising again in 2006. So basically some people who bought in 1997/1998 had “lost” a big value of the house before breaking even after 10 years. Of cos those who managed to hold on for longer and sold their houses between 2011 to 2014 would have made more $$$. Before all the property cooling measures came in, I believe there are also people who managed to buy in 2009 and then sell in 2011/2012 and made a tidy sum of money. But this is a scenario which is unlikely to happen again

So if you are looking for a short term (5 to 10 years), then I would say don’t bother to do a full rebuilt as the ROI may not be there. 
 

A live example is a house owner near my place. The owner bought an old inter terrace for 1.8M several years ago. The house was renovated to make it look new with new interior and such. Last I saw the house was put up on the market for 2.8M. I believe the owner had spent maybe 200/300k just to do up the house before putting up for sale after 5 years is up.
 

so you can see, landed houses need a longer period of holding time to really make $$$. The main reason would be more of land price appreciation over time. Also landed houses have a much smaller target group of buyers than condos. For one, the price of a landed house is much higher. Then only Singapore citizens or PRs are allowed to buy a landed house unless one is a rich FT who is willing to throw a few million $$ to invest here(eg: Mr Dyson)

 

[petetherock 13]

IMO, if you are buying for profit, then I'll say get a few condos in D10, live off the rental, which will be higher, or have higher appreciation..

The intangible factor is what a landed gives you vs any condo. The profit is nice, and there is some capital appreciation, but there are better ways to invest / get a better profit. Don't forget the opportunity costs of sinking those millions into a house. Even a 2.5% bond yield can match the capital yield these days.. 

You should re-assess why you want to buy a landed place. 

I didn't do a rebuilt, but I spent enough on renovations to make my place enjoyable to live in for at least a couple of decades. If spending 1.4mil is within your budget, and makes you enjoy that new home more, then do it for those reason. You can't really make back the reno money, even though there is some capital appreciation. 

I enjoy the space, the quietness and many more factors. YMMV

 

[DaddyJP 1]

Hi Petetherock,

Wanted the best of both worlds, an enjoyable place to call home for the next decade or more and yet achieve capital/investment preservation. \?/

Maybe it is not to be. Thanks for sharing!