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PROPERTY: Dual-key Apartments

By Stella Thng 

Just like how shoebox homes once dominated the property landscape, the new big thing seems to be dual-key units. Considered one property, these units share one main door and foyer, but both the primary unit and the adjoining studio have their own separate entrances.

At the Heron Bay executive condominium (EC) at Upper Serangoon, 38 per cent, or 149 units out of a total of 394 units, are dual-key ones. By the first week of November, 135 of these were snapped up. In another show of confidence in this new property trend, Frasers Centrepoint set up a new brand, Trio, in October focusing exclusively on developing dual-key units.

Within a month, 260 out of the 266 dual-key units marketed under Trio were sold, prompting Frasers Centrepoint to plan for its eighth project with dual-key units in 2013. Marketed mainly to multigenerational families with a larger total square footage (Heron Bay offers units ranging from 1,227sqf to 2,841sqf), current developments with dual-key units are all located in the heartlands.

Even small developments are joining in. One Robey, a small project in Kovan of just 18 units, also offers 2+1 and 3+1 options. This may prove attractive to local and foreign families with kids as it sits within one kilometre of the popular Rosyth School and near the French School. The situation seems rosy, but what investment value do these units hold?

BUYING FOR THE FAMILY
The most common reason cited by interested buyers, dual-key units offer extended families a chance to live together, yet apart. Jason Choo, sales director of Debenham Tie Leung (SEA) – who has marketed Woodleigh and Parc Olympia, which offer dual-key units – notes: “Most of these are mass-market projects targeting families. The ‘plus 1’ is a studio with a kitchenette that may be just 200sqf. The size makes it perfect for a granny’s room, which offers more privacy.”

He shares that most buyers he has met at these heartland projects are buying them more for self-stay than rental yield purposes. “The attached studio isn’t very big, so even if you rent it out, the maximum you can fetch in these areas might be only $1,000 a month.”

The prices of these units are also attractive. A three-bedroom,1,227sqf dual-key unit at The Heron Bay executive condominium goes for $837,000, much lower than what you’d expect from the private condo sector (its five-bedroom dual-key units are sold out). Another plus: First-time HDB buyers enjoy up to $30,000 in CPF housing grants. It’s no surprise that the development attracted 1,664 applicants for 394 units.

Hot on its heels were other new launches, such as the Citylife @ Tampines executive condo and Eight River Suites at Whampoa. Some potential buyers may be considering such a unit not for their elderly parents, but for their teenage or young adult children instead. John Lim, an interested investor who has a daughter in her mid-30s, is considering co-investing in a unit with her. “My wife and I understand that she’d like her own privacy, but we’ll be happy if she lives close to us. With property prices so high these days, a three-room HDB flat will cost more than $300,000, so co-buying a dual-key unit may be the best solution for us.”

However, Low Bee Hong, a lecturer in her 40s who has a young daughter, feels that it all boils down to the layout and space. “I imagine that having to factor in a kitchenette plus the ‘common corridor’ would really eat into the living space. It would be a good option if I’m living with my in-laws, but I wouldn’t buy it even if my daughter were older. I’d rather buy a bigger home and if she needs her own space, she can always close her room door.”

FOR RENTAL YIELD
Thirtysomething Beverly Low and her hubby are eyeing dual-key units more for their investment potential. When she first heard about the concept, it immediately piqued her interest. “I thought it would be great idea to rent out the studio,” says Beverly, who prefers to pick a project closer to higher education institutions and hopefully rent it out to lecturers.

Daphne Lean, a team director at ERA Realty Network, notes that despite being a relatively new concept, dual-key units are attracting many investors. She has already helped seven clients with their dual-key investments, mostly at Waterbay executive condominium and River Isles, both at Punggol.

“All of them are buying for investment (purposes),” says Daphne, who explains that renting out the main apartment and the studio can potentially fetch a higher yield than a regular apartment with a similar number of rooms. If a regular three-bedroom apartment fetches about $4,000 in rent, a dual-key unit owner may rent out the two-bedroom for, say, $3,000 and the studio for $1,500, which adds up to $4,500. Another plus point: both share the same address and are categorized as one property. Investors can avoid the three per cent additional buyers’ stamp duty imposed on Singaporeans who purchase their third property (second property for permanent residents), yet be able to rent out two properties effectively.

This may prove a good solution for buyers such as Beverly and her husband, as the prices of dual-key units tend to be higher due to their larger size. Having the option of leasing out part of it to help pay the mortgage can thus allow more people to become home owner-landlords, a prospect that is attractive to Beverly. Says Daphne, “The dual-key concept is still very new, but I feel there are more pros than cons.”

FOR A HOME OFFICE
Then there are those who might be considering dual-key apartments to use as a home office. Alan Leo currently rents a shophouse in town for his interior design firm. He’s attracted to the opportunity to work close to home, yet have a separate office to entertain clients. However, the petite size means a restriction on his expansion plans. Besides, running a business from a home address comes with its own restrictions. Among others, it must be used primarily as a home and only allows a maximum of two other non-residents to be engaged in the business. In addition, he isn’t allowed to put up any signage, unlike at commercial buildings.

The most important factor, however, may be the business address. These dual-key units are located in the heartlands – not exactly a hip zip code. Also, do you really want your clients and suppliers to know where you live?

Dual-key units are a refreshing option in Singapore’s property market. This relatively new concept is untested, so it’s difficult to predict if their current popularity with investors and homebuyers will hold. Homeowner-investors who count on the fact that the rental yield can cover their monthly mortgage may have to manage their expectations. They also have to think about the type of tenants their units will attract, as these mass-market projects are mostly located in the heartlands. No matter what your sales agent promises, don’t expect to fetch a $3,000 monthly rental for your studio (similar to shoebox units in the city fringes). But if you’re looking for a little extra pocket money to go towards the monthly bill, or to keep your elderly parents or grown-up kids close by yet offer one another some privacy, it will more than fit the bill.

NOTE: Although the main apartment and studio of a dual-key have their own entrances and can be rented out separately, they share the same address and are categorised as one property. Buyers can avoid paying the additional stamp duty for their “third” property.

 

First published in March 2014.

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