I noticed a slew of new Singapore property launches recently – the Central Suites @ geylang lor 25 and Centra Studios @lor 25a, Belle Calista, Loft@Rangoon, Viva Vista@ Pasir Panjang (launching soon)and the list goes on.
I dug in more and noticed a few trends.
FIRST, the developers are pushing out smaller units in the range of 360 sq feet to 460 sq ft to entice property investors. Why? Because the quantum are all much lower – from 500k onwards and hence more affordable for those of us without the deep pockets.
That is both good news and bad news of course.
The good news is it opens up more opportunities for people like me to invest in a unit that would likely have good rental potential, and the capital outlay is “affordable”. For example, a 500k studio would require 5% deposit ($25,000 by cheque) and the other 15% would be required in 8 weeks’ time ($75,000). You still have to leave some buffer for stamp duty and other administrative charges. For the first time property investor, this is a less risky proposition.
The bad news? Well that really depends. I will list a few here.
- The per square feet cost of small units are much higher (so far, I have been quoted $1200 -1400 psf for the small units. Just because the quantum is lower, but in fact you are paying MORE for each square feet.
- The rental potential is another issue, in my opinion such smaller units only appeal to the single expats/couple who are working in Singapore on a lower housing budget or out of their own pocket. This means they are not likely to stay on a long term basis compared to those with families. This translates to less stability and higher turnover of leases.
- But I could be wrong, if the rental market keeps trending upwards, many expats would have no choice but to rent a tiny studio even on a long term basis.
Is the trend of smaller units here to stay? Your comments are welcome.
SECONDLY, the developers are adopting a sneaky marketing gimmick which I termed “illusion of scarcity”.
So how do they do that?
They announce a VVIP preview launch – where they will only reveal the pricing level on that day. So buyers like us have only a vague idea of the price level for eg. it will be $1000 above and so on. Then they tell the property agents to ask their clients for blank cheques – this is good for the developers to gauge the level of interest but not good for buyers. Why? If developers see such overwhelming interest, they may up the launch price.
I think this is tarnishing the industry’s reputation – there is a lack of transparency ! Even if the developer is not as sneaky as that, my misconception persists due to this lack of transparency.
Here’s how it goes on preview day itself. An example:
11:00: Half an hour to look at the showflat.
1130: Price details are announced.
1230: One hour for you to consider and hand in your cheque
BALLOTING for “hot” units; if you dont get the units you wanted, then you have to decide on another unit before it’s grabbed by someone else. The pressure is on! The usual scene is chaos, you look around and you see many rivals competing for the same unit you are eyeing. You think – “wow, this property launch is hot, so many people are trying to grab the few units available.”
RESULT : Illusion of scarcity!
NEXT DAY: headlines screaming xx Project SOLD OUT !!!
Reinforces the idea that the property market is red hot; if you dont give the cheque now you are going to miss the boat.
DISCLAIMER: This is what I observe occuring for boutique developments with smaller units; I cant say the same for the higher-end condominiums.