cooling measures Archives - Holland Property https://hollandproperty.com.sg/tag/cooling-measures/ Your trusted Holland Village resident agent Fri, 24 Dec 2021 08:02:32 +0000 en-US hourly 1 https://wordpress.org/?v=6.9.1 https://hollandproperty.com.sg/wp-content/uploads/cropped-favicon-32x32.jpg cooling measures Archives - Holland Property https://hollandproperty.com.sg/tag/cooling-measures/ 32 32 Will The Latest Round of Cooling Measures Correct The Property Market? https://hollandproperty.com.sg/will-the-latest-round-of-cooling-measures-correct-the-property-market/ https://hollandproperty.com.sg/will-the-latest-round-of-cooling-measures-correct-the-property-market/#respond Thu, 23 Dec 2021 08:09:51 +0000 https://hollandproperty.com.sg/?p=11802 The government introduced another round of cooling measures on Dec 15, 2021 to curb the bull property market. Will they correct the market?

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How Will The Latest Round of Cooling Measures Impact Our Property Market?

The government announced the latest round of cooling measures on the late evening of December 15, 2021.

Did you see it coming?

The writings were actually on the walls. Property prices across the board have gone up fast and furious despite the pandemic.

The private property prices see a six straight quarters growth. As of November 2021, the overall price index has gone up by 9.3% year-on-year.

Developers sold 12,467 new homes for the first 11 months of 2021, more than the 9,982 new homes sold in the whole of last year. New home inventory has dropped to an all-time low of about 15,000 units, which has sparked a new wave of en bloc fever. We saw some recent Government Land Sales (GLS) and en bloc sales setting new benchmarks.

nov 2021 new homes sales
Despite the pandemic, buying interest has been very strong for properties across all the segments

In November 2021, the property market registered 1,547 units sold, largely fueled by CanningHill Piers which sold 576 units at a median price of $2,887 per sq ft (psf). A Singaporean businessman bought the sole penthouse on the 48th floor for $48 million or $5,360 psf.

The luxury market in Core Central Region (CCR) is very buoyant, with the price level hitting more than $5,000psf. Foreigners have helped drive the demand for this upmarket segment. For example, in Park Nova at Tomlison Road, foreigner ownership stands at almost 90%.

Demand for landed property is robust, with a record number of landed homes sold and prices increasing by 9% for the first three quarters in 2021.

As for the HDB resale market, we saw a reversal of fortune since Q3 2019 after moving downhill from its last peak in Q2 2013.

HDB resale prices have gone up by 8.9% for the first three quarters of 2021, and cash-over-valuation (COV) is now commonplace.

Recently, I sold a 5-year-old 3-room flat in Yishun with a whopping $70,000 COV!

As of October 31, 192 resale flats transacted at above $1 million in 2021, compared to 82 in 2020.

In the light of such a bullish market, the government saw fit to introduce the latest round of cooling measures.

What are these measures, and what are their possible impact?

cooling measures
The government announced the latest round of cooling measures near midnight of Dec 15, 2021 to curb the bullish market

Higher Additional Buyer Stamp Duty (ABSD)

ABSD Does Not Affect First-Time Singapore and PR Buyers for Their First Property

At a glance, there is minimal impact on first-timer Singaporean buyers in terms of ABSD.

Every Singaporean will still enjoy their zero ABSD privilege when buying their first property. However, if they were to buy their second and third property, the ABSD incurred would be a hefty 17% and 25%, respectively.

Singapore PR buying their first property remains unchanged in their ABSD payable, which is 5%. But subsequent purchases will be slapped with a substantial 17% to 25% ABSD.

Foreigners, Companies and Developers Will Have To Pay Higher Rates

On the other hand, foreigners will have to pay a hefty 30%, up from 20%.

Developers will also have to pay 35% ABSD if they fail to sell every single unit of the condo development five years from acquiring the land.

With the change in the ABSD rates, Singaporeans and PR will have to pay higher rates for their second and subsequent properties and foreigners for their first property.

Change In Total Debt Servicing Ratio (TDSR)

The government also tightens the Total Debt Servicing Ratio (TSDR) by reducing it from 60% to 55%. This means the borrower’s monthly mortgage payment cannot exceed 55% (include all other commitments, such as car loans and credit card instalment payments) of the monthly income.

Apparently, the government wants to ensure that home buyers remain prudent and do no buy beyond their means.

A lower TDSR means lower loan eligibility for home buyers.

But what is the impact of a 5% reduction?

An Example

Take, for example, a 30-year-old couple with a total monthly income of $12,000. With the change in TDSR, they can borrow up to $1.47m, down from the previous $1.6m. So with this $130,000 difference, unless they can fork out more cash, they will have to settle for a lower-price property.

City vector created by freepik - www.freepik.com

Loan-To-Value (LTV) For HDB Loans Reduced From 90% to 85%

This change will only affect HDB buyers who are taking HDB loans. As for those taking bank loans, the LTV remains at 75%.

If an HDB buyer has sufficient CPF funds in the Ordinary Account (OA) account, he can use it to pay for the 15% downpayment without forking out any cash, assuming he can borrow up to 85% of the value of the flat.

For example, if the valuation of an HDB flat is $500,000, it means the buyer can take a maximum HDB loan of $425,000 instead of $450,000. The 15% downpayment, which is $75,000, can be paid entirely with CPF. With the generous housing grant of up to $50,000 for first-timers and another $20,000 for proximity grant, they would almost cover the 15% downpayment required. If they are eligible for Enhanced Housing Grant (EHG), they even have enough CPF to spare.

Will this stop HDB buyers from buying an HDB flat? Probably not.

Most average Singaporeans will still purchase an HDB flat to provide a roof over their heads.

For some HDB buyers, their affordability might be affected to some extent, especially for young couples or low-income families who don’t have much CPF or cash reserves. They will then need to lower their expectations by paying a cheaper resale flat that is older or in lesser premium locations.

will we see a major correction in property prices
The question on everyone's mind is will we see a major price correction in property prices with the layesy round of colling measures?

Will We See A Major Correction In Property Prices?

 Upon hearing the announcement of the cooling measures, one of my clients shouted “Hallelujah!” because he expected property prices to come down.

Will that happen?

It is very likely for the next couple of months, home buyers will wait on the sidelines to let the dust settle and see how the market moves. But after a very short hiatus, the market will likely pick up again. We have seen this same thing happen in the past.

History of Cooling Measures

Not long after the 2008 Global Financial Crisis, when the property market started to pick up strongly, our government introduced the first round of cooling measures in 2010. Despite rounds of cooling measures, they did not stop the tide of home buyers and property investors.

This latest round would have been the 11th round of cooling measures. 

How would they impact the property market?

Impact of TDSR in the Past

The last peak was in 2013, which came to a screeching halt after the government Total Debt Servicing Ratio (TDSR) for the first time.

At the new 55% TDSR, it means your total debt monthly payment must not be more than 55% of your monthly income, based on an interest rate of 3.5% (not the actual borrowing rate).

TDSR, together with a lower Loan-To Value (LTV), are in place to curb speculations. Before its introduction, speculators borrowed vast sums of money to leverage and flipped for profits.

So will reducing the TDSR from 60% to 55% affect the market?

Singaporeans have long gotten used to TDSR, unlike in 2013. Psychologically, this round did not come as a rude shock to us.

Most home buyers are generally very prudent, as reflected by the low mortgage liability.

low mortgage liability
Across the different age groups, buyers generally have low mortgage liability with lesser than 50% mortgage-to-income ratio

Risen Household Income

The common perception is property prices have risen so much that they are beyond the reach of average Singaporeans.

While property prices have risen quite a fair bit, you may be surprised that household incomes have grown even faster. This means many Singaporeans can still afford to buy property, including investment property. Contrary to common beliefs, Singaporeans constitute the majority of the property buyers, including high-end properties.

With household income rising faster than property prices, it means property prices have not risen beyond the affordability of Singaporeans

Impact of ABSD in the Past

Historically, we see the impact of ABSD on property prices to be only temporary.

Singaporeans do not have to pay ABSD for their first property, and Singapore PR only have to pay a small percentage of ABSD.

Many investors are savvy enough to find ways to avoid (not evade) paying ABSD when buying their investment properties, such as decoupling and buying under trust. Hence, with the current changes, most buyers are not affected.

The private property market is driven largely by HDB upgraders. Many HDB owners ride on their highly-profitable BTO flats and Executive Condos (EC) to upgrade to private condos and even landed properties after meeting their five-year Minimum Occupation Period (MOP). With proper planning, they do not have to pay ABSD.

ABSD has very minimal impact on property prices in the past

Will Foreigners Continue To Buy With The Increase In ABSD?

While ABSD remains the same for local and PR buyers for their first property, foreigners will now have to pay 30% ABSD even on their first purchase, up from their previous 20%.

20% to 30% is a big hike.

Will that be enough to deter foreigners from buying Singapore properties? It may take a while to get over this huge tax increase.

At this point of writing, it is reported that Hong Kong-listed Shun Tak Holdings is walking away from the en-bloc deal for High Point condominium, which it has secured for $556.7m on December 9, 2021. Has the developer lost confidence that high-end foreigners will shun away from this luxury project?

Looking from a broader perspective, Singapore property prices are still relatively low globally, which remains attractive to foreigners. Property prices across the globe have sky-rocketed, with Singapore clocking one of the weakest gains (8%) in comparison.

Our political stability and safe environment are other factors that draw foreign investors to our shore. The well-heeled foreign buyers probably won’t blink their eyes when paying the 30% ABSD. The undisputed most expensive apartment in Asia is The Peak in Hong Kong. The same buyer bought two units recently. One of them, 4544sf in size, cost HK$640 million (S$111.3 million) or S$24,493psf, which is about five times as much as our Orchard properties. The 15% tax incurred was a whopping HK$95.97m (S$16.69m)!

property prices in global cities
Property prices in many cities have seen great gains. When comparing with many of these global cities, Singapore property prices have made one of the lowest gains, which means our prices are still good value for money.

Increase In ABSD Will Likely Affect En Bloc Sales

The change in ABSD rates will affect developers the most, increasing from 25% to 35%.

Though developers do not pay this tax upfront, they would be liable if they do not sell every unit within five years of acquiring the land.

Because of the risk of higher ABSD, developers will exercise more caution when bidding for Government Land Sales (GLS) or going for en bloc sales. So condos going for en bloc sales will have to lower their price expectations.

Mega sites like Mandarin Gardens and Pine Grove will face more challenges because of their high price tags, which translates to higher risk.

En bloc sales in premium District 09 areas, which depend primarily on foreign buyers, may also take a back seat till developers have a clearer sense of this market segment.

When the stocks of new homes hit below 20,000 in 2017, it triggered a wave of en bloc sales. Inventory then peaked in 2019. Now that the number of unsold homes have hit an all-time low, we are seeing a new wave of en bloc sales and record-price GLS.

Shortage of Supplies

The Covid-19 pandemic in the last two years ironically has resulted in a shortage of home supplies.

Developers have not acquired many lands because they were more concerned about clearing their high inventory to avoid incurring ABSD.

There were very few Government Land Sales, mainly because many building projects, including public housings, were delayed due to a labour and material shortage.

It creates a rippling effect. Singaporeans who want to buy BTO flats are put off by the long waiting time. So they turn to either resale HDB flats or private condos. The increased demand drives up resale prices. HDB sellers ride on the attractive resale prices to upgrade to private condos. With work-from-home and home-based-study becoming a new norm, more are looking for bigger homes. The resulted supply crunch caused demands and prices to sky-rocket across all segments.    

cooling measures

The current inventory of new homes is hovering at an all-time low of 15,000, compared with the high of 37,000 in 2019. This acute shortage explains why we saw a new wave of en bloc fever and high bidding prices for Government Land Sales (GLS) this year.

Right after announcing the new cooling measures on December 15, the following day government said that they would release five Confirmed List sites and eight Reserve List sites for the first half of 2022 (1H2022), potentially yielding about 6,500 private residential units. More public housings will also roll out.

Do take note 6,500 new homes will not be sufficient to meet the annual demand for about 10,000 new homes. There is a chance developers may still bid a high price for the released sites simply because they are land-hungry.

I foresee prices holding up in short to medium terms as long as we face a supply crunch. Home buyers will likely return with a vengeance after the dust settles down in the next few months.

Feel free to drop me a note for a non-obligatory discussion or book me via the Calendly below for a virtual meeting if you are wondering if now is still a good time to buy a property. 

danny han pwp

Danny Han is a licensed property agent since 2005.

As a kampong (village) boy growing up in Holland Village, he has so many fond memories. He grew up with pigsty (yuk!), cemetery, swamp and communal-living (with 10 families under one roof). His childhood games were gasing (spinning top), marbles, kites, spider-fighting and tree-climbing. An open-air cinema was his source of entertainment. 7th-month Hungry Ghost wayang (Chinese opera) and getai (concert) was a once-a-year event that brought the entire village together.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

Danny is an avid hiker and passionate foodie. He has covered most of the nature trails in Singapore, including some that are off the beaten track. Living up to his motto, “walk to eat,” he enjoys going out with his wife, a retired academician, on a food hunt across the island. He also has some foodie kakis who mix work with food. They then share their gastronomic experiences through food blogs. So do watch out, because every time he shows you a property, he will tell you what is the best food nearby!

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]]> https://hollandproperty.com.sg/will-the-latest-round-of-cooling-measures-correct-the-property-market/feed/ 0 Property Supply Glut: Misconceptions Debunked https://hollandproperty.com.sg/property-supply-glut-misconception-debunked/ https://hollandproperty.com.sg/property-supply-glut-misconception-debunked/#respond Tue, 28 Jan 2020 17:02:22 +0000 https://hollandproperty.com.sg/?p=3776 Do we have a property supply glut? This question is on the mind of many people, especially when there was an avalanche of about 60 new launches in 2019.

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Property Supply Glut: Misconceptions Debunked

(Updated September 3, 2020)

Do we have a property supply glut?  This question is on the mind of many people, especially when there was an avalanche of about 60 new launches in 2019.

Glut implies supply exceeds demand. 

The simple answer is, yes, we do have a property supply glut with more than 30,000 unsold units currently.

But beware of many misconceptions people have.

For example, we have a property oversupply risk, and hence prices will come down.

Or there aren’t enough buyers to take up all the unsold new homes.

Understand How Did We Get To Where We Are Today

Weak Demand After the 2013 Cooling Measures

The Singapore property market is a highly regulated market by our Government. The intention is to prevent the property bubble from forming. In a way, this is good for homeowners.

We have learned a valuable lesson from the subprime crisis in 2008. Hopefully, history won’t repeat itself.

Since 14 September 2009, the Government started to introduce a series of cooling measures.

Just like Electronic Road Pricing (ERP) and Certificate of Entitlement (COE), after a while, people got used to them.

With each round of cooling measures, the stamp duty got higher, Loan-To-Value (LTV) got lesser, and loan tenure got shorter.

But nothing seemed to stop Singaporeans from buying private properties.

Finally, the Government introduced the killer 8th cooling measure on 28th June 2013: Mortgage Servicing Ratio (MSR) for HDB buyers and Total Debt Servicing Ratio (TDSR) for private property buyers.

As a result, demands for new homes dropped drastically between 2014 to 2016. Developers only sold an average of only 7,576 new homes (excluding EC) per annum. This number was a massive contrast to the annual average of 18,131 new homes (excluding EC) sold between 2010 to 2012. The peak was 22,197 new homes sold in 2012.

Imagine if we were to continue to sell at this rate, our current stock would be wiped out in 1.5 years!

Expectedly, during those lean years, developers were not buying lands but trying hard to clear their stocks.

Market Recovery in 2017, En Bloc Fever and July 2018 Cooling Measure

In spite of the mother-of-all cooling measures in 2013, the property market was slowly showing signs of recovery in 2017 with prices and demand picking up.

Home prices went up 1% after three years of decline.

Inventory of unsold new homes dwindled to just over 15,000.

With the surge in demand for new homes and diminishing stocks, developers frantically started to replenish their land banks.

That resulted in an en-bloc fever with 32 collective sales in 2017 and 35 up to 5 July 2018 when the government stepped in with another damaging cooling measure.

In general, ABSD went up by 5%. For foreigners, it shot up to 20%. Loan-to-Value (LTV) dropped further. Developers also have to pay higher ABSD.

Developers were paying big bucks for the land sales because they had to compete with new Chinese players.  

The latest round of cooling measure did dampen the sales of new homes. It dropped from 10,566 in 2017 to 8,795 in 2018. 

With a total of 74 collective sales between 2016 to 2018, developers all had to race for time to launch their new projects to avoid hefty stamp duty. That brought up the inventory of unsold new homes to more than 36,000 by 2019 Q1. 

Warning of Property Supply Glut

More than two months ago, Singapore’s Central Bank issued a warning that an oversupply of apartments threatened` to push down dwelling values.

One week later, the President of the Real Estate Developers Association of Singapore, Chia Ngiang Hong, echoed the same concern.

As of 30 September 2019, there were 31,948 unsold units, twice as many as in 2017 Q2.

All the signs of property supply glut were there.

unsold new homes

Worrying Concerns in 2019

There were so many worrying concerns in 2019.

The longstanding United States-China trade conflict.

Uncertainty of Brexit.

Tensions between Japan and South Korea.

The social unrest in Hong Kong.

Singapore’s slowest economic growth since 2009.

Unprecedented Pandemic as we entered into 2020

Covid-19 took the world by storm since the beginning of 2020. Coronavirus has affected millions of people worldwide, resulting in many deaths. Global economies are severely battered. With international cross borders almost fully closed, the tourism and travel industries face the biggest test. Stock markets crashed. Many businesses shut down. 

Singapore is not spared from the devastating impact of Covid-19 pandemic. Our government has to dig deep into our reserves to fork out $100b to save our economy and jobs. That helps to stop the bleeding temporarily. Until the vaccine is readily available, the near future remains uncertain.

Unexpected Resilience

We would think with the rounds of cooling measures, the global issues and now the Covid-19 pandemic, they would seriously derail our property market. 

But our property market is not always so predictable. Often it defies human logic.

Guess what? 10,104 new homes (excluding EC) were sold in 2019, 15% higher than the preceding year.

In 2020, as we wrestle with the onslaught of Covid-19, home sales were greatly affected. During the Circuit Breaker from 7 April 2020 to 1 June 2020, new launches show flats were all closed and no viewings were allowed. Everything came to a standstill.

Despite this major setback, 3862 new homes were sold during the first six months of 2020.

When we entered phase 2 of the circuit breaker from 19 June 2020, there was a pent-up demand by home buyers. Developers sold an astounding 998 new homes in June and 1080 in July 2020!  

Even the private resale and HDB market all posted stellar sales figures. Our property market is well and alive!

new homes sold in 2019

Reasons For The Strong Demand

There are many reasons why the take-up rate of new homes had gone up.

En bloc owners buying replacement homes and investment properties

Those who got a windfall from their en bloc sales had plenty of money in their piggy banks. Armed with a huge payout, these home-owners were looking not only for their replacement homes but also investment properties.  

HDB Upgraders

In 2019, there was a record number of 30,169 HDB flats meeting their 5-year minimum occupation period (MOP). With their flats at the zenith of their values, many home-owners would take the opportunity to upgrade to private properties.

One common strategy is sell-one-buy-two. Potentially one couple can end up with two private properties.

For the next three years, record numbers of HDB flats will reach MOP (see chart).

Recently when I was marketing a 4-room flat at Trivelis (DBSS) in Clementi, which had recently fulfilled its MOP, I counted there were more than 100 4-room listings put up for sale! I would assume many of these owners, like my clients, are upgrading. 

Low Interest Rates

Borrowing rates are now at historical low. This makes it attractive for home buyers and investors to come into the market.

Priced to Sell

Developers are cutting their profit margins in an earnest effort to sell off their projects. They are dangling their carrots with attractive pricing and star buys to entice buyers. This helps to spur buying interest.

top selling projects july 2020
new homes sold q2 2020
Source: URA

Return of HNWI

In 2019, we saw a return of HNWI from the region, particularly Chinese buyers. They created a buzz in the luxury market. 

88 Boulevard, a high-end freehold project in Orchard, set a new benchmark of $5,125psf.

With the political unrest and instability in the region, Singapore stands out as a shining beacon. 108,000 millionaires around the world migrated in 2018. Singapore was one of the top 10 destinations, according to the 2019 Global Wealth Migration Review released by data consultancy New World Wealth in April 2019.

Some Notable Rich Individuals Who Made Singapore Their Home

Zhang Yong, the founder of Hong Kong-listed Haidilao International, is a naturalised Singapore resident.  He is currently Singapore’s richest man, with a net worth of almost $14 billion. 

Eduardo Saverin, at 37, a Brazilian by birth, is the lesser-known co-founder of Facebook. Saverin renounced his U.S. citizenship in 2012 before moving to Singapore. His net worth is $10.5 billion.

In 2019 Sir James Dyson moved his headquarter to Singapore. He then made news by buying Singapore’s most expensive penthouse at Wallich Residence for $73.8m. Not long after, he bought a Good Class Bungalow (GCB) in Cluny Road for about $45m.

A 20% ABSD doesn’t stop foreigners from buying our properties.

james dyson
Dr James Dyson bought Singapore’s most expensive penthouse at Wallich Residence for $73.8m

Are We Having a Property Supply Glut Risk?

As of Q2 2020, the number of unsold new homes is 27,977 (exclusing EC), with another 5,000 from GLS that have not been granted planning approval yet (source: URA Q2 report). 

With a stock of 33,000 homes, is it too many?

Let us analyse some figures.

If we based on the 9-year average 12,381 sold units per annum, it will take only 2.66 years to sell out everything.

That’s not a long time span.

time taken to sell unsold homes

Even if we take the lowest average of 7,576 between 2014-2016, it will take 4.35 years (note the figures have been adjusted as compared to the charts).

At 2019 take-up rate of 10,000 a year, just over three years.

time taken to sell unsold homes

New Homes Inventory Will Never Hit Zero

Developers will not wait till their stock reaches zero.

WHY?

In 2017, when the number of unsold homes was just over 15,000, developers were already frantically buying lands. 15,000 is a critical number.

Don’t forget; the whole construction process takes about 3-4 years. So they need the lead-time to acquire more lands and restock their new home supplies.

How Long Does It Take To Reach 15,000 Units?

If we based on the 9-year average, it will take less than only 1.5 years to reach the level of 15,000 unsold units.

And if we were to take the three bad years between 2014-2016, it will take less than 2.5 years to reach the 15,000 level.

It is not difficult to sell another 20,000 homes in the next 1.5 to 2.5 years.

Most developers have up to 2022 to 2023 to off-load their stock to meet the ABSD deadlines. With the Covid-19 crisis, our government has given a six-month extension to developers.

As of August 2020, quite a number of new projects have already sold more than 50%, including the 2203 unit Treasure at Tampines. Some, like Parc Esta and Tapestry, are nearly fully sold out. 

The government has slowed down Government Land Sales (GLS) for the second half of 2020 in view of Covid-19. There will be only three Confirmed List sites and nine Reserve List sites which can yield about 6,670 private residential units.

With a projected 8500 new homes sold in 2020, and a drop in new land sales, our supply will fall faster than we think.

We are not facing a property supply glut risk!

If the government does not increase Government Land Sales (GLS), we may see another round of en-bloc fever within the next two to three years.

no oversupply risk

Outlook in 2020

The sentiments were very positive when we first entered 2020 until we were hit hard by the Covid-19 pandemic. The crisis may last through end of 2021 or even longer. With many countries racing against time to come up with the vaccines, hopefully it may end sooner than we think.

So far, our property market has performed better than expected despite the pandemic.

While businesses are slowly recovering and unemployment rate is kept at its lowest possible level with strong governmental support, we are weathering the crisis fairly well. 

According to a report by the Asean+3 Macroeconomic Research Office (Amro), our gross domestic product (GDP) will expand strongly by 7 per cent in 2021 after shrinking 6 per cent this year (Straits Times August 6, 2020).

With the mass market well supported by HDB upgraders and investors, mid-tier market by affluent Singaporeans and luxury market by foreigners, the outlook remains fairly optimistic. My prediction is, the market will surge once the pandemic is over.

Rental Market Is Recovering

Our rental market is still healthy. The vacancy rate has dropped to 5.4%. Rental rates still remain strong.

This recovery will boost investors’ confidence.

rental market q2 2020
Source: URA

Is It A Good Time To Buy With So Many Unsold New Homes In The Market?

For those who are expecting developers to cut their prices to clear their stocks, it has not happened and unlikely to happen.

In the current market situation where there is a short-term oversupply, it is the best time to buy.

This is simple economics. The impact of supply and demand on prices tells us that prices will kept low when supply exceeds demand.

This is simple economics. The impact of supply and demand on prices tells us that prices will kept low when supply exceeds demand.

No unthinking developers will want to suffer loss by selling below cost. Neither will they price so high to deter homebuyers. 

They do two things.

Firstly, they keep their profit margins low.

Secondly, they roll out better products with nice designs, more features, higher quality, and using renowned architects to entice would-be buyers.

It is a known fact after selling a certain percentage of a new project, developers would almost invariably increase their prices.

If you are still waiting on the sideline waiting for market to crash or prices to drop, you can wait long long😅😂😜.

When demand rises and supply falls, prices will go up!

supply demand and price

Let’s take a look at some current new projects on the market and analyse their prices (sources: Edgeprop and SRX).

Project
Breakeven
Low
High
Average
Profit
Treasure@Tampines
$1,113psf
$1,117psf
$1,489psf
$1,280psf
15%
Leedon Green
$2,387psf
$2,378psf
$2,863psf
$2,719psf
13.9%
Florence Residences
$1,303psf
$1,354psf
$1,662psf
$1,450psf
11.3%
Garden Residences
$1,443psf
$1,448psf
$1,762psf
$1,547psf
7.2%
Parc Komo
$1,356psf
$1,408psf
$1,745psf
$1,450psf
6.9%

To Buy or Not To Buy?

From these examples, it is evident most developers are keeping their profit margins low.

In some cases, the prices of some transacted unit are lower than their breakeven prices!

No wonder discerning homebuyers are seeing the values and buying into these new projects.

You don’t want to miss the boat!

Remember, supply exceeds demand prices go down; demand exceeds supply prices go up.

We do have a short-term property oversupply. Give another year or two or slightly longer, the situation will change.

We are not facing a property oversupply risk, barring any unforeseen major crisis.

So is now a good time to buy? You decide.

Don’t sit on the fence; it hurts.🤣

You can Whatsapp me to get an idea of your home’s value; we can also work out a way to best use your home as a path to wealth and a happier retirement.

Like me on Facebook, and I’ll update you on future articles.

Need an opinion on your property investment plans? Want to know the value of your property? Or need help to sell or rent out your property?

Get a 1-time free 30 min Property Wealth Planning consultation. Schedule one right now by using the calendar below .

A PWP consultation includes:

  • An in-depth financial affordability assessment
  • Highly relevant investment insights
  • A clear and customised investment road map for your real estate investment journey ahead.
danny han pwp

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

 

Danny has a genuine interest in people and firmly believes in personal integrity. While helping homeowners with their property needs, their interest always takes precedence over his personal gains. Hence, Danny has consistently earned his clients’ complete trust and loyalty. Many of them have become his personal friends.

 

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

 

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker. 

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