Cooling Measures Property Sale? Yes!

SG Wealth Builder is pleased to form a partnership with SRX Singapore Property to bring you the latest information on property trend in Singapore. Below article is based on information provided by SRX Research and readers must not interpret it as a form of financial advice.

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In the world of shopping, it’s easy to spot a sale.  Big, bold red-lettered signs plastered all over stores’ windows, proclaiming huge discounts and savings!

But it’s not so simple in real estate.   To find a good deal, one needs to put in hard work and analysis.  To make matters worse, you must be brave enough to act before the herd mentality kicks in and recognizes the good deals, bidding the prices up.  It takes courage to buck the trend.

In February 2009 when the SRX Price Index (private, non-landed) was down 26% from the pre-financial crisis peak, there were some buyers who went into the market.

While the rest of the market was in a state of panic, these buyers did their homework.  They analyzed the situation and concluded that they could take the risk to invest in a down market.  My guess is that most of them were careful not to overextend themselves in the event the market continued to decline.  When the market eventually recovered, they saw huge gains.

The general mood of today’s market, like 2009, is one of pessimism.  Everyone seems to be griping about the market.  That is everyone but the shrewd bargain-hunters.  A quick perusal of project data in SRX Analyzer revealed that some buyers are purchasing homes in fundamentally-sound projects that are experiencing dips in prices due to the cooling measures.

For example, there have been two recent transactions in Hillview Regency this month.  This condominium’s price trajectory barely hiccupped during the global financial crisis but is now selling at a discount in this market.  Hillview Regency did its best to resist the cooling measures but finally, in April, it succumbed to two buyers who were able to negotiate a discount from the project’s normal price trajectory.  The buyers of those units have likely positioned themselves for success in the long run.

For buyers with sound financials, new launches might be the place to look for discounts.  The numbers suggest that there is ‘’a cooling measures sale’’ taking place in this segment of the market.

Typically, buyers pay a premium for a new home when compared with a resale home.  Since 2010, as the accompanying graph illustrates, median prices have converged in the two private markets.

For example, in Core Central Region, new homes used to be 37.3% more expensive than resale homes, on a median basis.  In 2013, the premium paid for new homes dropped to 14.1%.  That means the median price of new homes converged with resale homes by 62%.

Rest of Central Region saw a 52% convergence, while Outside Central Region converged by 83%.

The convergence of new sales with resale prices suggests that the cooling measures have had a larger price impact on the new projects market than on the resale market.  This means that new projects are priced more competitively than ever relative to units in the resale market.