Previously, we aired our views about rushing. Rushing to “beat” the announced cooling measures in Part 1, and then in Part 2, rushing to buy a project that will take at least 3 years to manifest. It should be fairly obvious that we are not fans of leaping without looking. In this third part, we are going to talk about another manifestation of that mistake; buying without research, comparison and understanding the market.

For purely illustration purposes, let’s take a look at the first of our subjects, namely The Echelon, a premium 99-year leasehold condominium developed by Freshview Developments. Scheduled to be completed in 2016, this project is located almost across the road from Redhill Mass Rapid Transit (MRT) station on the East-West line and is also within walking distance of  many amenities befitting a mature heartland estate. Topping off at 43 storeys, it includes the usual trappings of luxury expected of premium developments these days, such as sky terraces, swimming pool, landscape deck and pool, fitness spa, and gymnasium, amongst other facilities, as well as a design by award-winning architects.

d''Leedon-Brochures, Farrer Road, District 10, Nanyang Primary, Kings Road, Farrer MRT

When first launched on 28 December 2012, the average per-square-foot price was reported as approximately SGD1,700. One-bedroom units were about SGD800,000, while the large four-bedroom suites would fetch SGD2.13 million or more. Even at those prices, 200 out of 250 launched units were snapped up. Within a day. Anxious much?

No doubt it all sounds very nice and luxurious, but at an average of $1,700 per square foot (psf), we were a bit leery, especially since there’s another development just down the road. Well, a lot further down the road to be precise, right in district 10. As any Singaporean who’s been around long enough will tell you, district 9 and 10 are the holy grails of Singapore property. We’re actually talking about D’Leedon condominium at Leedon Heights, off Farrer Road. Sitting on a massive 840,000+ square foot plot of land, this 99-year leasehold condominium has a Temporary Occupation Permit (TOP) date in 2015. Being a district 10 development, it too has premium features, an even larger plot size and a brand-name architect. As of today, D’Leedon units are going for around $1,300 per square foot.

When Echelon launched in December last year, D’Leedon prices weren’t much higher than the current $1,300 psf; URA figures show the median price was $1,444 psf, with some units peaking at just over $1,500 psf. If we compare Echelon and D’Leedon then, we will see the following:

  • Echelon $1,768 psf vs. D’Leedon $1,444 psf
  • Echelon est. TOP 2016 vs. D’Leedon est. TOP 2015 (more likely late-2014)
  • Echelon 99-year leasehold vs. D’Leedon 99-year leasehold
  • Echelon near Redhill MRT vs. D’Leedon near Farrer MRT
  • Echelon near CHIJ St. Teresa and Gan Eng Seng primary school vs. D’Leedon near Nanyang primary school
  • Echelon in District 03 vs. D’Leedon in District 10

 

From the comparison above, the only reason Echelon might be worth more is that it will be newer once it reaches TOP date. However, even that point is not always good, since it means people must wait longer to take possession of their home. Of course, there will be other personal considerations, such as those who prefer one school over another, or perhaps they prefer a particular layout in Echelon more than those in D’Leedon. Some may find that the East-West MRT line is more convenient than the Circle Line MRT. However, such personal, subjective preferences should not be informing the developers’ decisions on pricing! The biggest factor seems to have been ignored, and that is the fact that traditionally, District 10 is worth more than District 03. A developer making such a miscalculation will usually suffer the consequences in the market place, whether it was due to greed or buying land at too high a price.

But it takes a savvy market to recognise such mistakes, and obviously we have a long way to go. Property developers are a business, and the objective of a business is to create wealth for its owners and shareholders. It is the onus of consumers to do their research, compare offerings and make an informed choice of where to spend their wealth. Whether one is buying eggs or property, the old saying still applies: caveat emptor!

The most disturbing part for us is how buyers just simply accepted the pricing as accurate and reflective of Echelon’s true value. They seem to have forgotten the widely accepted fundamental criteria of property: location! Either that or, almost 200 people  just didn’t do their homework. From a purely investment viewpoint, Echelon is simply over-priced compared to D’Leedon. We at BLUTA would wager that when a correction comes, D’Leedon units will keep more of its current value by virtue of its District 10 pedigree. And we wouldn’t be surprised if Echelon drops by more than 40% of launch pricing if the market turns sharply. That goes for rental yield as well.

Of course, not everyone is buying for investment. Actually, we believe that a large proportion of these buyers intend to be owner-occupiers. That, however, does not excuse a buyer from ignoring the real value of what he is buying. No matter what the motive for buying a property is, ignoring the fundamentals is a sure way to end up with a lump of coal after paying the price of gold. What do you think of our comparison? Let us know with a comment below, or via our FacebookTwitter, and Google+ pages. Remember to like or follow us for updates and articles on BLUTA-log.

 

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  2 Responses to “How to Avoid Property Blunders, Part 3 – Research and Comparison”

  1.  

    Singapore can, if it wants, accommodate eight million people. — Dr Paul Cheung, Director of Statistics Division, United Nations

    http://www.singapolitics.sg/features/prepare-upper-limit-population-planning

  2.  

    Nice..

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