Will New Launch Condo Price Drop further?

Recently, some developers offer a special discount during this circuit breaker period.

I understand many of you concern, what if you buy now, but then the developer reduces the price again in the future?

So, today I am going to address your concern, continue to watch on!!!

My answer here is YES to some projects but NO to some projects. Why? Because there are many factors to weigh the impact on each specific project.

So, it is very important to analyze this topic because you don’t want to be the chopping carrot head.

Today, I am going to share how I analyze whether the project price will still drop further or not, based on the following 3 factors.

Factor 1: Timeline to Sell / Developers holding power

All the developers are subject to the ABSD deadline, whereby they must fully sell all the units within 5 years, otherwise, they will have to pay 15 or 25% of the land price.

The 5 years deadline is counting from the tender award date for Government land sales and collective sale order (CSO) date for the en bloc deals.

Take Daintree Residence as an example, the land was awarded in April 2017. Meaning the developer must fully sell all the units by April 2022.

They have 1074 units in total. At this moment, they have sold 106 units (32%). So now, they still have another 2 years (24 months) to sell the balance of 211 units.

211 divided by 24 months. So, on average, the developer just has to 8 or 9 units per month, which I think is not difficult to achieve.

So, by checking the ABSD deadline, will help you to understand better which developer tends to be more ganjiong to “dispose” their units.

Factor 2: Developers Breakeven price

This help to understand whether the developers still have any room to reduce the price further.

I can find the estimated breakeven price for each development from the EdgeProp.

Take Daintree Residence again, for example, the estimated breakeven cost is $1448psf ppr.

Let say with the minimal profit of around $100psf, I think the lowest possible price would be around $1550psf.  And I don’t think they can sell anything much lower than that.

But of course, you can’t expect to buy the prime unit at this price.

Factor 3: Supply & Demand

The most important factor to determine the property market is still the supply and demand.

Developers know the supply and demand very well before they decided to bid the land or collective sale.

Let say if I want to buy a project. I will look at the supply and demand of the region.

But how to check the supply & demand?

For example, Parc Clematis near Clementi MRT. You look at the supply near Clementi MRT, how many of them?

Now we have The Trilinq, Regent Park, and Clement Canopy. In the near future, we have Parc Clematis and Clavon.  And Clavon will be the last new launch condo in Clementi. So eventually, total there will be only 5 of them the walkable distance to the Clementi MRT.  As compared to Lakeside MRT, you will realize that actually Clementi could be undersupplied for the private condo. (8 projects).

There are 3 ways to check whether the demand is high for a particular location.

Here, I will share one of them which is using the rental yield. Higher rental yield could be an indicator of low supply high demand. Homeowners with high rental yield are reluctant to sell their properties. Because they are comfortable to collect high rental income and not easy to find another property with the high rental.

For your info, Clement Canopy 2-bedroom rental can fetch up to $3,600. This could be an indicator of high demand.

Conclusion:

To understand whether the project will give a further discount or not, you have to understand these factors:

Number 1, you need to understand whether the developers are able to fully sold the balance units before the ABSD deadline.  So, you have to find out the number of balance units and dateline.

Number 2, you need to find out the developers’ breakeven cost. From there, then you can see whether there is any room for the developer to discount further.

Number 3, supply and demand determine the property market trend. Study the existing and upcoming supply and demand. With my comprehensive research, I believe you can buy a property with peace of mind.

Okay, I hope my article clarifies your doubt. Appreciate your support.  Contact me directly if you have any question.