Discussions have been ongoing about the future new launches rising in price, and this has led many to look closely at the current GLS sites to have an inkling of the pricing trends. With a correct analysis of the pricing trends, it will help greatly to extrapolate and forecast future prices as well. Based on a detailed analysis and extensive research, here are some points that I have at hand to share with everyone out there.
Low pipeline supply: Depleting unsold units
When it comes to price determination, both demand and supply play a crucial part. To understand how supply and demand can affect the new launch prices, we first need to look at whether we are in an oversupply or undersupply situation.
If we are in an oversupply situation, there is more supply than demand. With more supply in the market, the prices will have to become less expensive to attract the smaller pool of buyers to purchase their units. Hence, the price will decrease.
Conversely, if there is an under-supply situation, there is more demand than supply. This means that there are more people wanting to buy units than the rate where new launches are being pushed out, forcing the prices to go up with the larger pool of buyers. Hence, the prices will increase.
Currently, based on the latest information, it is evident that we are in an undersupply situation. With demand greater than the current supply, we see the number of unsold units dropping from 24,296 in 4Q 2020 to 20,340 in May 2021. Within such a short span of time, we see the number of units sold increase drastically, leading to a depletion of current units available in the market.
High demand for land: Rising land prices
When we further look at land prices, we see that as developers run out of land, they are increasingly motivated to buy land. This has further escalated the increase in the land price.
From here, we seek that the private condominium GLS sites sold in 2019 as compared to 2021 have significant price differences. For those in 2019, we see that many of the land costs are still well below the $1xxx range, with some as low as $644 psf ppr. However, when it reaches the year 2021, we start to see most of them well above the $1xxx range instead. They are now steadily within the $1,1xx range to $1,3xx range, much higher than what was offered just 1 to 2 years before.
In fact, if we take a closer look, within 2.5 years time, the land price of Lentor plot that is within OCR (outside central region) has even exceeded the land price of Newton area, which is within CCR (core central region).
And in just over two years, the land price in a similar location (Slim Barracks Rise) has increased by more than 20%.
It seems clear that the pricing trend is going up, and all factors strongly point towards this observation as well. Therefore, it becomes all the more crucial to secure the best price through an experienced property agent that knows the trends, analysis, and current market performance. To know more, contact Kaeden at +65 9048 0660.
Projecting future prices: Understanding Developer’s average margin
When we need a clearer indication of a future property price, we often need to have an in-depth analysis of a developer’s average margin and the land sales price to have a good gauge of how much the property would be.
When it comes to understanding a developer’s average margin, looking back at relevant case studies always helps. Here, we see that the current developer’s average margin in OCR (outside central region) is approximately 25%, and the average land cost is at $731 psf ppr.
Likewise, the developer’s average margin in the RCR (rest of central region) is approximately 21.8%. The average land cost is at $1,109 psf ppr.
When we take these statistics onwards to our future launches, assuming that the developer’s average margin remains the same, we can see that the future launch price would be something of this range:
From here, we can see that the Tengah Garden Walk (EC) would be estimated at around $1,100 - $1,250 psf. As for some of the en bloc sales, we see that the Maxwell House En Bloc would be looking to be around $2,500 - $2,800 psf. From here, we see that the future prices for upcoming launches in 2022 to 2023 have definitely risen.
Based on the past 4 consecutive quarters, the forecast has definitely been closely matching the ongoing trends, as the price has been increasing steadily. In fact, we are seeing a sharper and sharper rise, with the recent 4Q2020 and 1Q2021 seeing a whopping 8.0% rise in prices. Clearly, this will be the trend going forward.
How will this affect you?
Well, if you are someone that is looking to ride onto this rising trend and opportunity, then the options are endless for you. To pick out the right property in the best growing region with attractive exit strategies would benefit you the most. To get an idea of this, you will need the latest property information, market analysis and trend data. To get ready access to such information, you can reach out to Kaeden at +65 9048 0660.
The above is written by Kaeden Ong. To know more, you can contact him directly.
The information provided is for generation information purposes only and does not have regard to specific investment objectives, financial situation and the particular needs of any recipient hereof. No information here should be used as legal, taxation or investment advice.