Buying a Condo? Here’s a price guide (Part 4)

Hi everyone, welcome to Part 4 of our Guide on ‘Buying a Condo’. If you are new to this, do check out our previous post (see below).


 

Our post today focuses on one of the most common point of consideration for anyone buying or renting a place – the price.

 

Singapore Property DREA Home Prices

 

There are a few reasons why Prices are an important point for consideration

  • You want to know the ‘market rate’ for a given house or unit, so that you get a fair deal
  • It is also useful to understand how prices have been trending e.g. have prices been softening?
  • During negotiations, you would want to know how you can realistically push on getting a better price

 

For context, there are a number of property price indexes published by URA and other institutions. All of these are robust indexes based on different methodologies. However, do note that these are basket indicators. Meaning to say, these indexes are set up to measure macro trends across a period of time, taking into account a broad pool of properties across Singapore. As such, these property market indicators should not be used to evaluate, assess or predict price trends for specific properties or units. 

 
Another point to note when evaluating property prices is that averages are misleading. For example, if 5 similar property units are sold at S$ 1m, S$ 1m, $ 1m, S$1m and $1.3m respectively, the average price of S$ 1.06m is actually not a meaningful number. Looking at ranges and medians are statistically more meaningful. In the example above, the prices ranged from S$ 1m to S$ 1.3m. This tells you how high people were willing to pay for the unit, and conversely how low it has transacted for.
 
A last point to note is that property prices are compared on the basis of per square foot prices (PSF Prices). As property units tend to have different sizes, it is more relevant to compare PSF prices (i.e. the price of a given area). This is no different from comparing say…the price of a Kilogram of rice

Having established the above, let’s look at some of the more common price considerations in greater detail.

 

Know the market rate

You want a fair deal when buying or renting a property. This requires having a baseline understanding of prices in a specific property development or more broadly in an estate. Every individual property unit is unique in the sense that prices depend on a wide range of factors: tenure, size, location, floor, view, furnishing etc.
 
Tenure – In general, Freehold units should fetch a higher valuation and price compared to an equivalent leasehold unit because ownership is perpetual. However, there is much less of a spread between freehold prices and leasehold prices for recently constructed properties. The difference in valuation is usually more obvious for older leasehold properties (i.e. > 30 years old) and you may see that such leasehold properties transact at fairly low PSF prices.
 
Size (floor area) – For different units in the same development or area, you will notice that PSF prices are typically lower for larger units and higher for smaller units. As such, when comparing prices of property units, it is useful to think of them in terms of size categories. Is it a shoebox unit that is is <500 sqft? Or Is it a large unit >2000 sqft. With DREA’s area analytics tool, you can easily gain access to instant analysis of prices in a particular area segmented by unit size and tenure. This provides a high-level overview of prices so you get a rough sense.
 

DREA Singapore Property Prices

Experience DREA’s instant price analytics when on mobile – best with location services turned on

 

Location – Location definitely affects price. The common wisdom is that property prices are higher in premium districts such as D9,10,11 (Orchard, Bukit Timah, Newton area). However, this is not always the case and prices are much more dependent on proximity to amenities. Read about how location matters in our previous post. You may actually find that in some areas, a newly built leasehold property situated right next to amenities such as malls and train station can fetch very high PSF prices – at times higher than freehold properties. See an example here where Soleil@Sinaran skews leasehold prices in D11 and leasehold PSF prices actually become higher than FH prices for larger units.
 
Floor, view and furnishing – Unsurprisingly, well-furnished units on higher floors and with better view are able to command higher valuations. In fact, there are many other factors that would affect how individual unit prices in the same development would vary. That said, once you get a broad sense of PSF prices in a particular location, and after narrowing it down to a certain tenure and size, the rest are very much subject to negotiation.
 

Understand how prices have been trending

 

By now, you should be able to appreciate why it’s important to think about property prices in specific segments (e.g. <500 sqft Freehold units in District 11) rather than in general. The same concept applies when looking at property price trends.

 
Mix effect matters. To illustrate this, consider a hypothetical scenario where median PSF prices in a given district swings from S$ 1300 PSF in June to S$ 1100 PSF in July. Could we therefore conclude that prices have declined? It’s not necessarily so. Remember how larger units typically command lower PSF prices (all-things-equal). In the example mentioned, it could very well be that the units transacted in the first month were all smaller in size. As such, the change in median PSF price was driven by mix shift towards larger units rather than actual price decline or pricing pressure.
 
It is therefore important to look at price trends within specific segments of the property market. Even then, there’s no perfect way to normalize for all aspects. To help buyers, sellers and agents get a better sense of property price trends, we built a set of simple and yet robust tools for zooming into the trends for specific segments of the property market.
 
Try our price trend tools here
 

DREA Singapore Property Price Trends

See price trends for specific segments of the Singapore property market

 

Push on getting a better price

The idea of pushing for a better price is valid whether you are buyer, selling or even when renting a property. It is a big-ticket decision and you should never leave money on the table by not negotiating. On the flip side, being overly extreme and ‘out-of-whack’ when pushing for prices may thwart a potential transaction, leaving no outcome for anyone. This is why being savvy on market prices, as well as price trends are important.
 
For now, we will save the details for our subsequent post where we look deeper into how you can negotiate more effectively.
 
We hope you find our tips useful. If you have any question or comments, feel free to ping us.


 

In the meantime, here are links to our previous post

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