A recent discussion I had with someone ended up being a good reminder why it is so important to perform one very important check before you decide on a property to purchase. The consultation was regarding comparing between two properties: The Warren located at Choa Chu Kang and The LakeShore located at Jurong West.
The gentleman I met up had already done his own research on the properties and had wanted to use me as a sounding board to gain an external perspective. He told me the various pros and cons he had observed from the two developments, one of them being the location.
For instance, The Warren at Choa Chu Kang is a good potential purchase because it is located directly beside the MRT station and right next to Lot 1 Shopping Mall. As compared to The LakeShore at Jurong West which is simply next to the MRT station minus the shopping mall. Still, both developments are quite promising because they are 2-3 stations away from Jurong East MRT station, which also happens to be the heart of the Jurong Lake District.
The Warren
The LakeShore
His deductions were sound and listening to him, it did seem like The Warren was a better deal than The LakeShore. However, when I looked further into the respective properties, something made me change my mind about the two developments.
“The Peak”
Also known as the historical highest price, this determines your profit margin in your investments. This is important because with all the cooling measures implemented and news of property prices coming down, we would need as much advantage as possible in our current market.
Looking at The Warren, the purchasing price almost reaches the Peak pricing. This does not bode well for the purchaser because there is no advantage with the price considering today’s property landscape.
If you were to refer to the list above displaying the transactions made in The Warren (sorted by price) you can see that for a normal 3-room unit, the highest transacted price was at S$1.16 million (in Red Box). However, in order to get a unit in this current market, you will need to pay around S$1.1 million (in Blue Box). Buying a unit at Peak in a low market is quite worrying in my opinion.
To put those figures in comparison, here is a display of The LakeShore transactions (also sorted by price).
Today, you should be able to acquire a unit for S$1.25 million considering the current property conditions. Keeping that number in mind, you can see from the table, you are also buying a minimum of S$100,000 – S$200,000 below the peak in 2013.
Due to the new measures implemented by the Government, I can’t be sure of whether or not the development is going back to the peak but between these two developments, my profit will be much more secure with The LakeShore. The rationale behind this is that I will be buying the property well below the historical peak and will only have to wait for it to appreciate (hopefully back to the peak price in 2013 before the updated cooling measures took effect).
Whereas if I were to buy the unit at The Warren, I will be buying the unit at a transaction price very close to the historical peak which consequently limits my potential for profit growth of said unit. Unless of course, I’m hoping for a new peak to be created so I can enjoy more profit but that’s a risk I am not willing to take.
Talking numbers, you stand to make S$100,000 profit by only needing to hit the existing peak price (in the current market) for The LakeShore. On the other hand, you have to create a new peak price (in the current market) to enjoy the same S$100,000 profit at The Warren. Thus, it is clear to see that my potential for growth is much better with The LakeShore.
From this perspective, although The Warren seems more promising at first, The LakeShore reveals its true potential when you look into their respective transaction backgrounds. The question you should always ask yourself is, “Which has higher potential and likewise, which proves a more risky investment?”
Remember that in real estate, we always do our best to minimize our risk and maximize our potential for the best gains. What are your views about The Warren and The LakeShore? Share your opinions! Drop me an email at gary@secondpropertyinvestors.com.
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