2018 seems like a very good year if you are a private property owner. You will keep hearing a rosy outlook in the property market as sentiments become more optimistic – it seems the only direction that prices can go is up and away!

But as someone who observes the real estate market closely on the ground when meeting clients, I am able to see some less obvious trends happening.

When I meet with owners of higher-end properties that are located near or within the Core Central Region (CCR) – most seem very happy to see or hear that developments in their surrounding areas are being launched at new record prices. 

Or they feel good when they hear the empty plot of land next to their development being sold for a record-high land price.

Why the good feeling? Because of the assumption – when neighbouring regions are being transacted at higher prices, this means my own property prices will also be pushed up as well.

Right?

“A rising tide lifts ALL boats – so to speak?”

But is it always true? Will ALL “boats” benefit?

Let’s explore whether this assumption is true.

Example #1: River Valley Condominium Developments

Developments In River Valley area

Rivergate Condominium is a 9-year old freehold development located near Robertson Quay.

It is considered a branded development in the area with 545 units.

Nearby to Rivergate, we have 2 plots of land that has been transacted at record high prices.

They are:

• the old Zouk site at Jiak Kim Street ($1733 PSF PPR)
• the Pacific Mansion enbloc sale ($1987 PSF PPR)

The record high PSF PPR prices for these plots of land seemed to be an indication of prices to come for this area.

When launched, these plots of land will definitely be selling at prices above $2700 PSF at least. 

Let’s look back at Rivergate.

Below are Rivergate’s recent transactions and median prices:

Rivergate Condo – 2017 & 2018 Transactions

Rivergate’s average PSF is between $1.8K and $2.2K.

Here are some facts for you to chew on about Rivergate:

• freehold condo consisting of 545 units
• a branded development
• Completed in 2009 – can move in immediately
• PSF is between $2K and $2.2K
• 8 units sold in 2018
• 30 units sold in 2017

Let’s look at Martin Modern next.

Martin Modern is a new launch condo that was launched in Apr 2017.

Here are some facts for you to chew on Martin Modern’s new launch:

• 99-year leasehold development with 450 units
• To be completed in 2020
• PSF between $2.5K to $2.8K
• 45 units sold in 2018

2018 Martin Modern Transactions

With such buoyant sales of Martin Modern and record-high land prices within the area, can we expect that Rivergate’s future transaction prices to go even higher?

Unfortunately I don’t believe so. Older developments like Rivergate have likely hit its peak prices.

The minimum volume of transactions that is happening at Rivergate when compared to Martin Modern already sends a strong signal that buyers are more interested in new launches.

(Remember – Rivergate is a FREEHOLD development while Martin Modern is a leasehold.)

What I believe will happen is that Rivergate’s prices will likely remain stagnant for awhile. 

Should I Continue to Hold On & Just Wait?

For such owners, you might believe that holding on and wait for your property prices to go up will be a good strategy.

But it might not be such a great idea.

As time passes, these new developments will be completed and completely overshadow the older developments like Rivergate. People are always attracted to much newer projects.

You can see it clearly in the PSF numbers and volume of units sold within the same period.

Yes, there might exist buyers who are bargain hunters – who believe Rivergate is a value buy.

But because the attention is so focused on new launches – it is likely that the option of a Rivergate resale condo be ignored or not considered.

(Why? Because of sentiments, marketing hype and attraction to newer things.)

Example #2: Condominium Developments In Holland / Bukit Timah Area

Let’s explore the following developments here:

• Leedon Residences
• Tulip Gardens
• Waterfall Gardens

Here are some facts on Leedon Residence:

• Completed in 2015
• Freehold development consisting of 381 units
• 94 units sold in 2017
• 11 units sold in 2018 so far
• Average PSF price is more than $2000

Just beside Leedon Residence, there is the Tulip Garden development. It was recently sold enbloc in Apr 2018.

The sale price translated to a land price of $1790 PSF PPR. This means a likely launch of at least $2500 psf in the future.

Taking A Closer Look at Waterfall Gardens

The 3rd neighbouring development is Waterfall Gardens.

Here are some facts on Waterfall Gardens:

• Completed in 2010
• Freehold development consisting of 132 units
• 8 units transacted in 2017
• 5 units transacted in 2018
• Average PSF price: $1400 – $1700 PSF

Waterfall Gardens Transactions in 2016, 2017, 2018

We can see clearly again that buyers are preferring the newer launches like Leedon Residences despite the availability of various value-for-money units like Waterfall Gardens.

Time to Restructure Your Property Portfolio?

Having met such homeowners before – especially those who are in no hurry to sell or make changes – I can understand the mindset of “holding on and wait”.

But I believe the time will pass and you find that your property prices will likely to remain stagnant.

In a best-case scenario – there is a chance of course that it can still appreciate slightly. Buyers will still exist and will be interested in your older unit. 

However, by then – these new launches will be COMPLETED and provide ample choices for any buyers interested in these areas.

If you have an investor mindset, you know that having an exit plan is very important.

Exit Plan: When The Attention Is Focused On Your Area = An Opportunity To Sell

There is an opportunity to exit in 2018 – prices are high but it might not be as high as you want.

Perhaps you have passed the peak prices of your property.

But your property is also “too young” to go through an enbloc process. It might be many years of waiting before you can go enbloc.

Your older property could also be the 2nd choice for those whose first choice was to purchase the new launches – but couldn’t proceed.

Perhaps their budget might have fallen slightly short.

These buyers can see that your property while it is older – is also a potential value for money purchase. 

Hence this is a chance for you – the older property owner – to quickly offload and park those funds to another property that has greater potential to give you FASTER returns.

Going After A Better Opportunity To Profit

Being on the ground everyday, I spot opportunities regularly. Some are simply okay but some could be potentially lucrative.

The lucrative opportunities unfortunately are often more inaccessible due to higher entry prices.

Below is past transaction history of Marina One Residences – a high end luxury condo that was completed in 2017.

Marina One Residences Transactions

I like to draw your attention to the huge price gap between the lower floors (9th storey) and the upper floors (28th storey).

There is a price gap of at least $1.2 million dollars!

What this means is when a higher floor is transacted at a higher price, the lower floors will potentially follow suit – increasing in price. This is because the valuation increases when a top floor unit is sold at a higher price.

And a $1.2 million price gap means there is a lot of room for maneuver and potential price increases.

So why there is no rush to buy?

Besides the high quantum, the interest in the Marina Bay areas is not as high as compared to Orchard.

The Orchard Road areas still pull more interest currently though I believe that might change in the future.

Changing Demographic Sentiments

My observation as an agent is that Orchard Road condos are known to attract Indonesian foreign buyers. They like to shop at the luxury shopping belt as well as go for medical checkups and treatments at the private hospitals and clinics within the area.

However, Marina Bay is attractive to the well-heeled PRC buyers due to its proximity to the casinos at Marina Bay Sands.

Of course, I am just simplifying my observations – but I believe the interest will begin to shift to the newer areas.

Just like how people are naturally attracted to newer properties and new launches.

Conclusion

No matter what you decide to do, it is always prudent to do a review of your current property portfolio.

Ask yourself these questions and check your investor mindset:

• Have I made the gains I initially targeted?
• Is the market sentiment buoyant and optimistic?
• Will it possible to attract buyers who are ready and willing to pay the right price?
• Is my exit plan realistic?
• If I wait, when will the next best time to exit?
• Is it time to execute my exit plan?
• What are my plans after receiving my gains and returns from this investment?

Interested to explore your next potential options? I invite you to contact me for a no-obligation discussion to discover investment strategies that can make your funds work harder for you.