What You Must Know About Buying Condos That Are Almost TOP

Recently, I met up with one of my blog readers who asked me whether this particular condo was worth buying.

So my followup-question was “Is there any particular reason on why you need to buy this place?”

(There was more conversation in between to understand his situation better. But I think it is too long to share here.)

When buying property, sometimes we are too focused on what we need and what we want. It is expected we focus on the destination.

But we should not forget about the big picture…

Why are we moving? Why are we buying this property?

Is it for growth?

Is it for luxury – a lifestyle upgrade?

Or is it possible we can have both growth and luxury?

In the end, I did have not have the opportunity to conclude the whole case with him.

But I think it is important to share this with my readers here because I believe this family is not alone.

Buying an Almost Completed Development (Will TOP Soon)

A condo new launch will require typically 3-4 years waiting time for the construction to complete.

For this family, they bought a development that is going to achieve TOP next year.

TOP means Temporary Occupation Permit. In this case, it means the key collection will be next year and they can move in.

This development was launched for sale around 2 years ago.

This means the developer has sold quite a number of units. They are no longer under pressure to sell more units.

So when they are no longer under pressure to sell more – what will they do to the price?

Will they sell at higher or lower prices?

Usually… they will sell at HIGHER prices.

Now comes the dangerous part.

Imagine if 70% of the residents there buying at prices that are $150k to $200k cheaper than you?

How would YOU feel?

If they all plan to sell in the future with $150k profit – what will happen to YOUR unit price?

Yes, there exists other factors that can affect the price of your unit – eg. different facing, different unit layouts and different floors.

But let’s say – in the future, your competitors’ asking prices in the resale market – is the same price as the price you bought your unit.

How would you feel?

Do you think you will have a chance to make a good profit from the purchase?

Unless you are buying something that has a super unique facing. Something that is very different from the other units in the development.

Otherwise, do not expect that prices will be very different especially if the units are all similar-facing.

Example #1 – Resale EC Transaction

Recently I completed a transaction in a resale EC.

You will be surprised at the amount the owner paid for the better facing unit.

You will be even more surprised about how much the resale market was willing to pay to take over this unit.

The owner bought at a price that was $68k more expensive when compared to everyone else.

Eventually, they are only able to sell at a price that is only $8k higher than another unit!

One unit has a pool view. The other unit doesn’t have a pool view.

But the resale market was only willing to accept a price that was $8K higher.

I sold the unit without the pool view.

An EC resale transaction I recently handled

Do bear in mind that both units were sold at around the same time.

Imagine in a development that price gap is $68k more expensive – the final resale price is about the same…

The unit without pool view made a gain of $200K as it was bought at a cheaper price.

The other unit with the pool view only made a gain of $140K as it was bought at a more expensive price.

Did you know the unit with the pool view had a much nicer renovation than the “no-pool view” unit?

And yet the resale market couldn’t go higher than the $8k price gap…

Imagine what will happen if you bought your unit at a price that was $200k more expensive?

Look at the consistency of the resale selling price of this EC development….

From the transactions, you can see that no matter how much you paid during the launch – you can only sell at around $910k to $940k at the resale market.

This is the behavior of buyers of the resale market.

Imagine if you have this running thought – “Since I got the best view and I will pay $70k more.”

But when you finally want to let it go at the resale market – you only are able to sell at $28k higher.  How will you feel?

Example #2 – Resale EC “Bounce-out” Units

A “bounced-out” EC unit being sold at $1.14 million.

Here is another example. This is an EC that has a “bounce-out unit”. A “bounce-out unit” basically means the deal did not complete which could be caused by for example – a couple breaking up.

This is how much the market is willing to pay to get a brand new unit which is completed.

$300k MORE for an EC unit that can move in directly.

An example of a “bounced out unit” from an EC being sold at $1.2 million. The main reason? Ready to move in.

This is the additional premium that buyers are willing to pay – and what potential gains you miss out if you choose to buy at the later stages of construction. 

Imagine you brought a condo unit at $880k. In the future, someone is willing to pay you $300k more to you so their family can move in.

Wouldn’t you want to use this strategy to your advantage and gain profit since people are willing to pay so much more just to move in fast?

Or do you want to be the person who pay more to move in fast? This will determine the end outcome of your purchase.

Will you sell to them? For me, I am sure I will if i have a chance like this. 😉

People Are Willing To Pay For Speed and Convenience

Below are examples of people willing to pay more than $200k more just because don’t have to wait so long.

When the development is nearing completion and buyers need not wait for so long – this is the additional premium buyers are willing to pay.

(This is what almost everyone is willing to do when they seek convenience and speed. And it is one of the strategies I use to help my readers make profit.)

Are these “later buyers” wrong? Of course not.

Sometimes it just happens as they have their own reasons – people buy at their own timing. They can only wait for a certain period of time and prefer homes that are going to get the keys soon.

They will always be buyers who:

• wants a brand new development
• are not willing to wait 2-3 years for completion
• urgently needs to move in
• are willing to pay more than everyone else

For me, I simply want to caution my blog readers here.

You can choose to buy LATER. You can choose to buy when the construction is almost completed.

You can choose to wait first.

Just that… we need to know the consequences and the impact. That’s all.

Conclusion

If you buying at prices that is $200k more expensive… and then it grows another $200k…

Well, the first few buyers of the development will be very happy to sell at $400k profit.

But the challenge is this – we cannot control and ask them to wait till $400k profit before they sell.

(We are talking about mass market private property here. How much would a normal family be willing to pay for a very unique view?

An additional $200K? What is more likely is that they decide that the $200K can exchange for a better car. 😉 )

They decide to start selling at $200k profit and majority of them are doing that.

Guess what?

The $200k profit “price” will become the “market price”.

Once that happens, there will be a strong chance that your property price will stay stagnant – especially if you bought at prices that is $200k more expensive than everyone else.

Ultimately, what is key is that you do your planning ahead. Before you even enter the property market, think about how you want to exit.

Know what you are going to go through before you even buy.

Be aware of ALL the consequences. See the end in mind.

I commonly encounter this common reply – “Aiyah I don’t need to make a lot. Can make a bit – I happy already.”

But my concern – you can try to make more so at least can cover back the interest you spend on the loan…

Most of my clients will know all the blindspots and worst case scenarios very well – before they even sign on the dotted line.

Interested to learn more? I invite you to contact me for a no-obligation discussion to find out more on your various options.