Introduction
Beyond purchasing a property for homestay. Most buyers of new launch condos share the common goal of making money from purchasing the property.
Drilling further into this, there are generally 2 parts towards getting this right.
- Finding the right development and
- Getting the right unit within the development
Focus of this article
Selecting the right development is half the battle won. But selecting a sub optimal unit with a blocked view or overpaying for a top floor unit, could also hamper your goal towards maximising profitable returns.
In this article, we will dive specifically into the art and science of how to select the best unit within a new launch condo development.
We will first touch on guiding principles and strategy to select the best new launch condo and follow up to illustrate its application through case studies.
The challenges faced with selecting a unit at a new launch condo
For the benefit of those purchasing their 1st new launch condo. Let’s hash out all the challenges you will face.
Buying without physical viewing
Unlike resale condos which you will get to view the physical unit, its view and its actual physical location before purchasing. For a new launch condo you are purchasing a unit solely based on what you see on the architect’s model, site plan, floor plan and a glorified showroom.
Navigating the developer’s pricing strategy
To make the stake a little higher, each unit with different levels, facing and layouts are priced differently. And the pricing variance between each unit tends to have step up jumps as it passes a certain level or if the unit is exposed to a unique facing.
You will need to navigate the price jumps to make the best value purchase.
Different development different pricing strategy
To make things a little more complex, different developers may apply differences in their pricing strategy. This requires you to repeat the same analysis from every development that you shortlist.
Your goal is to
- Find a unit that is fairly priced or under priced by developer
- But has attribute that can translate to a greater premium when the actually development is being built
- and marketed to a resale or TOP buyer at a equally high or even higher price
Examples of different type of buyers selecting units in a new launch condo
Worst case example – Buyer that got caught off guard
- Purchase a unit, paying a premium for a open view
- Realise that view will be blocked by a HDB flat to be constructed in front of it in 5 years time
Result : Premium purchase did not translate to greater profit, reselling the unit at compromised profit or even at a loss.
Moderate case example – Benchmark setter
- Pay the most to purchase the biggest unit at the higher floor
- Set the benchmark price for that particular unit type
Result : Profit or loss hinges greatly on demand for the development. Took greater risk as premium purchase may not translate to premium selling price.
Best case example – Arbitrager. Opportunistic buyer
- Understands developer pricing strategy.
- Purchase a fairly priced unit with no or minimal objection from future buyers.
- Ride on the price appreciation of more premium units as price catalyst.
Result : Maximise risk return, pay less premium to developer and try to maximise profit to be earned from buyer.
Now that we have driven our point across. Let’s progress towards articulating the strategies that will serve as guide rails towards selecting the best unit in a new launch condo.
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#1 – Never be the one setting the benchmark price
You should try to avoid being the hero buyer purchasing the highest floor, the most expensive unit in the stack.
Instead you should seek to be the one piggybacking on the back of price appreciation of the unit setting benchmark prices.
By being a buyer that sets the benchmark price you are taking on the risk of pushing for market acceptance. You will need to find an exit buyer that is willing to purchase from you, setting the next benchmark price.
If you are bent on selecting the highest price unit then you make sure to take heed to the next strategy.
#2 – Premium facing or level on plan must translate to actual premium feature during resale
Make sure the premium attribute that you have paid for actually translates to something equally valuable when construction has been completed.
There are risks buying a unit off a site plan in a beautifully designed showroom. One of it being the final product after construction may differ greatly from what is being visualised on plan.
The stakes are higher when you are paying a significant premium to purchase a unit for its unique attribute, like a sea view, pool or garden view. Hence, we must exercise extra diligence to ensure that the premium pays off with a higher perceived resale value by the future buyer upon completion.
Here are some pointers to look out for when evaluating attributes that are often priced at a premium by developers.
| Attribute that commonly comes with a premium | Risk | Due diligence to assess risk |
| Open view facing empty plot of land | A hdb or residential block of equal height being build, obstructing view | > Check if pricing has already factor that in or is developer pricing it as though view will remain unblocked > Research URA master plan, check plot density and what is the land use classification of property to be build |
| Pool view | Close proximity with adjacent block that is also facing the pool | > Check distance between blocks using scale on plan, with minimum 50 m to 60m being an acceptable distance between blocks. |
| Sea view | Priced at exorbitant premium compared to other blocks | > Given that it is priced at a great premium, check that quantum is still within reasonable resale after marking it up by 300 to 400k during resale > Check URA master plan to ensure no future blockage |
| Garden view or unit situated next to garden | Garden becomes a frequent walkway or play area for children, compromising on privacy | > Review site plan’s to evaluate if garden will become a gathering place for neighbours |
#3 – Pay the least premium to get into the premium stacks
There are actually real merits in getting into the premium stack. You will be able to differentiate your unit from other competing units of the same layout. When you have got a unit with better facing and floor level, you will enjoy greater buyer demand and be able to price your unit at a premium.
But there could be a way to do it, while avoiding being the benchmark price setter.
The way to go about doing it is to pay the minimum entry price to enjoy the view or facing that the stack has to offer.
Consider the following example.
A particular block / stack in a development offers a unblocked sea view and each unit is priced at $10k different for every level and there is a step of increase of a $30k variance as you move higher up, starting from level 15 and above.
Apply the strategy above your goal is to purchase units in level 10, 11, 12, 13 and 14. These are units that are still priced at a smaller premium of $10k but yet still enjoy the benefits of having the unblocked sea view.
Avoid going for level 15, this is the level where the step price increase starts.
If you happen to miss the lower levels during the balloting process, and still want to be in the premium stack then go higher than level 15, aim for level 20 and above.
This is where the differences in height are amplified between the lower levels and better justify the higher step up premium that you paid for.
#4 – Buy the unit with the least or no objection from future buyer
This strategy is applicable for you, if you are a pure value investor. You are simply looking for the most affordable entry that can bring you the most profit.
Then the game plan is straight forward. Identify the stack that presents the least or no potential objection from buyers, yet it does not possess any special attribute that results in it being priced at a premium.
Using a classroom analogy, you are looking for that average boy that does reasonably well and is always neutral in most classroom tussles.
Key pointers to look out for when identifying such units.
- Avoid being situated near bin centre or electrical generator
- Avoid facing the main road, minor road is fine
- Avoid facing bbq pit
- Avoid facing MRT or LRT tracks
- Avoid levels below 5
- Avoid units near water feature like waterfalls
- Avoid units with west sun facing
Each development will have its unique quirks and nuances, so you will need to evaluate each development’s site plan to find these neutral units that present the least objections from future buyers.
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#5 – Exploit price disparity in developer’s pricing
In the first few pointer’s we have articulated the benefit of paying more for a unit that has more positive attributes.
But sometimes the strategy of intentionally getting something that is less premium with no major objection, can make a lot of sense when there is a huge discount being offered.
Price discounts or disparity normally occur in 2 areas.
Price disparity between unit types.
Developers normally priced highly sought after unit type a premium over less sought after entry level type unit.
In an area dominated with buyers purchasing for their own stay, the 3 bedroom unit with a utility or storeroom is normally priced at a premium compared to the smaller 3 bedroom unit without a storeroom, also known as a 3 bedroom compact.
Under such circumstances, check the price quantum difference. If the 3 bedroom with store is priced at a 100k premium compared to the 3 bedroom compact. It makes sense to start considering the 3 bedroom compact, assuming its layout is efficient.
Common price disparity between unit types
- 3 bedroom with store vs 3 bedroom compact
- 3 bedroom with study vs 3 bedroom with store
- 2 bedroom with study vs 2 bedroom compact
If you are in-market for a 2 bedroom condo for investment check out our latest research publication on ” The Investor’s Guide to Investing in 2 Bedroom Condos In Singapore “
Price disparity between levels.
Another area to look out for price disparity is between floor levels. The common “trick” that is being applied, is that there is often a sudden step up in price increment as a unit passes a certain floor level.
Consider the following example.
- A block comprising 20 storeys in a new launch development.
- Each unit is priced at a 10k difference from level 1 to 8.
- But a step up price increase occurs at level 9 onwards.
Your goal is then to look out for units at level 6,7,8, reaping the benefit of being located at a reasonably high floor without paying the step up premium.
#6 – Product to future buyer fit
Aside from selecting the right facing, zooming back out into the bigger picture. It is important to get the product buyer fit right.
Product buyer fit, refers to buying the right unit type, catering the needs of the exit buyers for the particular new launch developments.
If you are buying a development situated in the city centre targeting Singles and Investors, you should stay away from buying a 3 bedroom condo.
On the flip side, if you are buying a unit situated in the residential housing district like Punggol, Tampines or Pasir Ris, avoid getting a 1 bedroom condo and try to stretch for 3 bedrooms with a store.
To assess the future buyer profile for your new launch, lookout for the following factors.
| Factors to consider | Profile of exit buyers | Ideal unit type | Main attribute |
| Are there lots of HDB around your new launch condo ? i.e. Hougang, Punggol, Tampines | HDB upgraders | 4 bedroom compact3 bedroom with store | Optimise for affordable quantum |
| Are there lots of landed housing areas surrounding your new launch condo ? i.e – Bukit Timah, Lorong Chuan, Katong | Landed down graders orChild of parents living in landed housing area | 3 bedroom premium4 bedroom premium | Can optimise towards more premium feature |
| Is your new launch condo situated in an area that is near the city centre and is not your common Singaporean residential area ? i.e – Paya Lebar, One North, Boon Keng | SinglesMarried couple without kids | 2 bedroom with study2 bedroom compact | Optimise towards smaller unit type |
| Is your new launch condo located in the city centre, a common location for expat rental ? i.e – Raffles place, Outram, Tanjong Pagar, Marina Bay | InvestorsSingles | 1 bedroom1 bedroom with study | Optimise for rental yield |
#7 – Optimise towards affordable quantum
To put a wrap on all the strategies that we have shared, the last important strategy that is all encompassing is to optimise towards the sweet spot in purchasing quantum.
There is always a sweet spot in the quantum threshold for buyers purchasing in a specific district.
- For the OCR, you are looking at the sweet spot of 1.5 to 1.9 mil for a 3 bedroom condo.
- For the RCR, you are looking at 2.1 to 2.5 mil for a 3 bedroom condo.
So when selecting your unit it is important to ensure that when everything is priced in, the end quantum is still within the affordable range for your future buyer.
To identify the sweet spot for purchase quantum in a certain area, you would have to conduct a price disparity analysis, comparing prices in the following aspect.
- Target new launch vs surrounding resale condo
- Target new launch vs surrounding new launch that just TOP
- Target new launch vs surrounding new launch
Gaining a competitive edge when buying a new launch condo
Think about it, what does buying a new launch condo entails ? You are essentially sealing a multi million dollar purchase by relying on a developer’s floor plan, a showroom and some assurance from your property agent.
The only way to ensure you place your money in the best development is do your prep work, lots of prep work, lots of research.
Objectively parsing through facts and numbers to decide if the new launch condo development …
Is it priced fairly ?
Have upcoming price catalyst in place ?
Does it possess fundamental attributes that buyers desire I.e school, affordability ?
If research is not your cup of tea, the smarter way is to outsource it to someone who enjoys doing it.
More Reads Regarding New Launch Condo Investing
- Progressive Payment Calculator – Singapore New Launch Condo
