How long does it take an average law abiding, hardworking Singaporean household to accumulate over $200,000 ? I dare say, a long time filled with the agony of daily commuter and countless hours wasted, tolerating mindless politics at work.
Perhaps that is the reason why most Singaporeans develop an unspoken obsession with property investing. If done right, owning a property that appreciates in value, that $200,000 gain can be earned over a couple of years.
Aside from avoiding ABSD. One of the ways to ensure your property appreciates in value is to find a property that is undervalued. Akin to Warren Buffett investing in understated companies over the flashy Teslas and Nvidia. We will be looking to identify some undervalued properties today.
What are undervalued properties ?
Before we begin, let’s define what is an undervalued property. We can look at it from two levels.
At a higher level there are undervalued developments, meaning a price gap exists between the development and its surrounding proxies. Even though the development is not the most attractive new launch in the area, it shares many similar positive characteristics but is being priced much lower.
At a more micro level, there are undervalue units within a development. This refers to units that are priced lower than the average selling price of similar units.
In an ideal case you would try your best to find an undervalued unit within an undervalued development, this provides the best margin of safety for capital appreciation. In reality, finding a fairly priced unit in an undervalued development or vice versa, would make a good case for investment.
The complete list of methods to find undervalued property in Singapore
There are several methods to find undervalued properties in Singapore
- Identifying area where there is significant price gaps between new launches and its surrounding development
- Identifying area with a high concentration of condo developments and capitalising on price gaps
- Identifying new launch development with post launch discounts
- Buying into the worst development in the best area
- Buying into a property in view of future URA district or transport line development
- Looking for fire sale property by attending property auction
Today’s focus – finding undervalued properties by analysing price gaps between new launches and resale properties
While the scope for ways to find undervalued property remains broad, we choose to deliver value by going deep on the first method. We will be centering our research around identifying undervalue properties by looking at the price disparity between new launches and the resale development around it.
The general idea behind how this works is as follows. Whenever there is a launch of a new sizable condo development in a specific area, it ignites a wave of excitement and awareness for that particular precinct.
And this hype and excitement tends to extend way past the initial launch of the development. Buyers who missed the chance to own a prized unit during the initial launch period return to look for an opportunity to purchase a unit in the area after the project achieves its completion status.
Given that there will be segments of buyers who cannot or are unwilling to pay for the premium priced new launch. The spillover demand will trickle down to the older resale development surrounding it, driving renewed price appreciation for these developments.
An example of this would be the launch of Stirling Residences in 2018. The launch of this mega development brings renewed price appreciation for the older condo developments within the Queenstown MRT enclave.
Queens, a 16 year old leasehold condo development was one of the beneficiaries. Its price, which has been plateauing since 2016, experienced a new wave of price appreciation from 2020 to 2023. Buyers who bought in during 2019, prior to the launch of Stirling Residence sees a solid 22% upside in 3 years.
How was the research conducted
Given the purpose of the research is to identify areas where multiple new developments are being launched, making new highs in selling prices. Ideally presenting a significant price gap with the older developments in the surrounding.
We started the research process by aggregating all the new launch development for the past 5 years, from 2018 to 2023. We then group the new launches into its specific districts and a final layer of segmentation is done to cluster the new launches into more granular and meaningful precincts for analysis.
Number of new launches over the past 5 years, in different districts
| District | Location | No of new launches |
|---|---|---|
| 19 | Hougang, Ponggol, Sengkang, Serangoon Garden | 8 |
| 21 | Clementi Park, Hume Avenue, Ulu Pandan, Upper Bukit Timah | 7 |
| 3 | Alexandra, Queenstown, Redhill, Tiong Bahru | 7 |
| 18 | Pasir Ris, Simei, Tampines | 6 |
| 27 | Admiralty Drive, Sembawang, Yishun | 5 |
| 23 | Bukit Batok , Bukit Panjang, Choa Chu Kang, Dairy Farm, Hillview | 5 |
| 15 | Amber Road, East Coast, Joo Chiat, Katong, Marine Parade, Meyer, Tanjong Rhu | 5 |
| 5 | Bouna Vista, Clementi, Dover, Hong Leong Garden, Pasir Panjang, West Coast | 5 |
| 20 | Ang Mo Kio, Bishan, Braddell, Thomson | 4 |
| 10 | Ardmore, Balmoral, Bukit Timah, Grange Road, Holland Road, Orchard Boulevard, Tanglin | 4 |
| 13 | Braddell , Macpherson, Potong Pasir | 3 |
| 11 | Chancery , Dunearn Road, Moulmein, Newton, Novena, Thomson, Watten Estate | 3 |
| 9 | Cairnhill, Killiney, Orchard, River Valley | 3 |
| 22 | Boon Lay, Jurong, Tuas | 2 |
| 14 | Eunos, Geylang, Kembangan, Paya Lebar , Sims | 2 |
| 7 | Beach Road, Bencoolen Road, Bugis, Golden Mile, Middle Road, Rocher | 2 |
| 2 | Anson, Chinatown, Shenton Way, Tanjong Pagar | 2 |
| 28 | Seletar, Yio Chu Kang | 1 |
| 24 | Lim Chu Kang, Sungei Gedong, Tengah | 1 |
| 17 | Changi, Flora, Loyang | 1 |
Categorizing new launches into its respective noteable location clusters
| Area | No of new launches | Notable developments |
|---|---|---|
| Woodleigh | 2 | Park Colonial, The Tre Ver, Woodleigh Residences |
| Serangoon North | 2 | Affinity At Serangoon, The Garden Residences |
| Lentor | 2 | Lentor Modern, Lentor Hills Residences |
| Dakota | 3 | The Continuum, Dunman Grand, Tembusu Grand |
The crux of the analysis would be to then identify the price gaps in the particular areas by comparing the area’s benchmark new launch with its surrounding developments.
The goal is to find developments that are a few years older, with similar attributes but show a significant price gap. This will provide room for price appreciation as demand overflows, when people cannot afford a unit in these benchmark units.
#1 – Woodleigh
New development launched
If you look past the recent high profile launches in 2023. Park Colonial and Woodleigh Residences were one of the blockbuster launches in 2018 and 2019. Prospective buyers form long lines outside showrooms to snap up units in these developments despite record high PSF pricing.
About the location
The draw for these two new launches was not unsubstantiated, Woodleigh as a district enjoys multiple tailwinds. Positively impacted by URA’s Bidadari transformation plan, Woodleigh is often touted as the jewel of Bidadari and looked upon as the next Bishan.
Key draw for the location
- Reputable primary school – Maris Stella Primary school, Cedar Primary school and St Andrew Junior School
- Sizeable BTO developments with potential for high value exits – fueling HDB upgraders demand
- Stamford American school
Price Analysis – Woodleigh
| Project Name | Tenure | Age | Lease Remaining | No of units | Dist from MRT (m) | Avg Price (S$ psf) | Price Gap vs Benchmark (%) | Avg Price after lease reset (avg psf / remaining lease x 99) ($psf) | Price Gap vs Benchmark (with reset lease) (%) |
|---|---|---|---|---|---|---|---|---|---|
| THE WOODLEIGH RESIDENCES | 99 | 6 | 93 | 667 | 182 | 2,112 | 0% | 2,248 | 0% |
| PARK COLONIAL | 99 | 6 | 93 | 805 | 237 | 1,977 | -6% | 2,105 | -6% |
| 8@WOODLEIGH | 99 | 15 | 84 | 330 | 401 | 1,511 | -28% | 1,781 | -21% |
| BLOSSOMS @ WOODLEIGH | Freehold | 16 | NA | 240 | 438 | 1,559 | -26% | NA | NA |
| THE TRE VER | 99 | 5 | 94 | 729 | 741 | 1,816 | -14% | 1,913 | -15% |
Referring to the table above. Woodleigh Residences, an integrated development, stands as the leader of the pack being the newest condo with the greatest proximity to MRT.
From a price gap perspective, the following development presents a notable price disparity with Woodleigh residences and warrants further review.
Blossoms @ Woodleigh
A freehold development, 400m away from the Woodleigh MRT station is priced 26% lower than Woodleigh residences on a PSF basis and is priced 21% lower than the second new launch Park Colonial in the area.
Acknowledging the differences in age, with Blossoms @ Woodleigh being a 16 year old property versus Woodleigh Residences being 6 years old. We reset both developments back to 99 years by dividing its PSF pricing by its remaining lease and multiplying it by 99, to allow an apple to apple comparison.
Blossoms @ Woodleigh still priced 21% and 17% lower than both Woodleigh residences and Park Colonial respectively.
Beside comparing the two developments on a psf basis, it is also important to look at it from a quantum perspective. It is often the case for older developments, which often feature a bigger floor area due to inefficient features like bay windows and oversized planter boxes.
A 1200 sqft, 3 bedroom unit at Blossoms @ Woodleigh is priced between 2.1 to 2.3 million while a similar sized 3 bedroom unit at Woodleigh Residences is priced between 2.3 to 2.5 million.
From a quantum perspective, Blossoms @ Woodleigh still remains affordable and in line with the psf price disparity versus Woodleigh Residences.
But there is an important downside to be noted for Blossoms @ Woodleigh,even though it is within the 1 km radius of Cedar primary school and St Andrew junior school. It missed the 1km radius mark for the much sought after Maris Stella primary school, which is a major draw for the location.
Given that Blossoms @ Woodleigh remains interesting on a numbers standpoint. It is also important to look beyond the numbers and examine the aesthetics of the developments, making sure the development is well maintained and remains appealing to potential buyers.
#2 – Lentor
New development launched
The duo lentor launches dominated the headlines for the 1st half of 2023.
Lentor Modern, an integrated development, led the charge with 504 out of 605 units sold on its launch weekend. And Lentor Hills Residences launched shortly after. The upcoming Lentor Garden will comprise of the third new launch development in the Lentor area.
About the location
Lentor is an understated area situated near more popular and larger districts Ang Mo Kio that recently saw the popular launch of AMO Residences.
Key draw for the location
- CHIJ St Nicholas Girls’s School
- Lentor Central Mall – addition of new amenities to the location
- Lentor MRT station, launched 2021 – providing accessibility to the area
Price Analysis – Lentor
| Project Name | Tenure | Age | Lease Remaining | No of units | Dist from MRT (m) | Avg Price (S$ psf) | Price Gap vs Benchmark (%) | Avg Price after lease reset (avg psf / remaining lease x 99) ($psf) | Price Gap vs Benchmark (with reset lease) (%) |
|---|---|---|---|---|---|---|---|---|---|
| Lentor Modern | 99 | 2 | 97 | 605 | 123 | 2,122 | 0% | 2,166 | 0% |
| Lentor Hills Residences | 99 | 1 | 98 | 598 | 242 | 2,099 | -1% | 2,120 | -2% |
| THE CALROSE | Freehold | 16 | NA | 421 | 368 | 1,347 | -37% | NA | NA |
| SEASONS PARK | 99 | 28 | 71 | 390 | 394 | 971 | -54% | 1,354 | -37% |
| FAR HORIZON GARDENS | 99 | 41 | 58 | 270 | 461 | 938 | -56% | 1,601 | -26% |
| CASTLE GREEN | 99 | 30 | 69 | 664 | 521 | 998 | -53% | 1,432 | -34% |
| NUOVO | 99 | 22 | 77 | 297 | 707 | 1,006 | -53% | 1,293 | -40% |
| BULLION PARK | Freehold | 16 | NA | 472 | 761 | 1,254 | -41% | NA | NA |
Calrose, a 16 year old freehold property stands out in the price gap analysis. Thanks to Lentor Modern launching at a premium price of $2,122 psf.
Calrose priced at an average of $1,347 psf enjoys a 37% price disparity versus Lentor Modern and a similar 36% price disparity versus Lentor Hills Residences.
From a quantum perspective, a 3 bedder, 1,141 sqft unit over at Calrose is transacted at 2.0 million while a 990 sqft 3 bedder over at Lentor Modern is transacted between 2.0 million to 2.1 million range.
And this marks the challenge with older development like Calrose. Despite its lower PSF pricing, its larger floor area and the more liberal planning of space by its developer. Its pricing from a quantum perspective still falls within the range as a more efficiently sized smaller 3 bedroom unit in Lentor Modern.
#3 – Dakota
New development launched
The area surrounding the Dakota MRT area saw the most new launches in 2023. And these are not your usual mid sized projects but mega developments featuring more than 1000 units.
Tembusu grand, a 638 unit development was first to launched on 8 April 2023, followed by The Continuum, a freehold development with 816 units. The finale was marked by the launch of Grand Dunman, a 1008 units mega development with the closest proximity to Dakota MRT, Tanjong Katong Girls School and Chung Cheng High School.
About the location
The Dakota area poses desirable characteristics for ideal city fringe living. Aside from being known for having the popular Old Airport Road hawker centre in its vicinity. Its surrounding Kallang and Katong neighbourhood presents a good mix of private and public housing to give this location a premium and exclusive feel.
Key draw for the location
- Proximity to CBD – 6 stops to Raffles place MRT
- Proximity to 6 shopping malls – PLQ mall, Singpost Mall, Paya Lebar Square, Kinex Mall, Kallang Wave Mall and Kallang Leisure Park
- Kong Hua School, Tanjong Katong Girls School and Chung Cheng High School.
Price Analysis – Dakota
| Project Name | Tenure | Age | Lease Remaining | No of units | Dist from MRT (m) | Avg Price (S$ psf) | Price Gap vs Benchmark (%) | Avg Price after lease reset (avg psf / remaining lease x 99) ($psf) | Price Gap vs Benchmark (with reset lease) (%) |
|---|---|---|---|---|---|---|---|---|---|
| Grand Dunman | 99 | 1 | 98 | 1,008 | 178 | 2,535 | 0% | 2,561 | 0% |
| WATERBANK AT DAKOTA | 99 | 14 | 85 | 616 | 181 | 1,664 | -34% | 1,938 | -24% |
| DAKOTA RESIDENCES | 99 | 16 | 83 | 348 | 336 | 1,588 | -37% | 1,894 | -26% |
| THE SUNNY SPRING | Freehold | 25 | NA | 338 | 416 | 1,283 | -49% | NA | NA |
| THE WATERINA | Freehold | 18 | NA | 398 | 448 | 1,504 | -41% | NA | NA |
| GUILLEMARD EDGE | Freehold | 9 | NA | 275 | 541 | 1,433 | -43% | NA | NA |
| BUTTERWORTH 8 | Freehold | 19 | NA | 216 | 726 | 1,616 | -36% | NA | NA |
| The Continuum | Freehold | NA | NA | 816 | 823 | 2,731 | 8% | NA | NA |
| TEMBUSU GRAND | 99 | 1 | 98 | 638 | 857 | 2,474 | -2% | 2,499 | -2% |
| SIMSVILLE | 99 | 29 | 70 | 522 | 916 | 1,103 | -56% | 1,560 | -39% |
| KATONG REGENCY | Freehold | 8 | NA | 244 | 952 | 1,840 | -27% | NA | NA |
| PARK PLACE RESIDENCES AT PLQ | 99 | 8 | 91 | 429 | 956 | 2,086 | -18% | 2,269 | -11% |
| HAIG COURT | Freehold | 19 | NA | 360 | 975 | 1,616 | -36% | NA | NA |
| LIV @ MB | 99 | 2 | 97 | 298 | 987 | 2,429 | -4% | 2,479 | -3% |
We will be using Grand Dunman as the benchmark property for this location. It is the mega development new launch in this location with greatest proximity to Dakota MRT.
Waterbank At Dakota is an older, 14 year old development that stands out in the price gap analysis. It is located equally close to the MRT as Grand Dunman and differentiates itself from its surrounding resale development by being the only other mid-sized development with 616 units.
It is priced at 34% lower than Grand Dunman from a psf perspective. When we account for the difference in balance lease between Waterbank At Dakota and Grand Dunman. Waterbank At Dakota is still priced 24% lower than Grand Dunman
From a quantum perspective, a 1281 sqft, 3 bedder in Waterbank At Dakota is transacted between 2.0 to 2.4 million. A 958 sqft, 3 bedder in Grand Dunman is transacted between 2.3 to 2.5 mil.
So from a quantum affordability standpoint, Waterbank still remains more affordable than Grand Dunman while offering a unit with bigger floor area.
Looking at the layout, a compact 3 bedroom unit at Waterbank At Dakota features an efficient and squarish layout. It is void of inefficiencies associated with baywaters and oversized AC ledges, commonly present in older developments.
#4 – Serangoon North
New development launched
Serangoon experienced its fair share of limelight in late 2018 with the launch of 1052 units mega development, Affinity At Serangoon and 613 units, The Garden Residences.
About the location
Properties in Serangoon North have alway fallen under the limelight due to its lack of accessibility to a MRT station. The impending launch of Serangoon North MRT, to be completed by 2030, provides renewed interest for this area.
Coupled with the proximity to highly sought after Rosyth Primary School, properties in this area possess an appealing proposition for a OCR homestay property.
Key draw for the location
- Proximity to highly sought after Rosyth Primary School
- Sizeable HDB upgrader demand from surrounding Serangoon, Hougang and Punggol neighbourhood
- Improved accessibility with the launch of Serangoon North MRT station in 2030
Price Analysis – Serangoon North
| Project Name | Tenure | Age | Lease Remaining | No of units | Dist from MRT (m) | Avg Price (S$ psf) | Price Gap vs Benchmark (%) | Avg Price after lease reset (avg psf / remaining lease x 99) ($psf) | Price Gap vs Benchmark (with reset lease) (%) |
|---|---|---|---|---|---|---|---|---|---|
| AFFINITY AT SERANGOON | 99 | 5 | 94 | 1052 | 465 | 1,579 | 0% | 1,663 | 0% |
| TERRASSE | 99 | 13 | 86 | 414 | 477 | 1,188 | -25% | 1,368 | -18% |
| KENSINGTON PARK CONDOMINIUM | 999 | 145 | 854 | 310 | 523 | 1,291 | -18% | 1,510 | -9% |
| THE GARDEN RESIDENCES | 99 | 6 | 93 | 613 | 587 | 1,614 | 2% | 1,718 | 3% |
| Hundred Palms Residences | 99 | 7 | 92 | 531 | 644 | 1,502 | -5% | 1,616 | -3% |
| REGENTVILLE | 99 | 27 | 72 | 580 | 678 | 857 | -46% | 1,178 | -29% |
From a price disparity standpoint. Terrasse, a 414 units mid sized development stands out when compared against new launch, Affinity at Serangoon.
While both developments are less than 500m away from the future Serangoon North MRT station. Terrasse is priced 25% lower than Affinity at Serangoon and 18% lower when accounting for its age.
What is interesting is that Terrasse is priced 21% lower than Hundred Palms Residences, which is an EC that has yet to reach its MOP status and is located further away from Serangoon North MRT.
From a quantum perspective, a 1055 sqft unit in Terrasse is transacted between 1.3 to 1.4 million compared to a 1098 sqft unit in Affinity At Serangoon is transacted between 1.4 to 1.5 million
Final words
This marks the conclusion for our price gap analysis for new launches and its surrounding properties. While there are several areas with new launches, not everyone presents an opportunity to spot undervalued resale development that will benefit from price appreciation driven by new launches.
In fact there are some areas in which the price gap between new launch development and resale development is so narrow, that it makes more sense to purchase the new launch over its surrounding counterpart.
If you are on the lookout for a 2nd investment property do check out our other articles on decoupling and “sell one buy two” strategy to avoid paying ABSD
