Your search results

Are Early Bird Discounts At New Launches Genuine Or A Marketing Gimmick?

Posted by Jayson Ang on November 20, 2023

| 0

TLDR

When considering investing in new property projects, understanding developers’ pricing strategies is crucial. Early bird discounts are not just sales tactics; they help developers manage risks and maintain profits. Developers aim to sell all units within 5 years to avoid extra charges like ABSD and QC extension fees. Pricing stages progress from the primary launch to post-launch and TOP phases. The initial low pricing in phase 1 may lead to minimal profits, balanced out by price increases in phases 2 and 3. Capital appreciation in new launches is not guaranteed, and resale markets also come with uncertainties. Prices tend to rise after the TOP phase, with most units making profits due to developers’ pricing strategies. Owners typically wait for profits before selling, minimizing losses. Consider factors like market uncertainty and developer reputation before investing to make informed decisions.

You’ve probably heard marketing agents using phrases like “Early bird discounts” and “First mover advantage”. They use these terms to talk about the benefits of buying a newly launched property.

Typical Sales Pitches:

“Being the first to invest can lead to substantial financial growth.”
“Prices are at their lowest for those who buy early.”
“The builder makes the least profit when the project just starts.”

Today, I want to talk about how property developers decide on their prices for new projects. I also want to explain why the early bird discounts aren’t just a sales trick. They actually help developers manage risks and keep their profits healthy. To understand their pricing approach, we need to know both the good parts and the challenges of being a property developer. Sure, developers want to make as much profit as they can from each project. But, most of them need to sell all the properties in a project within 5 years of buying the land.

If they don’t, they face a big extra charge called the Additional Buyer’s Stamp Duty (ABSD). Also, if they don’t sell everything within 2 years of the project being ready, they get hit with another charge. This one is called the Qualifying Certificate (QC) extension charge. It’s designed to stop people from buying up lots of land and not using it on our small island. So, most developers use a well-proven strategy to balance cost pressures, profit margins, and the ever-ticking clock.

Developer’s Pricing Strategy

In a fresh new launch project, there are often several key stages.

The first stage is the primary launch, followed by post launch, and finally, the TOP stage. This is when the temporary permit for use is given and keys are turned over to purchasers.

Let’s Start With Phase 1 – The Main Launch

The first group of buyers were quite happy. They saw their money grow a lot in just one year. You can tell from the different starting prices for the first and second groups, which we’ve shown in different colors.

In the second phase, we managed to sell 149 units over the weekend. By the time Sunday evening rolled around, Park Place was almost full – 84% to be exact. Only 70 units were left, and most of these were of a larger size.

What Happens In The Middle Phases (Phase 2 and 3)

The developer often makes little profit from their initial low pricing, known as phase 1. However, they balance this out in phase 2 and 3 by raising prices or offering fewer discounts. This strategy typically causes new launch prices to rise. It also makes the developer’s loyal customers, or VIPs, happy because they can make money from the developer’s plan.

Is Capital Appreciation In New Launches Always Guaranteed?

Nope, it’s not always like that. Buying from the resale market doesn’t come with any surety either.

Sometimes, new launches have offered extra discounts after their initial release. But this doesn’t happen often.

Recently, you might have heard about more discounts at places like 38 Jervois, 8 St Thomas and One Pearl Bank among others. These are giving today’s investors a cost benefit over those who bought earlier.

Does this happen all the time? Luckily for those buying new homes, it rarely does.

It’s key to remember that developers are businesses that need to make money. They also have to manage how much cash they have on hand so they can keep running and keep people in jobs. When the market is uncertain, they have to do whatever they can to keep going.

The good news is, you don’t actually lose money until you sell. Most owners can wait until their property starts making profit, or until the rent they collect makes up for any drop in value.

What Happens To Prices After TOP

When the final phase of a property project arrives, known as TOP, usually there are only a few, or sometimes no units left for sale.

By this point, prices would have risen several times. So, it’s fair to say, those who buy during the TOP phase usually pay the top price.

At this stage, more units start appearing on the market. Not just from the developer’s leftover stock, but also from early owners who want to sell their units for more than they paid.

These owners have owned their properties for a long time. They’ve dealt with mortgage interest costs, stamp duties, and missed out on other opportunities. So, most of them hope to make a good profit when they sell.

It’s rare to find units sold at a loss, as people generally don’t like losing money. If they can’t get a good return, they usually prefer to keep their properties and rent them out.

Consider for instance, Botanique at Bartley, Coco Palms and Commonwealth Towers shown below.

You’ll often see several units making a profit, and very few or none at all making a loss. This is mostly because of our natural human dislike for losing money, which affects how much we’re willing to sell for.

Maybe this explains why, as you can see below, the study of past records reveals that more than 90% of new launch owners earn a profit.

Most New Condos Were Resold With Profits

Among the three areas in Singapore, properties in the Outside (OCR) and Rest of Central Region (RCR) had a better chance of making money with fewer losses.

People living in these places, who needed a home right after selling their government flats or were about to have more family members soon, didn’t have the time to wait for 3-4 years for a new launch. They had no choice but to opt for ready-to-move-in properties.

So, should you consider early bird discounts and getting in first when you’re thinking about investing?

It’s good to be ahead if you’ve done your homework before putting your money into a project and you know your builders well.

Some builders are known to give discounts faster than others, which can cause harm to those who buy first. It would be smart to think about this before investing with them.

We shouldn’t assume that all new launches are safe or even that past events will happen again affecting your chances of gain. I hope this gives you a clearer idea of what marketing agents mean when they talk about early bird discounts.

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

You May Also Like …

All Blog Posts Buying Tips

Should We Upgrade to a Condo Now or Wait for Interest Rates to Go Down?

Jayson Ang – January 18, 2023 –

TLDR Considering the Singapore property market trends and financial factors, it's crucial to make informed decisions about upgrading from an...

All Buying Tips

5 Reasons To Invest In UK Property In 2024 Instead Of Saving

Jayson Ang – February 8, 2024 –

TLDR Investing in UK property in 2024 offers significant advantages over saving due to the potential for long-term value growth,...

All Blog Posts Opinion

Don’t Miss Out: Take Control of Your Life in Your 30s and 40s

Jayson Ang – December 28, 2022 –

TLDR The stages of wealth management vary from ages 30 to 80, with different focuses and considerations at each stage:...

All Blog Posts Buying Tips

Get Into Core Central Region Before Big Price Adjustments

Jayson Ang – February 13, 2023 –

TLDR Jayson Ang discusses the essential factors to consider when seeking a property for investment. By analyzing the safe entry...

Mandarin Top 5

5 Pros of Buying a New Development

Jayson Ang – March 3, 2024 –

Deciding whether to buy a new development or a resale property can be a challenge. In the next few video...

All Blog Posts Opinion

Unlock the Potential of Your Home: 5 Reasons to Start Selling Now

Jayson Ang – June 6, 2023 –

TLDR When considering selling your home, several key indicators can help you determine if it's the right time to make...

Mandarin Top 5

Singapore’s Top 5 Property Investment Hotspots for 2024

Jayson Ang – April 4, 2024 –

As one of the world's leading financial centers, Singapore has always been a popular destination for property investment. With a...

All Blog Posts Buying Tips

Checklist for First-Time Homebuyers in Singapore: A Guide to Viewing Condos

Jayson Ang – May 4, 2023 –

TLDR The checklist provides essential steps for first-time homebuyers in Singapore to consider when viewing a condo. It includes aspects...

Mandarin Top 5

Top 5 Live Music Venues in Singapore

Jayson Ang – May 20, 2024 –

Singapore, a vibrant and multicultural city-state, is well-known for its diverse food scene, stunning architecture, and bustling shopping districts. However,...

Buying Tips Mandarin Top 5

5 Essential Tips for Renting Property in Singapore as a Foreigner: A Guide for Newcomers

Jayson Ang – July 25, 2023 –

TLDR Renting property in Singapore as a foreigner can be challenging due to the high cost of living. To navigate...

All Buying Tips

Strategies for Overcoming ABSD and Acquiring Multiple Properties in 2023 (Revised)

Jayson Ang – August 15, 2023 –

TLDR When it comes to navigating the Additional Buyers Stamp Duty (ABSD) in Singapore, there are legal strategies available to...

All Opinion

Singapore’s Property Market: Will the Newly Proposed 2023 Cooling Measures, Including a 60% Foreigner ABSD, Make Waves or Mere Ripples?

Jayson Ang – April 27, 2023 –

TLDR The recent surge in Additional Buyer's Stamp Duty (ABSD) rates in Singapore targets mainly foreigners and entities, with rates...

Mandarin Top 5

5 Reasons Why Districts 9 and 10 are the Next Big Thing in Singapore Real Estate

Jayson Ang – March 2, 2024 –

Singapore is renowned for its thriving real estate market, with many desirable neighborhoods and top-notch properties. However, when it comes...

All Buying Tips

Should Foreign Buyers Be Deterred By the 30% ABSD?

Jayson Ang – December 7, 2022 –

TLDR Foreign buyers interested in private residential properties in Singapore is a common sight due to the country's positive reputation...

Mandarin Top 5

5 Biggest Mistakes I Made When Starting Out In Singapore Property Investing

Jayson Ang – May 16, 2024 –

Investing in Singapore property can be an excellent way to generate passive income and build long-term wealth. However, like any...

All Blog Posts Buying Tips

35 Brand New Condominiums Nearing Their ABSD Deadline 2023

Jayson Ang – March 4, 2023 –

TLDR The blog post discusses the looming ABSD deadline for several new launch condos in 2023, highlighting the impact on...

Buying Tips Mandarin Top 5

The 5 Most Common Mistakes First-Time Buyers Make (And How to Avoid Them)

Jayson Ang – June 12, 2023 –

The 5 Most Common Mistakes First-Time Buyers Make (And How to Avoid Them) Here are the 5 most common mistakes...

All Blog Posts Buying Tips

Are You Worried About Overpaying On Your Property? Here’s The Secret To Finding Out Its Perfect Purchase Price!

Jayson Ang – March 14, 2023 –

TLDR Understanding property valuations and their impact on mortgage loans is crucial in the Singapore real estate market. By considering...

All Buying Tips Reports

2024 Residential Property Market Outlook

Jayson Ang – December 22, 2023 –

TLDR The market outlook for 2024 suggests continued uncertainties affecting housing demand and risk appetite due to geopolitical tensions, macroeconomic...

All Blog Posts Buying Tips