5 Secrets To Successful Property Investing In Singapore
Investing in property is a popular option in Singapore, with many investors seeing it as a lucrative way to build...
Read More
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 …
5 Singapore Property Trends to Watch in 2023: Expert Weigh In
5 Singapore Property Trends to Watch in 2023: Expert Weigh In Top 5 Singapore Property Trends to Watch in 2023...
Read More
5 Reasons : Why Investing In Commercial Real Estate Can Offer Stable Long-Term Returns
Investing in commercial real estate has become an increasingly popular choice for investors seeking stable long-term returns. There are several...
Read More
Discovering the Response of Private Property Owners towards the 15-Month Wait-Out Phase
TLDR The blog post discusses the impact of the 15-month wait-out period cooling measure on private property owners in Singapore....
Read More
Exploring the Resale Condo Market? Here’s What to Watch Out For!
TLDR The impact of COVID-19 on Singapore's real estate market has been significant, leading to a surge in demand for...
Read More
“I Kept My Condo Empty for 7 Years” – Here’s What Singaporeans Living Overseas Do With Their Properties Back Home
TLDR In today's global workforce, many Singaporeans find themselves working abroad, raising questions about the management of their local properties....
Read More
Top 5 : Greatest Challenges That Investors Face In Singapore’s Real Estate Market
Singapore's real estate market is a dynamic and attractive investment landscape for both local and international investors. Known for its...
Read More
The Unexpected Choices: Why Some Singaporean Homebuyers Opt for Smaller Condos (Even When They Could Afford More Space)
TLDR In Singapore's property market, buyers often prioritize factors beyond just size. Many choose smaller units within their budget due...
Read More
Punggol Northshore HDB Flats Reaching MOP: Navigating the Resale Window
TLDR In 2025, around 1,765 HDB flats from Northshore Residences I & II and Northshore StraitsView in Punggol’s Northshore will...
Read More
The COV Conundrum: Navigating Singapore’s Property Premium
TLDR Cash Over Valuation (COV) is the difference between a property's official valuation and the price a buyer is willing...
Read More
Beware! Spot These Warning Signs Before Making a Home Purchase!
TLDR When purchasing a property in Singapore, it is crucial to thoroughly assess various aspects of the home to avoid...
Read More
What Difference in One Year After the ABSD Hike in April 2023?
TLDR The recent hike in ABSD rates, especially the increase from 30% to 60% for foreign buyers, has dramatically affected...
Read More
Unveiling 4 Scenarios of CPF Accrued Interest Impact on Property Owners
TLDR When selling your first home, be aware of CPF accrued interest, which is the interest that would have accumulated...
Read More
Top 5 : Places to Find Unique Singaporean Souvenirs
Singapore, a vibrant city-state known for its multicultural heritage and modern marvels, is a treasure trove of unique souvenirs that...
Read More
What’s Needed For Singapore To Lift Those Cooling Measures?
TLDR The blog post discusses the recent relaxation of real estate restrictions in Hong Kong, contrasting with Singapore's stricter regulations....
Read More
5 Frequently Heard Sales Pitches from Agents Encouraging You to Choose a New Development Instead of a Resale Condo: How Accurate Are They?
TLDR While some agents may discourage resale condos due to personal incentives, the difference in profits between resale and new...
Read More
Top 5 Factors Should Be Taken Into Consideration When Choosing The Right Neighborhood To Invest In Singapore’s Real Estate Market
Singapore's real estate market is known for its stability and potential for growth, making it an attractive investment destination for...
Read More
Would It Be More Better To Engage One Property Agent Or Multiple Agents In The Selling Process?
TLDR When planning to sell your property, you have the option to work with one agent exclusively or non-exclusively. Engaging...
Read More
5 Reasons : Why Singapore’s Rental Market Is Still Lucrative For Property Investors
Singapore's property market has always been an attractive investment option due to its stability and potential for high returns. While...
Read More
The Unsung Importance of Property Finishing: More Than Just Aesthetics
TLDR Many homebuyers overlook the importance of high-quality finishes in properties, assuming they will renovate later or that tenants won’t...
Read More
