Categories: Property

Property Investment: Focus on what is right

Please visit my webpage at www.daryllum.com. It is about investing and real estate. There are also articles about finance as well as property guides.

Our Singapore government has time and again mentioned that property investment is something which should be thought about carefully and not something to get sucked into especially with all the fancy marketing and pressure selling from the marketing agencies. Which then brings us to the very interesting question of whether a renowned architect makes a difference when it comes to pricing a particular project. I believe that there is very little if not zero studies ever done on this but then let us dwell deeper into this very interesting notion.

Similar to purchasing HDB flats through the Design, Build and Sell Scheme (DBSS), once the flat have reached their five year minimum occupation period and are placed on the resale market, the property is deemed as a HDB flat. Buyers are not going to think that this is a premium property and pay prices above the market rate. That being said, there are many who still see the need to purchase a property at a premium just because they are marketed as premium flats.

With the impending completion of the 99 year leasehold property Sky Habitat in Bishan Central, let’s then take a step back to understand why the developer priced the property at such an exorbitant price (an average price of $1747 per square foot) for a development outside Singapore’s core central region. The land was bought at a stark premium by a developer who should know better. It was bought for SGD$550 million which was approximately 27% higher than the next highest bidder. Perhaps someone at CapitalLand might have gotten a ticking off or perhaps more?

So then how does a developer get itself out of such a huge mess? What it did was to get a renowned architect, build a huge and impressive sales gallery complete with a mammoth model of the project and spend tons of money on advertisements to make buyers believe that this would be the next property hotspot and thus the pricing was justified.

The artist’s impression looks great. The real thing looks a whole lot different.

Personally I am no fortune teller but through experience, buyers do remember project names and location but they do not quite remember the developer or less so the architect which was responsible for the design of the property. In time to come buyers of properties like Sky Habitat will find themselves in a huge mess when they try to sell the property. They will come to realise that prospective buyers will not remember that it is Moshe Safdie who designed the property and only focus on the fact that it was grossly overpriced for a mass market condominium. What will hold? Location and the market sentiment will determine, to a majority extent, the price at which a property can be sold at.

The excessively huge sales model is representative of the excessively huge price. Marketing methods to make a project more desirable than it should be.

Does this hold true for all properties around the world? Generally it should. I have yet to encounter a valuer that can tell me that he can value a certain property at a stark premium just because a certain architect was responsible for the design of the property. Currently there are many overseas properties being sold in Singapore. Buyers should not be fazed by the marketing tactics and focus on whether the property is being priced at a fair market rate. A city center will generally remain the same. If you are investing in potential it is like buying a seed, not the grown plant. Please pay the price of a seed and not a plant. Just because the property is designed by an architect that is perceived to be an international brand does not mean that it can and should be sold higher. Locally there are many choices for local purchasers of overseas properties. Places like Malaysia, Thailand, Cambodia have proved to be very popular with local buyers. So much so that the hype generated tends to leave the buyer in awe of the development thus making an uninformed purchasing decision.

In every property purchase, location is key. Buy the right property at the right price. To all investors out there, please make more informed decisions.

Yours Sincerely,
Daryl Lum

Daryl Lum