Such a question is indicative of a purchaser who has not made up his or her mind on whether to purchase a certain property during its launch. For clarity’s sake, we are referring to new launches. This is where a developer has obtained a plot of land and is looking to sell units in a future development to the general public. The typical purchaser would think the developer would offer discounts on unsold units if the development did not sell as ideally as they thought. While it would be true for some developments, it does not happen at every new launch. Especially not if the development has good investment attributes like being well-located and having reasonable pricing.

When a buyer is looking at a new launch, it is first important to identify whether this development is located in a good location. Next, the buyer should consider whether all units in the development are open for sale. This is because the key to property investment is selecting the right development and the right unit within the development.

I had previously written an article titled “How to select a good unit at a new project launch“.

If a buyer is focused on these two requirements, he should not be focused on whether the developer issues a discount or not. The next consideration is whether the development is priced competitively. The comparison should be whether the pricing, i.e., the per square meter or square foot pricing of the development is in line with either the units in the resale market or other new launches in and around this area. New launches should have a premium over older developments in the same area. The older the development, the larger the premium. As for comparable new launches in the same area, the pricing should be similar and in line with these developments.

 

In summary, this should go through a property investor’s mind when looking to purchase a new launch. I write with reference to properties in Singapore and Bangkok as I only have experience in these property markets. However, I would think that this train of thought should apply to all property markets.

 

Step 1: Consider the location of the new launch.

 

Step 2: Consider which units are ideal within the development.

Remember that you are buying a development with many units of similar layouts. Identifying units with unique investment attributes will help your unit stand out if you decide to rent or sell the unit in future.
An example of this would be a unit on the facilities level. I had sold such a unit at a higher price as compared to the asking prices of similar units in the same stack on a higher level. Trust me, there will be people who will tell you that it may be very noisy and there will be no privacy, etc… Let them be. This is just prospective purchasers’ methods in trying to press down the selling price.

 

Step 3: Compare prices of resale units in the same area.

 

Step 4: Compare prices of other new launches in the same area.

Consider also whether the units come fully fitted and fully furnished by the developer. This is more prevalent in Bangkok than in Singapore.

 

 

Look at all the factors which I have stated. If a purchaser is focused on the attributes that make up a good property investment, nowhere in the matrix that I just mentioned is there consideration of the discount that the developer is offering.

So why then do purchasers consider the discounts on offer when deciding to purchase a new launch?

Because some purchasers are enticed by discounts rather than the more important factors which I just stated. Selling is playing on emotions. For many, the idea that they are getting a discount is enough psychologically to entice them into making a purchase.

Hence, is a discount always an indication of a play on emotion?

Now always. The developer will usually place discounts on less desirable units. In Bangkok, the 13th level of every condominium is labelled as #12x and not #13. However, units on that particular level will still be less desirable. Hence, the developer may offer a significant enough discount for buyers to consider those units. Also, in every development, there will be less desirable units. They may be facing a noisy road or are blocked by a neighbouring development. Imagine a development with unblocked views on all three sides but on the fourth, the view is obstructed. Buyers will naturally not consider such a unit. The developers will usually throw in discounts to try and move these units. Also, at the tail end of the sale, when most units have been snapped up and only a few units are left,  the developers would typically throw in discounts to clear these unsold units.

So then consider why the developer is giving a discount. Especially if it is at later stages of the new launch.

 

What I need to reiterate to property purchasers is this: Focus on the factors that matter.

 

Yours sincerely,

Daryl