New project launches are extremely popular among buyers. Even with the latest round of cooling measures, there seems to be a strong demand for new project launches. It just seems that buyers, in general, prefer to purchase off plan rather than a completed property in the resale market. In this blog post, I will be highlighting a few things that buyers should take note of when visiting a sales gallery during a new project launch.
1) Not everyone who is in the show flat is there to buy
At times, what we read in certain media may be rather daunting. In today’s market, where sentiment is still rather positive, the norm is for a preview period whereby buyers can enter the showflat and take a look at the mock-up units. Cheques will be collected during this preview period and there will be a day of ballotting. At times, reports will make it out that there were thousands of people who visited the showflat over the preview weekend. It may seem like demand is extremely strong. The truth is that strong preview numbers do not always translate to strong sales. There will always be people who are just in the area or owners from neighbouring developing developments that will want to take a look at the latest new project launch in the area. You as a buyer should always focus on whether the development is well located, pricing is reasonable and whether the attributes of the unit which you are looking at will benefit you in the future. If the project in question ticks all the right boxes, then demand should correspondingly be strong. You should never base your buying decision on how large the crowd is at the showflat.
2) The show flat is heavily renovated with extensive interior design
The show units will always be very attractive. Property developers will always doll up the showflat to attract buyers. The newer properties are usually smaller than older ones. Developers will come up with creative space-saving designs to make every small space seem larger. Loft beds with a study table underneath create the illusion that the room can function as both. This may be something which may appeal to some buyers but they must remember that the units will come bare, without the interior design work. If you as a buyer needs such a design, you can always take a photo or a video of the showflat for your reference. It would be wise to note that such interior design work cost money. Thus that is an additional cost on top of what you already paid for the property. The property would usually come with basic cabinets fitted in the kitchen, bedrooms and bathrooms. You as a new homeowner will require some work like installing lights, painting the walls, installing curtains and some additional carpentry work.
3) There are no doors attached to the room
I would think that this is for safety purpose in show flats. The rooms in the showflat have no doors attached to them. This may invariably make the room feel larger than it actually is. There will be a marking done on the floor to show which part of the room will be covered by the swinging door but some buyers may not take notice of this. Some show flats may place certain furniture in a certain manner which may be unsuitable once there is a physical door. For example, I have seen a study table placed in a manner whereby the door could not be swung open or close if someone was seated in at the table. When you are taking a look at the showflat, do try to visualise how everything is supposed to work with a swinging door.
4) There is usually no storeroom in newer developments
For a period of time, the household shelter was located inside the property. This provided units with a storeroom. The household shelter was large enough to store big and bulky items. Items like suitcases, old books and sporting gear can be stowed away in the storeroom. These days, however, the staircase in the common area of condominiums double up as household shelter. What this means is that the property will not come with a storeroom. When you view the showflat, all items will seem nice and tidy. The truth is that without a decent room to store items, some homeowners may end up having to leave their items in various places throughout the house. I have seen buyers turn one room of the property into a place to store their items. This may not seem prevalent when you are in the showflat but it will become an issue for some buyers once they live in the property.
5) The location of the show flat may not be on the actual site
Three projects come to mind. Affinity at Serangoon is located in Serangoon North but the showflat is located at Lorong Lew Lian. The Tre Ver is located in Potong Pasir but the showflat is located close to Woodleigh MRT Station. Jui Residences is located along Serangoon Road but the showflat is located next to NEX Shopping Mall. There may be limitations to placing the show flat at the actual site. Buyers should make a trip to the actual site to take a look at where they are actually buying. The location of the actual development is stated in the brochure and promotional materials but buyers should do their own homework by making a trip to the actual site. At the actual site, buyers can better gauge the facing and location of the units that they are looking to buy. Someone mentioned to me that he bought a unit from a showflat that was not at the location of the actual site. When he moved in, he realised that fighter planes from the nearby air base flew past his development daily.
6) The sales kit is loaded with reasons to buy
The sales kit presented by the sales agents in the showflat would be loaded with reasons to buy. The truth of the matter is that for every reason to buy, there will be a corresponding reason not to. The sales kit is there to tell you all the good things about the development and its surrounding area. Buyers should be more discerning and do their own homework. Any future developments in the area would already be in the news and the Urban Redevelopment Authority’s (URA) Master Plan would state the developmental plans in the area as well as what can be developed on neighbouring plots of land. If you want to know the amount of rent that units can command in a particular area, you can visit URA’s website to take a look at the rental contracts concluded. Past transactions are also placed on URA’s website. New project launches are usually higher than resale properties but they should not be too much higher. All these data are available to buyers with an internet connection. Doing proper homework would really narrow your choices down to a few good projects instead of just walking blindly into a showflat just to “find out more”.
7) Prices listed are usually the lowest priced unit
This is to show that the development is affordably priced. In truth, the average price for that particular type of unit may be 5 to 10% more than the quoted price. It is usually stated that the price starts from rather than the average price. The lowest priced unit is usually the unit which is the smallest, at a low level and the less popular facing. More often than not, this particular unit would be snapped up by buyers in an instant. If you are not so fortunate to have gotten the unit, you would have to pay for a more expensive unit if you want to own a unit in that development. Thus, whatever price that was quoted to you, be prepared to fork out another 5 to 10% more if you want something on a higher level and with nicer views and better facing.
8) The brochure and sales models usually look very good
I have had a client comment to me that the artist’s impression of the development that he bought looked distinctively different from the eventual product. The difference was that in the artist’s impression, the surrounding area around the development was filled with lush greenery. Artist’s impressions usually depict a lot of lush greenery. They show the development as a standalone building surrounded by trees. They also show fully grown trees within the development. Greenery adds to the appeal of the development and this helps to portray a serene and welcoming environment to the potential buyer. The truth is that in land-scarce cities like Singapore, more often than not, there will be something next to the development in question. Also, expect the trees in your development to start off as saplings which will eventually be fully grown over the course of a few years. This is one of the reasons why sales in new project launches do better than the resale market. Artist’s impressions are usually more appealing than reality.
9) You do not know what is the actual view and whether the unit is noisy
Unlike units in the resale market, you cannot see the view out of the window of the unit you are purchasing. You also cannot gauge the noise that will possibly come from any nearby road or train track. You can ask the sales agent whether there are pictures or videos of the possible views captured using drones. If there are buildings nearby and the higher levels are accessible to the public, you should go up to the higher levels of the buildings to take a look at the view and gauge the noise level from the road or train tracks.
10) You should do your own research. Is resale better? What is the average per square foot for the area? What is the instalment if interest rates rise?
New project launches are invariably priced higher per square foot as compared to the resale market. Thus you should be prepared to pay slightly more if you would like a new project launch in the same area. However, some new project launches are priced at a significant premium as compared to the units in the resale market. Even though you would probably get a higher rental if you purchased the new project, you must work out whether that potentially higher rent collected is worth the additional premium that you will have to pay for the new project launch. Also, in today’s low-interest rate environment, the difference in instalment may not be significant. However, when interest rates start to rise, the additional burden may turn out to be rather significant.
11) You should read reviews and decipher if the review is biased
Reviews are a good way to learn more about a certain project and to aid you in your buying decision. However, it would be wise to note that reviews are not always unbiased. Certain reviews may be written by parties that may benefit from healthy sales of a particular project. Also, there are many sponsored posts about the latest new project launches advertised on social media. These are paid articles about a particular project which are biased and should not form the basis of your rationale to purchase a certain new project launch. Just about every review should have some sort of biasedness. You as a reader should try to separate facts from sales pitches.
12) You are free to walk away and ask back for your cheque. Even after booking, you can forfeit 25% of the downpayment to cancel the unit.
Placing a cheque during the preview period merely guarantees that your name will be in the ballot on the launch day. I usually encourage buyers to just place a cheque and decide later. The fact is, you can withdraw this cheque anytime before the balloting day. Moreover, on balloting day, if the unit which you wanted is not available or the price is above what you expected, you are free to take back your cheque. If you proceed to book a unit and would like to seek a refund after making the booking, you will need to forfeit 25% of the booking fee. The booking fee is 5% and at times forfeiting that 1.25% of the purchase price may be better than going through with a bad property investment.
13) Valuations at new project launches are usually higher than the resale market.
Many buyers have asked me why the valuations in the resale market are lower than those in the primary market or new project launches. For example, the new project launch in the same area could have a per square foot price of 10 to 20 per cent higher than that of similar units in the resale market. The reason is that for new project launches, the valuation is done by the valuer appointed by the developer. For units in the resale market, the bank appoints the valuer. When you go into a new project launch, the selling price of the property is the valuation of the property. Your loan to value will be based on the selling price of the property.
The rest of 2018 should see rather brisk sales for new project launches as some of the projects in the pipeline are really well located. Projects like Parc Esta, next to Eunos MRT Station and Jade Scape, close to Marymount MRT Station and slated to be released later this year. Moreover, if developers price their developments competitively, then we should see a healthy take-up rate for such projects. I do hope that this article can serve as a guide for buyers when they visit show flats of new project launches. Always remember that buying a property is a long-term commitment and when in doubt, look for a reliable property agent for advice.