Are New Launch Properties Too Small?
Updated: Jan 15
Speak to any buyers looking for a resale property and it will be clear why new launch properties will not be what they are looking for.
These new launches are too small! However, can this be a case of us as real estate consumers unknowingly demanding for them to be built as such? Let me explain.
An overwhelming majority of new launches are being sold on the premise of quick capital appreciation. While this is not inherently bad, but what happens when most property purchases within a new launch development are being bought by investors, waiting for a quick flip within 3-5 years?
We get an oversupply of these investment units within the market, which are unjustifiably marked up by 20% of the price as compared to when you first bought it.
Honestly, if you are a buyer will you be interested in such an “offer”? A 20% bump just because the apartment is built and ready for immediate occupation?
Condominiums from The Past Decades
In my opinion, condominiums 15-20 years are developed exceptionally well. I might be wrong as I was still a wee lad back then, but I remembered condominiums were of bespoke quality.
This can be seen even from the common facilities. Wood carved fittings in common areas were the norm back then, (i.e., even in lifts!) and even though they look dated now, you can’t deny that these presents such grandeur with a commanding presence.
Carpark space also was a luxury, and it is common to have at least a minimum of two carpark levels. This means that for every dwelling unit, two or maybe three carpark lots are available!
The Bayshore is the condominium that I have mentioned above, and it is still to date one of my favourites in the D16 area.
That’s for the facilities. What about the actual units themselves? Individual dwelling units are highly characteristic and uniquely designed. Condo units in the pre-2000s have unique layouts which are not common today. This is due to Singaporeans strong demand for the characteristic squarish layout, which somewhat is translated loosely into the squarish layout with the elongated living room space you see in most condos today.
Besides, the sizes of the units sold were very reasonable. A 3 Bedroom unit will be minimally 1300 sqft and a 2 Bedroom unit will be 1000 sqft.
Will You Move into Your Investment Property?
Considering that the total population count of Singapore is around 5.69 million, and Singapore Citizens amount for 4.04 million, you will have to appeal to the masses. The masses are Singaporeans like yourself, who want to occupy a sizeable, big property that is fairly priced.
So, will you move into your investment property? If the answer is yes, it’s a good buy. If not, I think you need to relook into your purchases.
Why Flipping Worked Exceptionally Well in the Past
Singapore experienced an economic boom from the 1960s to 1990s. Coupled with the strong push on homeownership by the Housing Development Board (HDB) in Singapore’s early nation-building years, this mentality has carried on to the middle-class Singaporeans looking for a better standard of living.
The Four Tigers of Asia—South Korea, Taiwan, Hong Kong and Singapore—raised the per-capita incomes sixfold between 1965 and 1995.
With an increase in household incomes, the easiest way to improve their standard of living is to move from public housing to private housing. This shift meant that real estate developers will emphasize strongly on creating properties with the intention of them being owner-occupied.
In turn, these properties will strongly appreciate due to strong demand and the resale market is supported with a good supply of these spacious units.
Sure, the rental market was hot back then, but I believe that the disparity between rental properties and owner-occupied ones were not as large as compared to present times.
I don't have the actual figures to prove this, but it's pretty obvious when every middle-class family can afford more than 1 residential property.
Why I Think New Launch Units Are Smaller Now
Money, power and sex sells. Speak to any salesperson and most will tell you that the easiest way to sell a product is to focus on one of those points. This has been the reason why people will often purchase lottery rather than on placing their money into a good, diversified stock portfolio.
Now, I’m not saying that people do lose money on rental properties. On the contrary, they do make good cash! But have you ever wondered what would happen if there were an oversupply of rental properties within a development? It’s only a matter of time before some of these excess supplies will affect its price! This is the reason why I do not like condominium belts/clusters as they will cannibalize each other in terms of price.
The implementation of Additional Buyer’s Stamp Duty (ABSD), is a good tax to keep the market in check and we should all thank for it to happen. However, it simply is stopgap measure, without nipping the problem in the bud.
Strong demand by rental property purchasers reinforces the idea to the real estate developers that the size of these properties does not matter. This means that they can have a higher build-up that focuses on increasing the number of dwelling units, instead of the size of the dwelling units and instantly make more money.
At the same time, real estate developers will break price barriers and blame it on increasing land costs and inflation.
Does that make sense to you?
Don’t Blame the Real Estate Developers and Salespersons
I think we as a nation should relook into our buying criteria and not look into the hype of making quick money from flips and rental income. The only solid reason to make such money is if you are willing to take on the role of a real estate developer and bring up the value of the land.
Remember, Real Estate Developers are companies with thorough market research teams and they will naturally look into what Singaporeans want in a new launch property.
Small, cookie-cut units are exactly what we have been requesting for the past 10 years, and they have been giving us what we want so do not fault them.
I might be wrong about my opinions and get hate for this article, but these are the sentiments that are reflected to me from my clients. However, there is such strong hypocrisy that we as home buyers are not willing to purchase small units for own stay but are buying them for investment purposes.
Even for investment purposes, do the average PSF of these new launch units make sense to you?
Wage stagnation is actually happening in Singapore, and we as Singaporeans should be more responsible with our purchasing decisions and exercise more scrutiny.
If not, how are we going to ensure affordable housing for our future generations? Yes, public housing will always be present for the working class, but the prices of both housing types will always move in tandem.
I shudder to think of a future where 700 sqft 3-Bedroom units will be the norm.
That being said, I do believe that some new launch units are good purchases, but you will have to exercise due caution. I have written many reviews for new launches in my website so before you make any decision, do have a read.
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