reporter2
20-04-22, 11:08
When 'one-time' condo discounts are anything but, do buyers have any recourse?
Apr 19, 2022
PROMOTIONS for early-bird buyers and subsequent “star buy” units at Perfect Ten are again drawing attention to the grey area of how property developers price - and discount - their private residential projects.
Analysts, consultants and lawyers The Business Times (BT) spoke to expressed mixed views on the issues.
For one thing, when a developer announces a “one-time” discount, is it reasonable for buyers to expect that no bigger discounts will be given in the future? Are buyers entitled to partial refunds if prices keep falling?
Also, could there be more clarity and transparency in disclosing the gross and net prices? Will it disadvantage developers commercially to reveal why they are adjusting certain prices?
For the past 4 months, agents marketing CK Asset’s luxury condominium project Perfect Ten have been touting units at reduced prices. For several units, the advertised discounts in percentage terms were larger than the 5 per cent offered at its Dec 19 launch.
The developer did not respond directly to The Business Times’ (BT) questions about the reasons behind its pricing strategy.
To be sure, multiple price cuts – be it by lowering the listed price or raising the discount – are not unheard of in Singapore’s private residential sector.
A property consultant said the practice is not new, “but very unpopular”. “If you keep lowering prices, some earlier buyers may be upset, and those who are interested will become more cautious and wait for prices to go down further. It also affects how buyers view your other projects in the future.”
Why trim prices?
Historically, many developers have slashed prices to clear their remaining units quickly. That usually happens in an economic downturn, when a deadline to sell out the project is looming, or after a fresh round of cooling measures. Asking prices that were simply set too high, due to overestimated demand or aggressive land bids, would also be revised.
However, developers tend to do so by officially relaunching the project, reopening the showflat, and announcing the extent of the price cuts.
Also common are “star buy” promotions for specific units, publicised to drum up interest again. These are usually offered after the initial buzz from the launch has died down.
Industry players noted the current unfavourable economic conditions, which could dampen developers’ sentiment and influence their pricing, depending on how reactive they are.
Another consultant said: “Uncertainty and headwinds are growing. Consider Singapore’s fresh cooling measures, turbulence in stock markets, fears of the potential economic fallout from the Ukraine war, plus risks of interest rate hikes and stagflation which will eat into housing affordability. The overall mood is getting more cautious, which could trigger some developers to offer discounts to sell as quickly as possible.”
An analyst familiar with the Asian property market noted: “Generally speaking, some Hong Kong developers have a more dynamic approach. Once they sense demand might lag, they want to cut their losses and move on. Therefore, they typically go in and out of a deal very quickly.”
"In contrast, major Singapore-based developers tend to be more steadfast in their pricing strategies, as they will try to hold their prices and ride out a difficult market correction. But with that being said, in the past there have also been several Singapore developers that cut prices aggressively and very soon after the initial launch,” the analyst added.
An overly optimistic outlook at the start could also potentially lead to price reductions later.
Another analyst highlighted that Perfect Ten’s listed per-square-foot (psf) prices had looked “very high” when compared to nearby condominiums in early December – the sales gallery opened to the public for preview on Dec 8 – “so we already knew it was going to be a tough sell, even before the Dec 16 cooling measures”.
Caveats data from URA Realis showed that Perfect Ten was one of the most expensive among comparable condominiums in the vicinity, including uncompleted projects with unsold units.
Median transaction prices at comparable condominiums largely hovered between S$2,378 psf and S$2,889 psf last year. Perfect Ten’s pre-discount prices ranged from S$3,200 psf to S$3,618 psf for the 10 units in its price list released on Dec 16.
https://i.imgur.com/I4gbiLw.png
A buyer purchased a unit at Perfect Ten on Dec 19, after learning of the 5 per cent discount through his agent.
In a letter to Japura Development, an entity linked to CK Asset, the buyer claimed that he had bought the unit based on “firm verbal assurance” from his agent of “equitable financial compensation” if further discounts were given after Dec 19.
The developer’s response, seen by BT, said: “Since the factors that we take into account when pricing our properties (are) not static but constantly changing and moving, we do not, have not and cannot give any price and/or discount assurance for any of our properties to our customers.”
Essentially, there is nothing stopping developers from giving bigger discounts or changing their marketing and pricing strategies at any point in time.
Norman Ho, senior partner, corporate real estate at Rajah & Tann, said: “This is a free market, and the price agreed is the meeting of the minds at that time of the agreement to purchase, unless there is a commitment (which is best to be written) that the developer will always adjust to the lowest price, but such commitment is unlikely.”
He added: “The converse is also true – what if the price moves up after the initial sale?”
Are refunds likely?
Just as early-bird buyers do not cough up more money when property prices are climbing, developers are not obliged to refund them in a price downtrend, observers told BT.
It is rare for developers to offer compensation or partial refunds to earlier buyers after subsequent price reductions. And even when they do so, it is couched as a “goodwill” payment.
Back in 2001, CapitaLand gave some early-bird buyers what it called a “one-time goodwill cash rebate” of 5 per cent of the purchase price at The Levelz along Farrer Road to compensate for falling prices.
Those buyers included 24 people who had bought The Levelz apartments at about S$830 psf during a preview in August 2001, before the condominium officially launched in December at S$788 psf amid a property market slump.
CapitaLand Residential also gave a 5 per cent rebate to a group of Tanamera Crest buyers in late 2001, “in view of the unique market environment”. The condominium complex in Bedok was launched in February that year at S$560 psf, but taken off the market due to poor response. It was then relaunched in December 2001 at S$445 psf, or about 21 per cent less.
But such examples are few and far between. One seasoned property lawyer told BT: “In my years of practice, I’ve only heard of 1 case: when Bukit Sembawang agreed, out of goodwill, to reduce the prices even in the absence of a written agreement to do so, as they were appreciative of the support of the early buyers.”
An industry veteran said it can be “very painful” for some developers with thin margins to offer compensation because it requires deep pockets.
“Also, for certain projects, the first batches of units are already released at breakeven or loss-making prices to stimulate sales first (under a loss-leader pricing strategy), before the rest of the units are launched at profitable prices,” he added.
A litigation and dispute resolution lawyer reckons it will be “very difficult” for buyers to succeed in claiming for compensation, unless it can be determined there was misrepresentation.
“It can be tricky. If someone is simply giving a declaration or statement of intention, for instance by saying: ‘I intend this to be the best discount’, and he truly and genuinely intended it at the time, it is unlikely for it to be misrepresentation even if he changes his mind later,” he said.
On the other hand, there may sometimes be room to argue there was a breach of warranty based on certain statements. But to seek redress and compensation, one will still have to prove that the warranty is part of the contract.
“The main challenge for buyers is that developers are usually protected by the contractual terms. There are often detailed provisions that exclude reliance on such statements that are verbal promises or extraneous to the contract. For example, it’s common to have an entire agreement clause, which basically says you can’t rely on anything I told you outside of this contractual document.
“And of course, if they agreed to something orally, then it’s going to be difficult to prove it. It’s better to get it in writing,” the lawyer added.
Lately, industry participants have called for more transparency when it comes to pricing at project launches, to ensure consumers make well-informed purchasing decisions.
A property lawyer suggested introducing a free-look or cooling-off period, during which a potential buyer can walk away without any penalties. “This is practised in some jurisdictions, as it also prevents property agents from pushing the public to commit to a purchase without sufficient time for an informed decision,” he added.
https://www.businesstimes.com.sg/real-estate/when-one-time-condo-discounts-are-anything-but-do-buyers-have-any-recourse
Apr 19, 2022
PROMOTIONS for early-bird buyers and subsequent “star buy” units at Perfect Ten are again drawing attention to the grey area of how property developers price - and discount - their private residential projects.
Analysts, consultants and lawyers The Business Times (BT) spoke to expressed mixed views on the issues.
For one thing, when a developer announces a “one-time” discount, is it reasonable for buyers to expect that no bigger discounts will be given in the future? Are buyers entitled to partial refunds if prices keep falling?
Also, could there be more clarity and transparency in disclosing the gross and net prices? Will it disadvantage developers commercially to reveal why they are adjusting certain prices?
For the past 4 months, agents marketing CK Asset’s luxury condominium project Perfect Ten have been touting units at reduced prices. For several units, the advertised discounts in percentage terms were larger than the 5 per cent offered at its Dec 19 launch.
The developer did not respond directly to The Business Times’ (BT) questions about the reasons behind its pricing strategy.
To be sure, multiple price cuts – be it by lowering the listed price or raising the discount – are not unheard of in Singapore’s private residential sector.
A property consultant said the practice is not new, “but very unpopular”. “If you keep lowering prices, some earlier buyers may be upset, and those who are interested will become more cautious and wait for prices to go down further. It also affects how buyers view your other projects in the future.”
Why trim prices?
Historically, many developers have slashed prices to clear their remaining units quickly. That usually happens in an economic downturn, when a deadline to sell out the project is looming, or after a fresh round of cooling measures. Asking prices that were simply set too high, due to overestimated demand or aggressive land bids, would also be revised.
However, developers tend to do so by officially relaunching the project, reopening the showflat, and announcing the extent of the price cuts.
Also common are “star buy” promotions for specific units, publicised to drum up interest again. These are usually offered after the initial buzz from the launch has died down.
Industry players noted the current unfavourable economic conditions, which could dampen developers’ sentiment and influence their pricing, depending on how reactive they are.
Another consultant said: “Uncertainty and headwinds are growing. Consider Singapore’s fresh cooling measures, turbulence in stock markets, fears of the potential economic fallout from the Ukraine war, plus risks of interest rate hikes and stagflation which will eat into housing affordability. The overall mood is getting more cautious, which could trigger some developers to offer discounts to sell as quickly as possible.”
An analyst familiar with the Asian property market noted: “Generally speaking, some Hong Kong developers have a more dynamic approach. Once they sense demand might lag, they want to cut their losses and move on. Therefore, they typically go in and out of a deal very quickly.”
"In contrast, major Singapore-based developers tend to be more steadfast in their pricing strategies, as they will try to hold their prices and ride out a difficult market correction. But with that being said, in the past there have also been several Singapore developers that cut prices aggressively and very soon after the initial launch,” the analyst added.
An overly optimistic outlook at the start could also potentially lead to price reductions later.
Another analyst highlighted that Perfect Ten’s listed per-square-foot (psf) prices had looked “very high” when compared to nearby condominiums in early December – the sales gallery opened to the public for preview on Dec 8 – “so we already knew it was going to be a tough sell, even before the Dec 16 cooling measures”.
Caveats data from URA Realis showed that Perfect Ten was one of the most expensive among comparable condominiums in the vicinity, including uncompleted projects with unsold units.
Median transaction prices at comparable condominiums largely hovered between S$2,378 psf and S$2,889 psf last year. Perfect Ten’s pre-discount prices ranged from S$3,200 psf to S$3,618 psf for the 10 units in its price list released on Dec 16.
https://i.imgur.com/I4gbiLw.png
A buyer purchased a unit at Perfect Ten on Dec 19, after learning of the 5 per cent discount through his agent.
In a letter to Japura Development, an entity linked to CK Asset, the buyer claimed that he had bought the unit based on “firm verbal assurance” from his agent of “equitable financial compensation” if further discounts were given after Dec 19.
The developer’s response, seen by BT, said: “Since the factors that we take into account when pricing our properties (are) not static but constantly changing and moving, we do not, have not and cannot give any price and/or discount assurance for any of our properties to our customers.”
Essentially, there is nothing stopping developers from giving bigger discounts or changing their marketing and pricing strategies at any point in time.
Norman Ho, senior partner, corporate real estate at Rajah & Tann, said: “This is a free market, and the price agreed is the meeting of the minds at that time of the agreement to purchase, unless there is a commitment (which is best to be written) that the developer will always adjust to the lowest price, but such commitment is unlikely.”
He added: “The converse is also true – what if the price moves up after the initial sale?”
Are refunds likely?
Just as early-bird buyers do not cough up more money when property prices are climbing, developers are not obliged to refund them in a price downtrend, observers told BT.
It is rare for developers to offer compensation or partial refunds to earlier buyers after subsequent price reductions. And even when they do so, it is couched as a “goodwill” payment.
Back in 2001, CapitaLand gave some early-bird buyers what it called a “one-time goodwill cash rebate” of 5 per cent of the purchase price at The Levelz along Farrer Road to compensate for falling prices.
Those buyers included 24 people who had bought The Levelz apartments at about S$830 psf during a preview in August 2001, before the condominium officially launched in December at S$788 psf amid a property market slump.
CapitaLand Residential also gave a 5 per cent rebate to a group of Tanamera Crest buyers in late 2001, “in view of the unique market environment”. The condominium complex in Bedok was launched in February that year at S$560 psf, but taken off the market due to poor response. It was then relaunched in December 2001 at S$445 psf, or about 21 per cent less.
But such examples are few and far between. One seasoned property lawyer told BT: “In my years of practice, I’ve only heard of 1 case: when Bukit Sembawang agreed, out of goodwill, to reduce the prices even in the absence of a written agreement to do so, as they were appreciative of the support of the early buyers.”
An industry veteran said it can be “very painful” for some developers with thin margins to offer compensation because it requires deep pockets.
“Also, for certain projects, the first batches of units are already released at breakeven or loss-making prices to stimulate sales first (under a loss-leader pricing strategy), before the rest of the units are launched at profitable prices,” he added.
A litigation and dispute resolution lawyer reckons it will be “very difficult” for buyers to succeed in claiming for compensation, unless it can be determined there was misrepresentation.
“It can be tricky. If someone is simply giving a declaration or statement of intention, for instance by saying: ‘I intend this to be the best discount’, and he truly and genuinely intended it at the time, it is unlikely for it to be misrepresentation even if he changes his mind later,” he said.
On the other hand, there may sometimes be room to argue there was a breach of warranty based on certain statements. But to seek redress and compensation, one will still have to prove that the warranty is part of the contract.
“The main challenge for buyers is that developers are usually protected by the contractual terms. There are often detailed provisions that exclude reliance on such statements that are verbal promises or extraneous to the contract. For example, it’s common to have an entire agreement clause, which basically says you can’t rely on anything I told you outside of this contractual document.
“And of course, if they agreed to something orally, then it’s going to be difficult to prove it. It’s better to get it in writing,” the lawyer added.
Lately, industry participants have called for more transparency when it comes to pricing at project launches, to ensure consumers make well-informed purchasing decisions.
A property lawyer suggested introducing a free-look or cooling-off period, during which a potential buyer can walk away without any penalties. “This is practised in some jurisdictions, as it also prevents property agents from pushing the public to commit to a purchase without sufficient time for an informed decision,” he added.
https://www.businesstimes.com.sg/real-estate/when-one-time-condo-discounts-are-anything-but-do-buyers-have-any-recourse