Latest property data: What does it mean for home buyers?

July 18, 2007

NEWS ANALYSIS

Latest property data: What does it mean for home buyers?

Big price ranges likely due to exceptional units; median price is the best guide

By Fiona Chan, Property Reporter


HOME buyers in Singapore have never been so well-informed as they are right now.

In response to endless reports about soaring prices, the Government has been steadily releasing new data about the property market to inject some transparency and calm.

Its biggest move came on Monday when it unveiled a comprehensive record of brand-new homes sold last month - direct from the mouths of property developers.

This details the lowest and median prices in every project, in a bid to counter the potentially distorted picture that may result from developers trumpeting only headline-grabbing prices.

But what is a potential buyer to do with this deluge of data? How can he use it to figure out how much to pay?

The new data reveals, for the first time, the range of prices and the median price fetched by each of 329 projects for last month. It will be updated monthly.

What jumps out at first glance is the very broad range of prices at certain developments, such as The Orchard Residences. Here, the cheapest unit last month went for $2,620 per sq ft (psf) - almost half the level of the priciest one, sold at $5,000 psf.

Some cynics put this down to heavily discounted units at the lower end.

But property experts, noting that these wide price ranges are only in the highest-end projects, offer another view.

For most developments, it is common to pay a higher price psf for a higher floor with a better view. Each successive level commands a premium, such that the top-most units are often the most expensive.

At high-end developments, the premiums that buyers are willing to pay for higher floors shoot up, because these are usually the choicest units in the development.

In certain luxury projects, the price range is widened even further by one or two outlying, special units that go for top dollar.

There, the difference in the highest and lowest prices could translate into the difference between an average-sized unit on the 7th floor that faces a dumpster, and a spacious penthouse on the top floor with 360-degree city views and customised fittings.

Indeed, for The Orchard Residences, the unit that fetched $5,000 psf was the penthouse on the 54th floor, said developer CapitaLand.

'At the very high end of the market, the buyers want the best units in the best developments,' said Mr Lui Seng Fatt, regional director and head of investments at Jones Lang LaSalle.

'There are only so many penthouses in prime districts, so the premium they command for their space and their height can be quite significant.'

So how can an average buyer tell if a project's price range is being widened by just one or two exceptional sales?

This is where the median price comes in. By definition, half the units in a project are sold above this level and the other half below it.

For most projects, the median price is almost perfectly in between the lowest and highest sale prices. This implies that prices are quite evenly spread within the project.

At Ferraria Park in Changi, for instance, 47 units were sold last month at between $546 and $744 psf. The median price was smack in the middle, $650 psf.

But at some luxury projects, the median price is actually much closer to the lower end of the range. In other words, many are far more affordable than their headline prices imply.

At The Marq on Paterson Hill, the median price was $4,044 psf - much nearer the $3,604 psf lowest price it fetched than the $5,100 psf on the other end.

Similarly, the median price for The Orchard Residences was $3,392 psf, a far cry from the top $5,000 psf price.

For most buyers, the median price is by far the best measure of a development's pricing structure.

It is, roughly, the cost of a unit that 'is halfway up the block in terms of which storey it's on, has a glimpse of the pool instead of a full pool view, and has a bit of afternoon sun', said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

'If the development comes with a range of units, the median price will probably be for a three-bedroom unit.'

So a buyer looking for a unit on a higher floor or with a better view should expect to pay more, Mr Mak added.

But buyers should also be aware of the limitations of this new data, especially as the market is moving so fast.

'If the data for June comes out in mid-July, but developers raised prices at the beginning of July, then the data will already be outdated when it comes out,' noted Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

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