Developers should reveal more price data

March 23, 2007

COMMENTARY

Developers should reveal more price data

Selective disclosure makes it tough for buyers to judge true value of projects

By Fiona Chan


THE record home prices achieved this week by luxury condominium Orchard Residences have become the talk of the town.

Everyone is abuzz at the dazzling $4,000 per sq ft (psf) that buyers forked out for 'several units' in the condo - a figure proudly announced by joint developers CapitaLand and Sun Hung Kai Properties on Wednesday.

But does this undoubtedly remarkable price give an accurate picture of the overall pricing achieved at the condo, being built above Orchard MRT Station?

The answer is: We don't know.

The only other clue we have is CapitaLand's statement that 'units above the 30th floor have also attained prices of over $3,200 psf'. This throws up more questions than it answers.

For one, just how many units were sold at $4,000 psf? What price did the units below the 30th floor manage to fetch? What was the lowest price achieved?

And - most importantly - what was the psf price of a typical unit?

When asked for these details, CapitaLand simply clammed up.

It declined to say how many units were sold at record $4,000 psf prices, which floors they were on, and what proportion of their buyers were foreigners.

A similar scenario unfolded last year at the much-hyped Marina Bay Residences. Despite throngs of buyers on the first day of sales, its developers - Keppel Land, Cheung Kong Holdings and Hong Kong Land - refused to give sales figures or prices.

The next day, they offered some information: They had sold 'more than 90 per cent of typical units...with prices in excess of $2,700 psf'. It took another day for them to finally disclose the average prices, which turned out to be 'in the region of $1,850 psf'.

Should this lack of clarity be allowed to continue?

The danger in withholding information about average prices and sales figures is that it makes it impossible for the average person to judge the true value of, and demand for, any given development.

Offering only the highest prices further skews the market's perception of what similar projects are worth. Those who suffer most from this obfuscation are home buyers. In the first place, they are handicapped in their access to such industry information.

Actual sales data, with prices and unit details, is available only through caveats, which are lodged when a sale takes place. But these are not mandatory and can take up to a few months to lodge.

By then, the average buyer may already have made a decision based on incomplete information.

Developers should also disclose why certain units fetch exceptionally high prices, and if these were bought by foreigners.

Often, these apartments are on higher floors, come in bigger sizes, or are equipped with special features. A typical unit, therefore, could be worth much less than the record-busting figures fetched by more unique apartments.

Apart from giving a better picture of individual condos, detailed sales data can also improve the workings of the broader property market.

Condos such as Orchard Residences and Marina Bay Residences, while out of the reach of the average buyer, belong to the category of closely-watched projects.

Rival developers and property analysts study their prices and use them as guidelines for future price points. If the prices of these projects are to act as benchmark prices for others, their actual levels should be made clearer.

A final point has to be made about investors who put money into property stocks such as CapitaLand and City Developments. Investors watch how these developers price their projects, because sales feed directly into their profits.

The issue of how project pricing can affect the developer's share price was brought up last month. The question then was whether it was right for developers to announce target prices before their actual launches.

But the same principle applies even after the units have been transacted. If there is only partial disclosure of prices in a certain project, investors have no idea whether these prices are truly reflective until weeks later.

Still, there may be good reasons developers are reluctant to release too much price information.

They may have competitive or strategic interests, or may simply want to wait until all the options have been exercised. But in a fast-rising market, where benchmark prices for private homes are scaling dizzying heights, selective disclosure is especially worrying.

Home buyers tend to remember only the trumpeted highest prices in a project, even if average prices are much lower.

Take SC Global's Boulevard Residence, which made headlines last month when one unit went for a 'benchmark' $3,205 psf. But the average price of the six units sold there in the last year was only $2,200 psf.

CapitaLand's Rivergate is remembered for a 'benchmark price' of $1,700 psf last August, even though most units were averaging $1,250 psf. Similarly, City Developments' St Regis Residences is known for being the first to cross the $3,000 psf mark, although its average price now, from caveats, is about $2,500 psf.

Not all developers are equal; some are more forthcoming with sales data than others.

But surely it is in the interests of all developers to ensure that the market is acting on as much information as it can get.

The alternative is a speculative bubble due to the exuberance of poorly-informed buyers - and that is in the interests of no one.

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I agree! Most of the time developers like to talk up the market price - it is in their interests to do so. Why can't we have more transparency instead of the hemming and hawing? The buyers have to be smart, don't go into panic buying mode.

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Originally Posted by Unregistered

I agree! Most of the time developers like to talk up the market price - it is in their interests to do so. Why can't we have more transparency instead of the hemming and hawing? The buyers have to be smart, don't go into panic buying mode.

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True but don't forget to buy. Be quick too!