Should there be more transparency around pricing at property launches?

Sep 30, 2021

THE launch of Pasir Ris 8 in July - where feverish demand led to a series of price hikes over the course of a day - raises the question of whether there is a need for greater transparency around pricing to ensure that buyers make well-informed purchasing decisions.

The 487-unit, 99-year leasehold project in the suburbs created waves, thanks in no small part to six upward price revisions in a day.

Some market watchers were confounded as a few units ultimately went for over S$2,000 per square foot (psf) - a pricing more typically at home in prime locations and the central business district.

The average price of the 415 units at the integrated development sold by developers Allgreen Properties and Kerry Properties on launch weekend worked out to almost S$1,600 psf, while prices for units ranged from S$1,400 psf to about S$2,000 psf.

According to data from the Urban Redevelopment Authority (URA), 425 units have been snapped up at Pasir Ris 8 to date, as at end-August. For the month of August, 11 units were transacted at a median price of S$1,806 psf. The highest price forked out during that month was S$2,045 psf and the lowest price, S$1,662 psf.

Of course, it is also worth noting that multiple price adjustments over launch weekend is not altogether common, leading more than one analyst to suggest that demand was underestimated and that perhaps the project was initially priced on the lower side.

Still, with the "fear of missing out" (FOMO) gripping buyers despite a still-recovering economy, more transparency around pricing as well as measures to better educate buyers could help to level the playing field.

Savills' executive director (research and consultancy) Alan Cheong, for one, suggests that prices for all units should be displayed upfront at the sales gallery. Any changes to the prices should be clearly marked so that purchasers are well aware of both the "before" and "after" prices.

Mr Cheong also thinks that a cooling-off period of five business days should be implemented upon a buyer securing the option to purchase (OTP), allowing enough time for cooler heads to prevail if necessary.

"We could take some lessons from the Japanese model for greater transparency," reckons chief executive of International Property Advisor, Ku Swee Yong, who pointed out that developers in Japan have to lodge the prices of the residential units for sale with the government before they are issued a sales licence. Should the developer make any revisions to pricing, the document would have to be refiled. "It's a public document - the banks, valuers, and buyers all get to see it," Mr Ku went on to say.

In contrast, prospective buyers in Singapore are generally given an indicative starting price during the preview of a project and may even have to submit a blank cheque as a sign of their interest. However, if at the launch, buyers feel that actual prices have surpassed their budget, they can - and should - walk away.

Mr Ku called for more appropriate regulations by the URA and the Controller of Housing (COH), suggesting that developers should have to register a price list of residential units being released for sale with the URA - and stick to the pricing.

He said: "This should be expanded to all new strata title launches of retail, office and industrial properties. The valuers' report on the price list could also be submitted to the authorities and be made available for viewing by the public, banks, the Monetary Authority of Singapore (MAS) and the COH. Any queries (regarding the valuation) by the regulators should be appended to the valuation report so buyers and banks are well aware."

Consumer education is another area where there is room for improvement, though buyers too must do their part, consultants say.

Lee Nai Jia, deputy director of NUS' Institute of Real Estate and Urban Studies, believes that while there is information on property transactions that can be gleaned from the likes of the URA website, OneMap or even PropertyGuru, some overwhelmed buyers may rely on the sales agent to break it down for them. And in this case, the interests of the sales person and buyers may not necessarily be aligned, Dr Lee went on to point out.

Agreeing that buyers should do their own research, Mr Ku said: "While the database of residential transactions on the URA website is pretty comprehensive and timely, many people do not know how to navigate it. There could be education seminars for consumers conducted by URA on how they can look for data themselves. Consumers could also be taught how to study a floor plan so they can spot any differences between the floor plan and the actual unit delivered." In the case of the latter, signs of cut corners include excessive air-conditioning ledges or planter boxes and inconvenient dead spaces.

Dr Lee suggests that developers should provide buyers at launches with the average prices for transactions of both primary and resale units in the vicinity in the past three months. This would also give them a better sense of the premium that that they are paying for a unit at a new launch vis-a-vis a resale unit.

Data on rentals and vacancy rates in the area would also be useful as some investors might be buying a property with the intention of renting it out to support the mortgage payments, he said.

Why should a developer comply? For starters, buyers would appreciate it, thus generating good will.

Dr Lee added: "It would be good for the developer in the long term in terms of their branding. In addition, if the project subsequently has many forced sales, it is not good for the future resale value or for the developer as confidence in the developer will be lost."

All this comes as firms, investors and consumers are placing greater emphasis on environmental, social and corporate governance.

Meanwhile, buyers should first check a property's indicative valuation before finalising their purchase, highlighted Nelson Neo, head of home financing for DBS' consumer banking group.

When it comes to disbursing a mortgage loan, locals banks such as DBS and UOB say that they compare a property's valuation and the purchase price, before ultimately using the lower quantum.

According to the head of group personal financial services for UOB, Jacquelyn Tan, the bank relies on a panel of independent property valuers to ascertain property valuations.

Ms Tan said: "As we take a prudent approach to extending credit, we use the property valuations or the purchase price, whichever is the lowest, as one of the factors in calculating the loan amount we will provide a borrower."

This prevents borrowers from over-leveraging and ensures they can afford their monthly loan payments in the long run, she added.