In the first of a two-part series, Bernard Tong from The Edge Property look at ways to determine if a particular home is a good buy, especially when discounts are offered. 

SINGAPORE: We can all fondly recall that one euphoric moment when we discovered a great bargain and took advantage of it, whether it was for a 50-inch TV at a promo price of S$399 or that pair of sneakers you always wanted at half the original amount.

But when it comes to buying properties, how easy is it to assess what is a good bargain? Recently, CapitaLand rolled out a stay-then-pay scheme coupled with a 15 per cent discount for two of its projects, d’Leedon and The Interlace. Not to be left out, Bukit Sembawang offered a 10 per cent to 13 per cent discount for its Skyline Residences development. Earlier this year, Wheelock Properties introduced an ABSD Assistance Package, which provided buyers a 15 per cent discount and a 15 per cent ABSD rebate for selected units at Ardmore Three. OUE Twin Peaks is probably the most notable project, being the first developer to have brought back the deferred payment scheme.  The scheme has been a huge success as 116 units have been sold since.

While these are a handful of popular developments which have been widely cited, we put the numbers to the test to uncover some other deals. And to find the “real deals”, we looked at:

  1. New condos that are substantially discounted from the original launch price, and
  2. New condos that are selling at close to their cost-price.

In our analysis on projects with heavy discounting, we looked at the average per square foot (psf) of transacted new units in the last three months versus those in the first three months of launch. We took into account developments with at least three recent transactions and excluded those with no remaining units (you can’t buy what’s not for sale). Even though it is impossible to account for every single nuance of the transacted properties in this exercise, we ensured there must at least be comparable transactions in terms of size, level and stack in the two different time periods.

Condominiums that are substantially discounted:

Source: URA, The Edge Property. Based on caveats lodged up till Jul 12, 2016.

Although we only included projects with an average discount of 5 per cent or more, we were surprised at how short the list is. Beyond the prominent projects that were mentioned earlier, there are not that many discounted projects despite a softening market. Developers’ large holding power from the boon years and compressed margins are possible reasons.

Nonetheless, the projects presented above are being transacted at notable discounts.  If you are looking for property deals, this list could be a good start as a general guide. For example, at Floraville, a 50-unit apartment at Ang Mo Kio, a 635 sq ft unit on the second level was transacted at S$1,316 psf in May 2016 verus S$1,470 psf for a same size and stack transaction on the third level in August 2013. This translates to a 10 per cent discount, although the unit was located only one floor lower. Based on the analysis by The Edge Property, a typical discount/premium for each level is in the range of 0.3 per cent to 0.5 per cent.

Sophia Hills and The Trilinq are two projects with more than 400 remaining units. Last month, a 463 sq ft unit at Sophia Hills was transacted at 7 per cent discount compared to a same size and stack unit in December 2014, despite it being one floor higher. The Trilinq, which has been frequently cited as the first project likely to incur developer’s ABSD remission charge, is also cutting prices. Transactions lodged indicated an average discount of 5 per cent to 10 per cent.

The Trilinq has 433 available units and is likely to incur ABSD remission charge next year. (Photo: The Edge Property)

Mon Jervois, a 109-unit condo at Tanglin, has sold seven units since the beginning of the year, some at a considerable discount. For example, a 1,905 sq ft unit on the third floor was transacted at S$1,975 psf in May 2016 versus S$2,037 psf in October 2013 for a same size and stack unit located one floor lower. If you are not the superstitious sort, you can find even greater deals. At this same development, a #04-04 unit was recently transacted at S$1,850 psf, a significant 20 per cent discount compared to a #02-04 unit which was transacted at S$2,318 psf in August 2013. (The number 4 is considered unlucky by many in the Chinese culture).

At The Crest, a prestigious development located at Bukit Merah, sales have also picked up in recent months. Wing Tai Holdings, the developer, is understood to have offered 6 per cent commission to salespersons in April and May. A discount of 15 per cent is also applied to selected units.

The level of discounting is just one of the ways for property buyers to identify bargains. Understanding cost and margins allow buyers to make better informed decisions. In the second article in this series, we will continue to identify the “real deals” by looking at condos that are selling near costs.

The second part of this series will be published on Aug 29.

Original article here.