ANALYSIS: Are current asking prices unrealistic?
By Elizabeth Choong
/ EdgeProp Singapore |
Cape Royale is the only condo in our analysis with an average asking price that is lower than its average transacted price. (Photo: Samuel Isacc Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) – Residential property prices have been on an upward trajectory despite increasing mortgage rates, a weaker economy on the back of the pandemic, and the introduction of government regulations to cool down the property market. This has prompted buyers to question if asking prices have gotten too high and unrealistic. We will attempt to answer this question.
Methodology to prevent biased analysis
We compared the average transacted price and the average asking price of the same development over a time period. The average transacted price is based on actual sales transactions for the development during the last 12 months. The average asking price is based on current sales listings on EdgeProp.
The condos used in our analysis have the highest number of resale transactions this year compared to their counterparts in the same region. These condos also have at least five sales transactions over the past 12 months and at least five current listings on EdgeProp.
Additionally, only transactions and listings for the most common unit size of each development are used in our analysis. For example, units of 901 to 1,100 sq ft account for the majority (45.5%) of the units in Petit Jervois so only transactions and listings for units of that size are used in our calculation of price difference for the development.
Core Central Region has the lowest difference between asking and transacted prices
Among condos in the Core Central Region (CCR), D’Leedon has the highest number of resale transactions this year with 35 such transactions. Royalgreen and Petit Jervois closely follow with 31 and 29 transactions, respectively. Cape Royale secured the fourth position with 26 transactions, while The Sail @ Marina Bay rounds up the top five with 22 transactions.
Among the CCR condos in Table 1 above, only Cape Royale has an average asking price that is lower than the average transacted price. Cape Royale is a 99-year leasehold condo in Sentosa. When Cape Royale was completed in 2013, the developer rented out the unsold units. However, the developer released some units for sale last year, which were quickly snapped up by buyers.
Among the CCR condos in Table 1 above, V on Shenton has the second highest price difference of 13.6%.
The average transacted price for V on Shenton has declined by 10% since 2016. Most of the transactions in the secondary markets have been losses. The higher asking price could potentially indicate sellers’ reluctance to sell their units at a loss, resulting in higher asking prices, but also fewer transactions.
Concourse Skyline has the largest price difference of 22.9% among CCR condos. Sellers’ positive sentiment for the development could have contributed to the large disparity between the transacted and asking prices for the development. There are three other 99-year leasehold condos (677 units) and Sultan Gate Place (a 999-year leasehold condo with 12 units) within a 500m radius. With the exception of City Gate (311 units) that obtained TOP in 2018, all the other developments are much older and have less than 250 units.
Additionally, the nearby Golden Mile Complex was sold via en bloc in May 2022. The property is expected to be transformed into a new mixed development comprising residential, retail and office. Sellers of Concourse Skyline could have listed their units at higher prices in anticipation of price increases when the new development injects more amenities and vibrancy to the area.
The average price difference for all condos listed in Table 1 is 7%, indicating that CCR condos tend to have asking prices that are about 7% above the final price agreed upon by the buyer and seller.
Rest of Central Region has the highest difference
Among condos in the Rest of Central Region (RCR), Reflections at Keppel Bay has the highest number of resale transactions this year with 29 transactions. Sims Urban Oasis is the runner-up with 28 transactions, followed by Commonwealth Towers and Principal Garden with 21 and 17 transactions, respectively. Park Colonial rounds up the top five with 16 transactions.
All condos in Table 2 above are 99-year leasehold developments and have average asking prices that are above their average transacted prices.
Commonwealth Towers (7.1%), Park Colonial (7.2%), and Stirling Residences (7.6%) have the three smallest price differences among the RCR condos. In terms of dollar value, Commonwealth Towers has the smallest difference of $151 psf, while Stirling Residences has the largest difference of $178 psf.
Commonwealth Towers and Stirling Residences are located in District 3 and are within a 500m radius of each other. The developments are also within walking distance of Queenstown MRT Station. However, Commonwealth Towers is five years older, having obtained temporary occupation permit (TOP) in 2017, while Stirling Residences obtained TOP last year.
The average prices for both condos are trending below their leasehold counterparts in the same district. Units in Commonwealth Towers and Stirling Residences are currently averaging $2,054 psf and $2,247 psf, respectively, which is lower than the average price of $2,415 psf that leasehold condos in District 3 are fetching.
The average price for Commonwealth Towers has been growing at a pace of 7.1% since 2018, which is much slower compared to the growth of 27.7% for Stirling Residences and 37.5% for leasehold condos in District 3. The slower capital appreciation could have dampened buyers' interest in the condos and encouraged sellers to list their units at competitive prices to secure a sale.
Park Colonial is located beside Woodleigh MRT Station in District 13. The neighbourhood has benefited from the injection of more amenities with the recent opening of the nearby Woodleigh Mall. The mall is also integrated with The Woodleigh Residences and the MRT station.
The Woodleigh Residences poses strong competition to Park Colonial, which has helped narrow the price difference for Park Colonial. Additionally, there are 19 active listings and 26 transactions in the past 12 months for Park Colonial, providing buyers and sellers with a good benchmark of prices for the development.
Interestingly, the RCR condo with the largest price difference is also from District 3. Principal Garden along Prince Charles Crescent has a price difference of 15.3%. Unlike Commonwealth Towers and Stirling Residences, Principal Garden is not located within walking distance of any MRT station. Sellers’ expectations could have gotten a boost by several new launches in the last three years.
The average price difference for all RCR condos in Table 2 above is 10%. This indicates that asking prices for condos in RCR are approximately 10% higher than their actual transacted prices.
Outside Central Region
Among the condos in the Outside Central Region (OCR), High Park Residences had the highest number of resale transactions this year (31 transactions), making it the most popular OCR condo among buyers. Kingsford Waterbay took the second position with 24 transactions. Parc Riviera, The Minton, and Watertown tied for the third position with 20 transactions each. Symphony Suites and The Tapestry are tied for the fourth position with 17 transactions each, while The Glades and Euhabitat round up the top five with 16 transactions each.
Among the 20 condos listed in Table 3 above, The Hillier and The Tapestry have the smallest price differences of 3.4% and 3.6%, respectively. River Isles has the largest price difference of 20.5%.
It is noteworthy that The Tapestry and River Isles are leasehold condos in the east region. The Tapestry is located along Tampines Street 86, while River Isles is located along Edgedale Plains. On the other hand, The Hillier is located along Hillview Rise which is in the north region.
The Hillier is a mixed development with a retail podium and is located within walking distance of Hillview MRT Station. Surrounding the development are six freehold condos (1,645 units), Hillington Green (a 999-year condo with 480 units), Kingsford Hillview Peak (a 99-year leasehold condo with 512 units), and Midwood (an uncompleted 99-year leasehold condo with 564 units).
The intense competition could have tempered sellers' expectations and kept asking prices closer to actual transacted prices. Furthermore, there are 53 active sale listings on EdgeProp for The Hillier but only 23 units were actually sold during the last 12 months.
The small price difference for The Tapestry could also be attributed to competition. Arc at Tampines (an executive condo with 574 units), Parc Central Residences (an uncompleted executive condo with 700 units), and three 99-year leasehold condos with 1,853 units are all within a 500m radius of The Tapestry.
Buyers who are keen to purchase a property in the neighbourhood have plenty of choices. Therefore, it is not surprising that sellers have to price their units competitively to secure a sale. Additionally, the numerous nearby choices also make it easier for buyers to compare prices.
In contrast, River Isles is the only condo within a 500m radius. There are only two executive condos nearby, namely Riverparc Residence (504 units) and The Amore (378 units). River Isles is also the largest development with 610 units.
The lack of nearby developments means that sellers have fewer comparable developments to use as benchmarks when deciding on their asking prices. As such, they may have less realistic expectations of the actual price that their unit can fetch.
Despite being the only condo in the neighbourhood, sellers may have overestimated the demand for River Isles, as its average price is trending significantly below its counterparts in District 19. In fact, the average price for River Isles is trending more closely to executive condos in the same district.
The current average price for River Isles is $1,221 psf, while 99-year leasehold condos and executive condos in District 19 are fetching $1,466 psf and $1,261 psf, respectively.
The 20 condos listed in Table 3 above have an average price difference of 8.8%, indicating that buyers are able to reduce the sellers’ asking prices for OCR condos by more than 8%.
Key observations
The price difference for condos in the CCR is the smallest at 7%, while RCR condos have the largest price difference of 10%. The average asking price for OCR condos is about 8.8% above the average transacted price. However, readers should bear in mind that these are the overall averages for the condos from each region that were examined in our analysis.
The price difference for each individual condo in the same region varies greatly due to various factors such as competition from nearby developments, new launches in the neighbourhood, the number of units in the condo available for sale, and the general price trend of the condo compared to other condos in the area. As such, buyers must do their research on each development before signing on the dotted line.
The overall average asking prices do not seem unrealistic because the difference between asking and transacted prices for the three regions range from 7% to 10%. Sellers would usually list their property at prices higher than actual transacted prices to have some room for negotiation. Assuming the seller agrees to reduce their asking price by 5% at the negotiating table, this means that they will sell their unit at 2% to 5% above transacted prices.
The current average price for CCR condos increased 4.9% from last year while the average prices for OCR condos rose 5.8% over the same duration. The condos in RCR showed the highest increase of 11.0%.
In terms of asking prices compared to transacted prices, CCR has the lowest price difference, followed by OCR and RCR. This could be a leading indicator that the luxury and high-end residential property markets are softening, probably due to the latest round of cooling measures. For example, foreigners who tend to purchase CCR projects could be deterred by the recent increase in Additional Buyer’s Stamp Duty to 60%.
Furthermore, there have been a number of new launches in RCR and OCR that have proven to be very popular with buyers despite being priced higher than their existing neighbours. For example Tembusu Grand along Jalan Tembusu sold 53% of its units when it was launched in April. The current average price for Tembusu Grand is $2,474 psf; significantly higher than Dunman View ( $1,346 psf) which is the only other 99-year leasehold condo within a 500m radius. The average price for Tembusu Grand is also higher than its freehold neighbours, such as One Amber ($2,045 psf) and The Esta ($2,123 psf).
Newly launched condos are priced higher than existing condos which could give a boost to prices of nearby existing condos. Additionally, existing condos will benefit from the attention that a newly launched development brings to the area, especially if the new development adds more amenities, such as restaurants or shops, to the neighbourhood.
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