How developers can continue to whet homebuyers’ appetite

By Benedict Lim / The Edge Property | November 14, 2016 9:00 AM SGT
Developers have to contend with many challenges in the local residential market as a number of factors have combined to create a most unprofitable situation of modest demand and oversupply. The anti-speculative measures put in place by the authorities to prevent runaway asset inflation caused by cheap and abundant liquidity is continuing to dampen purchasing interest. As a consequence, property prices are starting to slide and unsold inventory to build up.
Developers will need to behave and think like modern-age technological entrepreneurs and develop solutions to drive property buyers’ imagination and aspirations. Bringing social-club amenities to the residential domain is no longer a value-add feature but a minimum requirement for any private condominium buyer.
Given the competitive landscape, developers will have to differentiate themselves by creating communities with unique identities. In the early days, having a country club or social club was an aspiration for many. Bringing the clubhouse to the doorstep was a great thing in the past and developers have started to churn out very similar products, albeit in different locations and under different names.
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With increasing land prices, developers are minting private condos with smaller living spaces to ensure an equilibrium price for healthy take-up. Have developers given consumers less for more, or really more for less? It is time to rethink.
The millennials of today are idealists. Providing bricks-and-mortar units alone is no longer enough to capture their imagination and push up housing demand. What they are looking for is a community and activities not available online. Developers must think hard about the existing property management approach and adopt a more club management approach. They need to remain engaged in the development and not walk away from the project after the 12-month defect liability period has expired.
For example, bringing in international or recognised commercial brand operators to handle professional maintenance of equipment or ser-vices, especially for gymnasiums and other facilities, is a way of providing a certain level of service. If the operator takes charge of an entire chain of gymnasiums in the developer’s residential portfolio, it will be very attractive if home owners in these projects can access the facilities that it manages and operates in town and locations near their workplace.
Besides millennials, developers should also consider the needs of Gen-X clients. Many of them have growing or grown-up children. The priority of many in this group are their careers and families. As most are dual-income families, the majority have live-in domestic help. An alternative to a live-in foreign domestic helper would be serviced-residence support, such as house-cleaning and laundry services, provided by the private condo.
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The other is the phenomenon of online shopping. However, the inconvenience of that is having someone at home to receive the delivery. Condo developments can provide a service to receive goods on behalf of residents and either deliver them to their doorstep or have the residents pick them up from a service desk. This is a convenience many would want.
Value-add activities such as enrichment classes for the young, practice examinations for students, mahjong sessions for the old, outings to unique destinations, yoga or Zumba classes and other activities to engage residents’ participation will do much towards creating a sense of community.
Sense of place and pride of ownership will continue to drive homebuyers’ imagination. Developers should stay connected and not just leave the project in the hands of the Management Corporation Strata Title to sustain the initial aspiration of quality environment and care.
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While the underlying business is still bricks and mortar, it has to evolve to include software by providing the services and amenities to meet the lifestyle needs of Gen X and millennials in the same development. This will provide developers with a point of difference in their products, enhance their brand and perhaps create a new revenue opportunity. But what is clear is that buying land to develop and sell will no longer be enough to ensure success.
Benedict Lim is a partner and principal with EY, as well as the Asean Real Estate leader and managing director for EY Corporate Finance.
This article appeared in The Edge Property Pullout, Issue 754 (Nov 14, 2016) of The Edge Singapore.