This article is a follow-up piece to my earlier blog post with regards to buyers who had purchased homes during this pandemic. Are they gamblers who are treating the real estate market as a casino because they have nothing to do at home? Or is there a genuine reason for acquiring a home in the first place? If you have not read that earlier article, I suggest you read that first to have a better context and understanding of the overall picture. If you have done so, let us continue.
A Baseline Is Crucial For Any Comparative Analysis
First of all, for any comparative analysis, you would always want to have a baseline. The baseline is important because it gives you an idea of what happened historically and a reference point to the data we have today. For example, you happen to head to the supermarket today and saw some apples. Let us assume that you have never seen an apple before, and prices of them were going at $50. Without a reference point, you would not have any idea if they are expensive or cheap. Of course, if you have seen apples regularly at the supermarket, you would know that $50 is a ridiculous price.
The same assumption holds for real estate. If you do not even understand what the baseline consumption of condos in Tampines, how can you assume that the 56 units sold at the Treasure at Tampines is such a high number? As such, it is very important to stay objective and compare the current data with the underlying demand. How you determine this baseline demand is simple and free. Just go to websites like Square Foot Research and compile them!
Baseline Market Demand For District 18 For The Past 10 Years
To make things easier for you, I have extracted the sales of condos in District 18 for the last ten years. This volume is not uniform and varies from year to year. The consumption demand for some years can vary as much as ten times. There are a lot of reasons for this variation. Things like the economy, government cooling measures, population growth, cash liquidity, market sentiment and the list go on. I will not go into details with the specific factors, but you should see that there is a baseline demand for Tampines/Pasir Ris condos every year.
Historic Demand for District 18 Homes (Last 10 Years)
|Time Frame||New Sale||Sub Sale||Resale||Total|
|June 2010 to May 2011||1266||232||822||2320|
|June 2011 to May 2012||2902||231||589||3722|
|June 2012 to May 2013||3371||166||471||4008|
|June 2013 to May 2014||1466||46||271||1783|
|June 2014 to May 2015||911||31||248||1190|
|June 2015 to May 2016||293||62||298||653|
|June 2016 to May 2017||890||55||433||1378|
|June 2017 to May 2018||801||73||799||1673|
|June 2018 to May 2019||573||57||508||1138|
|June 2019 to May 2020||946||4||531||1481|
|10 Year Average Per Year||1341||95||497||1934|
|Average Consumption Per Month (Rounded Down)||111||7||41||161|
How you want to define this baseline demand is entirely up to you. Some people will take the average data for the past ten years to see a bigger picture while others will use only last year data of 78 units to understand the recent market consumption.
Monthly Baseline Market Demand For District 18
If you use the average baseline, you would know that 161 condos are sold in Tampines/Pasir Ris every month for the last ten years. Out of which 111 units are new launches, and 41 units are resale. There are a few reasons why new launches sell better. The quantum could be more affordable; renovation is minimal and limited choices in the resale market. Whatever it is, that will be another article for another time.
If you were to compare this average consumption data with what was sold in District 18 last month (May 2020), you would know that there were only 77 new launches, 0 subsale and 13 resale units sold. A total of only 90 units. Or slightly more than half of what is supposed to be sold on an average basis. In other words, buyers are extremely cautious of the market. From another angle, 71 buyers were supposed to purchase a condo but they did not. Due to the current conditions, they decided to defer this decision to another day.
So Why Did These Buyers Still Went Ahead Despite The Price Increment From Day One?
Developers do not raise prices for no reason. There must be a very compelling reason why they decide to take this course of action. There is no point raising prices, and you end up in a scenario where nobody buys. I always tell my clients that to understand the developer’s price movement, you must think like them.
Now that you have done your research on the market demand for district 18, it is now time to do a similar study on the available units in the new launch market. This information is also readily available at Square Foot Research. To speed things up for you, I have compiled the following summary of the remaining and upcoming units.
Supply Of New Homes In District 18
|Treasure at Tampines||983|
|Casa Al Mare||31|
|Parc Central Residences EC (Upcoming Launch)||695 Estimated|
|The Ryse Residences (Pasir Ris Central) (Upcoming Launch)||480 Estimated|
When Will The Supply Of New Homes In District 18 Last?
With the baseline average of 111 units sold monthly, the upcoming supply will only last 20 months from today. If you were to use the recent data of 78 units, the amount would last about 28 months instead. If you are a developer looking at this data, what do you think you would do? Remember, as the months go by, more and more buyers will continue to wait on the sidelines while the overall supply is dwindling.
Whenever we are faced with a big decision, it is always not easy to control our emotions. Furthermore, news articles that exploit market sentiments may put you in a position where you can make the wrong decision. Instead of regretting past choices, why not look at real estate from a number’s perspective? Only by understanding the market’s supply and demand will you honestly know where prices are heading. Meanwhile, stay safe, do your research and look at the numbers!
Article contributed by Jerry Wong
Jerry Wong is a realtor with Propnex Realty. He loves coffee, cookies and condos and has been in real estate for ten years. Most importantly, he loves connecting people to properties and gets enormous satisfaction when they acquire their dream home. Or making well-informed decisions that see their assets grow. Book a video call appointment and Jerry will share with you the following.
- How certain factors affect real estate prices. Why some condos can make a million dollars while others can lose that same million.
- Why timing is not the most important thing. Because some people can buy the same condo at the same time, but one end up making $100k to $200k while the other suffers losses of the same amount!
- Understanding your requirements and craft a solution for your real estate needs. Be it in the form of asset progression, tax planning, financial calculations, rentals, sales, etc.
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