What are the key lessons of the Pasir Ris 8 price hike?

Aug 16, 2021

Pasir Ris 8 has caused a big stir in the property market, thanks to prices that shot up from around $1,400 psf to about $2,000 psf. What’s amazing is that this all happened on a single Saturday, when there were six rounds of upward revisions to the price. This has raised the question of whether (1) prices are too high for new launches right now, or (2) buyers should move to buy now, before prices rise further. In truth, there has been some overreaction on both sides. Here are the lessons we should be taking away from the Pasir Ris 8 launch, but with a bigger dose of reality:

First, let’s clear up some of the misinformation going around

Prices are definitely rising for suburban, OCR condos. This has been going on since 2016 at least. However, impressive leaps like $1,400 psf to $2,000 psf are not the norm:

Over a five-year period, prices of OCR condos (excluding ECs) have risen just around 10.2 per cent, from $1,119 psf to $1,234 psf. It’s an upward trend, but you can see why Pasir Ris 8 isn’t a good reflection of the overall market.

To be more specific, let’s examine new launch prices in District 18 (where Pasir Ris 8 is located) over the past year only:

New launches in District 18 have risen from an average of $1,356 psf, to about $1,557 psf over the past 12 months. This is an increase of about 14.8 per cent. So again, while prices are rising, it’s not so dramatic that most buyers are getting priced out by the day. There’s no need to go into a panicked buying mode.

I also want to point out that most Pasir Ris 8 units do not cost $2,000 psf

While some desirable, smaller units did see such a price hike, the average price at Pasir Ris 8 (from all sales to date) is only $1,613 psf. These are the five most recent transactions at Pasir Ris 8, which you can verify with URA transaction data:

Transaction date Unit size Approx. price psf Total price
25 Jul 01 1,302 sq. ft. $1,613 $2,101,000
25 Jul 01 1,302 sq. ft. $1,644 $2,141,000
24 Jul 01 775 sq. ft. $1,644 $1,274,000
24 Jul 01 775 sq. ft. $1,659 $1,286,000
24 Jul 01 775 sq. ft. $1,648 $1,277,000

It’s unsurprising that Pasir Ris 8 is priced higher for the area, as it’s an integrated development (it’s connected to Pasir Ris MRT station, and with space for shops and eateries). But while Pasir Ris 8 is not the cheapest new launch, its pricing has been exaggerated by word-of-mouth.

What are the key lessons of the Pasir Ris 8 price hike?

Lesson 1: Hearsay and social media tend to focus on outliers

As you can see from the above, news tend to focus on the most exceptional outliers.

For example, people are more excited to read about a $1.295 million resale flat, than to hear about the actual average price of a 5-room flat in Bishan ($599 psf, or around $791,505 if you’re curious).

It’s hard to blame them, as the most dramatic examples are what attract attention – but serious home buyers must keep in mind that these are poor representations of the wider market. The most extreme prices (high or low) are not what you’ll probably encounter; so temper your expectations accordingly.

If you read about sky high or rock bottom prices for any development, I suggest you re-check the details on the URA transaction records. This way, you’ll know if you’re looking at the real “average price”.

Lesson 2: Be prepared with Approval In Principle, when you visit the showflat

At Pasir Ris 8, it was a hectic time for buyers who weren’t clear on their available budget (i.e., they had not yet secured a loan). If it turns out that you need to pick a different unit, or that prices are going up fast, it can be stressful when you don’t have clear numbers.

Some of these buyers might have dropped out, only to find out they could have gotten a loan for a bit more. In some cases, buyers aggressively secured the Option, only to find out they couldn’t get the loan amount later (thus forfeiting a portion of the deposit).

Pasir Ris 8 is a good example of how fast prices can move, if a development does well. This is why I suggest you find the bank first, and get them to issue an Approval In Principle (AIP). The AIP will clarify how much the bank is willing to lend you, and you’ll have a clear idea on whether you can afford to go higher on price. If you’re not sure how to do this, drop me a message and I can help.

Lesson 3: There are still good deals to be found, for new launch condos

As of 2021, new launch condos are being overtaken by resale condos in popularity; April this year saw resale price at an 11-year high. This is partly due to Covid-19 and the fear of construction delays. However, it is also because of the current price gap between new and resale segments.

New launch condos currently average around $1,770 psf, Singapore-wide.

Resale condos, on the other hand, average $1,366 psf, making for a roughly 25 per cent price gap between the two. When you add in the fact that resale condos tend to be bigger, and don’t face construction delays, you can see why many buyers consider new launches less palatable.

However, there are situations where new launches pay off. For those who bought Pasir Ris 8 units before the price went up, they would have realised significant gains in a very short time span.

Now this isn’t true of every new launch – remember Pasir Ris 8 is an outlier – and it’s unlikely that you’ll see prices shoot up over 40 per cent by the end of the launch. However, new launch buyers have realised gains as significant as 10 to 15 per cent at the end of the launch, just by being among the earliest buyers.

So don’t be too quick to dismiss new launches; even if the wider market favours resale for value buys right now.

Lesson 4: Suburban condos can be as investment-worthy as prime region counterparts

In 2021, it’s archaic to think that only prime neighbourhoods like Orchard, Newton, Raffles, etc. are viable for property investment. As the graph above shows, the OCR also has its share of fast appreciating properties. In fact, suburban condos are favoured by the current bulk of buyers, who are HDB upgraders (three-bedders in the CCR are beyond the typical HDB upgrader’s price range).

As Singapore continues to decentralise, and we see more business hubs outside the CCR (like Changi Business City, or Punggol Digital District), suburban condos will also retain their upward momentum. Coupled with their lower quantum, investors can have a lower-risk property, with better room for appreciation.

So whether you’re a landlord or owner-investor, don’t be too quick to dismiss fringe region condos. Their gains can be just as good, if not better, percentage-wise.

For more updates on this situation, follow me on RonChongProperty.sg. I’ll help to keep you in touch with the Singapore private property market, and plan a smooth asset progression journey.

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