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Will New Condo Relaunches Trigger The Great Property Sale We Have All Been Waiting For?
It has been in the making for 2 to 3 years. With the amount of new condominiums coming onto the marketplace in recent years, coupled with the relentless credit control measures implemented by the authorities, add the mega supply of HDB BTOs being churned out like a production line, toss the 5 year rule developers have on selling new condominiums into the picture, eventually something has to give. A contributor predicted it here in 2012.
For dramatic effect, let’s just add in the fact that many resale HDBs have been transacting way below valuation in recent months, which used to be ridiculously unheard of. Then spice it up with the many thousands of new condominiums that are still unsold, and the fact that private property prices are going down very slowly in recent months. We are then left with developers who have their own finances and cash flow to take care off. Something has got to give.
In the commercial world, product relaunches are conducted when initial launches fail for one reason or another. So I am very surprised that a marketing spin was not used to powder up the “relaunches” of new condominiums. If you don’t already know, Sky Habitat did it in April. Panorama is doing it in May. You must think that the former had achieved considerable success for the latter to follow suit. And they look like being priced lower than where they were at initial launch.
But the first thing that comes to mind is if prices are being slashed to a level lower than their initial launch prices, does that mean the buyers who jumped in at the first launch have made terrible investment decisions? Are they being compensated in any way by the developers? Developers are not obligated to be charitable, but maybe even a small generous gesture will be greatly appreciated by their customers.
Even though relaunching at lower prices might make sense to those who need to report the quarterly number to the big boss, this can be a very slippery slope developers are navigating here. Because if the public of so many first time home buyers no longer sees an advantage of being amongst the first to buy, and are actually disadvantaged by being first movers, who in the right mind will turn up anymore at upcoming launches?
I know I would be enraged. I imagine it would feel like going to an electronics store to find a desktop computer at 30% off for only 1 day, enticing me to make an immediate purchase. But then find the newspapers 3 days later advertising the same computer at 40% discount. The good thing is that many electronic stores claim to have a price guarantee. Meaning if you can find the same item somewhere else selling at a lower price, the retailer will refund you the difference. This does not happen in real estate, and I don’t expect to witness it anytime soon. It will be a pleasant surprise to see it though.
As developers get more nervous with falling prices and get their minds tangled up with game theory, relaunches will slowly prop up one after another until it is no longer an option to be a bystander and all others are going to follow suit. The slowest runner out of the blocks is the one who is going to end up with the highest unsold inventory. It would be an exciting race for property observers. And a thrilling achievement for the winner too.
Observing that real estate marketing activities for new launch condominiums are some of the most creative forms of marketing I have ever seen, I’m very interested to see if we are going to see things like “soft relaunch”, “VVIP relaunch”, “Pre relaunch, sneak prelaunch preview”, etc. It will then be an awkward conversation in social gatherings where we have to define which launch we are referring to. The pre-launch? Launch? Or relaunch?
Sure. I think a lot people would like to see a realistic correction of property prices. Because they are genuine buyers and they are being priced out of the market. So these relaunches are sure to be popular. But if you are one of them, the best part of this game has yet to reveal itself. That is, the longer consumers hold their purchases, the longer developers will be starved of cash flow. And the more hungry they are, the more competitive they are going to get. At that moment, all it takes is one player to make an audacious move for the ripple to jolt the boats. Or has that already happened?