Here are the current market statistics and my informed guesses

1. New threshold of S$600 per sq ft for mass market condos

First of all, I believe Singaporeans have already accepted the S$600 per sq ft threshold for mass market private condominiums. It will becomes the new psychological support point, which means that anything below the threshold will cause a ‘mad rush’ like the ones we saw in February/March 2009 period where the soft-launches of many new home projects attracted droves of potential buyers. Queue numbers had to be issued at the waiting areas of these showrooms, such as Caspian, Mi Casa and Domus.

On 11 April 2009, it was reported that a 72-unit freehold luxury condominium, Illuminaire, in District 9 Devonshire Road near Somerset MRT Station, achieved a 96% sell-out rate in a matter of two days with the average price of S$1,700 per sq ft.

2. Good marketing strategies still work – recession or not

The (mentioned) phenomena confirm an established truth in real estate sales and marketing, i.e. buyers react to good selling strategy. As long as the strategy is able to appeal to buyer’s emotion, the buyers will react. On the other hand, what the real estate salespersons need to do is to give the buyers a little ‘push’ – by giving them a good reason to justify the emotion.

3. The new order in mass market condo pricing

There are a number of reasons why the S$600 per sq ft threshold for mass market condos will be the new order of the day.

Firstly, buyers in the general hardly showed any genuine resistance to the final proposition of the absolute sale prices in recent months, judging from various degrees of successes at developers soft-launches. Though the ‘per sq ft’ price may appear high by the usual standard, the absolute sale prices were considered ‘palatable’. Buyers in general have snapped up new condo units at between S$600,000 and S$750,000 without any qualms, though per sq ft prices are way above the ‘S$600 per sq ft’ threshold.

For example, the majority of the 101 units sold during the soft-launch of Mi Casa at Choa Chu Kang were transacted at S$610 per sq ft (the lowest per sq ft price being S$578 and the highest S$707).

The majority of the 264 units sold at Double Bay Residences at Simei St 4 were transacted at S$650 per sq ft (the lowest per sq ft price being S$409 and the highest S$898).

The Singapore property market has come a long way since the last market bull-run in 1994/95 period where ‘S$600 per sq ft’ was the ‘point of resistance’ for mass market condos. In fact, in 1996, the market crashed when the per sq ft price for many mass market condos breached the S$600 per sq ft level.

From the look of things in recent months, buyers in general have accepted the S$600 per sq ft price level as ‘affordable’ and ‘reasonable’ and this is very significant for older private residential properties as well.

The psychological support point for the new home unit will provide a basis for older condo projects to find their suitable price point, perhaps between S$400 and S$500 per sq ft – anything lower than that the sellers might as well sit tight and wait for ‘en bloc sale’ propositions when the ‘en bloc sale potential’ emerges from the project’s functional and design obsolescence.

One must not forget that not only the human population in Singapore is greying; the property sector is also aging. This means that up to a point, more and more old private property projects will be ‘locked into’ en bloc sale negotiations and taken out of the supply equation for individual home buyers. Regardless of the tenure, the ‘older and uglier’ the project is, the ‘more attractive’ it will become when en bloc sale is concerned.

4. Small is the next big thing

Secondly, the basis for the new support point is also in the new ‘acceptable’ size of the new apartment units that are recently introduced into the market.

Most of the units sold in the recent two months were between 380 sq ft and 1,100 sq ft with the vast majority  in the 500 sq ft to 600 sq ft range, which is smaller than the size of a typical HDB 3-room flat. By Singaporean standard, anything that is smaller than a 3-room flat is considered small. Of course i Hong Kong, the smallest unit is 140 sq ft; and only time will tell whether houses in Singapore will shrink to that size.

Prepared by Sam Gian, Independent Real Estate Sales Consultant. Article was first published in the Singapore Property Market Review, April 2009.