As a graduate from NUS, majoring in Real Estate, this is a piece of news that had shaken my world because the art of valuation is the rice bowl of Real Estate Graduates and now it is a point of contention in the business world. We had heard it many times over on why we need to be ethical and professional in doing valuation but it seems like the business world thinks otherwise.
What is wrong? What is fundamentally wrong with the recent transactions in the market? Do the premium of ‘newness’ and ‘years left from lease’ carry so much weight? Does the average buyers know what are they getting into?
It is my personal opinion that a buyer will need to do his homework and ask himself if the premium to pay for a new development is worth that much. If it is, what is the basis for the premium in the 1st place?
For a home-buyer, does owning a unit in Caspian make any difference to his lifestyle or does it add any utility as compared to owning a unit in Lakefront Residences? For an investor, will Lakefront Residences have a higher rental yield that Caspian since the location / proximity of the MRT is negligible? Will a tenant take into consideration the lakeview or the ‘newness’ of the project into consideration when renting a unit? Will the name/reputation of the developer make a difference to the tenant as well?
Doesn’t this sounds like sub-prime in disguise?
I believe by asking such questions, it will be pretty clear that those who had bought a unit in a development, with comparables selling at a lower price, would probably face resistance from the market in time to come when they are going to sell the property or even to rent the property. Consumers will always be price sensitive.
Real estate is unique. Real estate is different from most other products. Real estate, no matter how unique, will still be subjected to the forces of the market. Location is one important consideration for Real Estate but when the consideration of location is negligible, price will be the overpowering consideration.
The art of valuation should be reviewed and valuation firms should not be at the beck and call of their clients. Many horror stories were shared where valuers were told what the value of the property is and then justify the values subsequently. Is that right? What are the consequences of doing this repeatedly?
The good thing about Singapore is that the loan-to-value (LTV) is providing a good buffer for drop in valuation where it could trigger a meltdown if banks were to keep foreclosing properties that had their values falling below the loan outstanding.
Who won? The DEVELOPERS. Congratulations!
Lovely Regards,
Lynn ONG (王丽英)
Lynn ONG (王丽英)
District Manager
ECG Property Novena District
ECG Property Novena District
L3009759F / R014-395F
BSc. Real Estate (NUS)
Mobile: (+65) 8479 3149
BSc. Real Estate (NUS)
Mobile: (+65) 8479 3149
Website: http://www.LYNNONG.net/
Blog: http://www.lynnlovelyhomes.blogspot.com/
[Blogging on Analysis of Listings and Real Estate News]
[Blogging on Analysis of Listings and Real Estate News]
Original Article can be retrieved from http://www.todayonline.com/Commentary/EDC110121-0000201/Restoring-sanity-to-property-prices accessed on 2nd Feb 2011.
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