The status factor
People are always upgrading themselves. It could be dining in an upmarket restaurant, wearing branded clothes or living in a luxury condominium. Firstly, it could be that owning a high-end development gives the status and recognition that one seeks. Most wealthy individuals want to be associated with one another by owning similar high-end development. After all, one’s address does make a difference.
Money sense
Besides the prestige factor, it makes money sense too. The price of a high end development may drop significantly when the market sentiment is weak but when it starts to pick up again, their prices can jump significantly. For example, in February 2009, a high floor Ardmore II unit was transacted at S$1, 600 per sq ft. But recently, a lower floor was transacted at $2, 150 per sq ft. That is a 34 percent increase in just barely two to three months.
In a way, this could mean that first tier property owners need not be afraid even if they bought a high-end development at a slightly higher price. When market sentiment turns positive, those properties will be the first to react followed by their mid-tier counterparts. When prices of mid-tier properties increase further, high-end developments will definitely continue to rise even more.
Without a doubt, a high-end development often generate very good profits margin when the market is bullish. It may be risky, but your gains could be well worth it.
In fact, some buyers may buy such properties to be given to their children as these properties are considered “evergreen”. As long as you have the holding power, even if you are experiencing an economic downturn, the potential upside of your property is still there.
So what exactly do investors look out for in first tier properties?
a) District & Location/Road name
District, Location & Road Name are very important to a high-end investors. Sentosa Cove and Marina Bay areas are very popular to high-end investors because of its strategic location. Districts 9 and 10 (D9 & D10,), where Orchard Residences, along the stretch of Ardmore Road and Claymore areas are located in, are also very popular to investors.
If you are concerned about your status factor, pick a project with a good road name because a prestigious address raises your status immediately. Expats holding high position in a company often reside in these luxury projects as it clearly defines their status.
b) Land size
Land size can represent the status of the project as well, especially in D9 & 10. In Singapore, land is scarce and in Orchard Road, where the pulse of Singapore is felt strongest, land is even more precious. Land size also does affect the potential of an enbloc opportunity in the future.
Usually, high net worth individuals prefer to live in a project with good landscaping for their family members to enjoy and appreciate. Let’s take a look at Marina Bay. That area will undergo a total transformation from a working area to a place where people can live, work and play. The Sail and Marina Bay Residences are among the most popular projects for investors as they are situated beside the Integrated Resort (IR). The fact that their land size is not huge is relatively less important in this instance.
Projects in Sentosa Cove are also hot favourite for high end investors as these projects are near to the IR. This area will also become a lifestyle living experience for the rich as
the sea is just nearby. Hence, they could enjoy the cool sea breeze and beautiful sea view as and when they want. Furthermore, there are only 2, 500 residential units on Sentosa island, of which 2, 100 are condominiums and 400 are landed properties. Therefore, investors’ confidence is high as there will hardly be a problem of oversupply of houses there.
c) Number of units in the development
They are usually not a lot of units in each project as developers tend to reserve a lot of land area for landscaping, walk-way and facilities. Residents living in exclusive projects
prefer a quiet environment with less people. Therefore, developments with greater space allocated to landscape and a lower density of residents tend to be preferred.
d) Size of the unit
Big units are often the popular choice among high net worth individuals. They prefer to own big unit with an average size of 2, 000 sq ft. While a big home makes it easier to entertain their guests, investors know that they can make high profits too. With every $100 per sq ft jump, they earn a neat sum of around $200, 000. Furthermore, luxury
projects’ prices jump substantially when the market improves.
Conclusion
One should know that high-end properties are always associated with high-end investors. As a result, the price per sq ft of these properties will always have the potential to increase significantly, and at a much faster rate than the mid-range market. Also one needs to remember that high gains always come with high risks. If you are faced with such an enticing opportunity of making high profits quickly, ask yourself: Are you willing to take that risk?
Extract from the article written By Kelvin Fong
Kelvin Fong is the senior associate district director at PropNex. He is also the group leader of Powerful Negotiators group, the NO. 1 Team in Propnex. He has seven years of experience in the real estate industry, adding many accolades to his name along the way. He has led his group to be the top earners at the agency.
