#18 How Does Volume of Transactions Affect Property Performance? NOTG 18 – Investing in Real Estate

1[Melvin Lim]
00:00:06,160 –> 00:00:07,960
Okay, the door is closed.

2[Melvin Lim]
00:00:07,960 –> 00:00:09,800
We’re starting

3[Melvin Lim]
00:00:09,800 –> 00:00:13,200
the first recording of 2022.

4[Melvin Lim]
00:00:13,200 –> 00:00:15,480
Welcome back everybody.

5[Melvin Lim]
00:00:15,480 –> 00:00:18,080
How was your year? Angeline, how are you?

6[Melvin Lim]
00:00:18,080 –> 00:00:20,280
When do you want to appear on the show? As co-host.

7[Melvin Lim]
00:00:21,560 –> 00:00:22,120
Yeah.

8[Melvin Lim]
00:00:23,440 –> 00:00:24,360
HAHAHAHAHAHA

9[Melvin Lim]
00:00:24,360 –> 00:00:27,400
Angeline is our host for How We Sold.

10[Melvin Lim]
00:00:49,680 –> 00:00:51,200
All right, welcome back to our next episode

11[Melvin Lim]
00:00:51,200 –> 00:00:52,080
of Nuggets On The Go.

12[Melvin Lim]
00:00:52,080 –> 00:00:55,040
Today is the first recording of 2022.

13[Melvin Lim]
00:00:55,040 –> 00:00:56,360
So Happy New Year to you.

14[Melvin Lim]
00:00:56,360 –> 00:00:58,680
And we hope that you had a great 2021.

15[Melvin Lim]
00:00:58,680 –> 00:00:59,840
Today we’re going to talk about,

16[Melvin Lim]
00:00:59,840 –> 00:01:05,200
this particular topic about volume, transaction, density

17[Melvin Lim]
00:01:05,200 –> 00:01:07,800
of a project and how it affects the valuation

18[Melvin Lim]
00:01:07,800 –> 00:01:09,440
and price appreciation over the years.

19[Melvin Lim]
00:01:09,440 –> 00:01:13,040
Because once you understand about this particular key factor

20[Melvin Lim]
00:01:13,040 –> 00:01:14,600
relating to real estate in Singapore,

21[Melvin Lim]
00:01:14,600 –> 00:01:16,160
you will then have a better understanding

22[Melvin Lim]
00:01:16,160 –> 00:01:17,960
on what are some of the key differences

23[Melvin Lim]
00:01:17,960 –> 00:01:19,160
when we’re trying to decide

24[Melvin Lim]
00:01:19,160 –> 00:01:22,000
between buying a 99-year property or freehold property.

25[Melvin Lim]
00:01:22,000 –> 00:01:25,040
Because in Singapore, our property valuation

26[Melvin Lim]
00:01:25,040 –> 00:01:26,280
behaves a little bit differently.

27[Melvin Lim]
00:01:26,280 –> 00:01:29,280
We spoke about this about three years back during 2018,

28[Melvin Lim]
00:01:29,280 –> 00:01:31,480
when we had our first episode of Investors Series.

29[Melvin Lim]
00:01:31,480 –> 00:01:32,600
You can look back at that one,

30[Melvin Lim]
00:01:32,600 –> 00:01:34,000
where I was still wearing a coat.

31[Melvin Lim]
00:01:34,000 –> 00:01:37,320
I was just filming at the backdoor of our media office

32[Melvin Lim]
00:01:37,320 –> 00:01:39,360
in one of our first few offices in Bugis.

33[Melvin Lim]
00:01:39,360 –> 00:01:41,240
I want to revisit that topic again

34[Melvin Lim]
00:01:41,240 –> 00:01:42,640
because something has changed.

35[Melvin Lim]
00:01:42,640 –> 00:01:44,600
And of course we have different tools right now

36[Melvin Lim]
00:01:44,600 –> 00:01:46,720
in terms of our PLB Analytics Tools.

37[Melvin Lim]
00:01:46,720 –> 00:01:49,840
But the very key fundamental idea behind

38[Melvin Lim]
00:01:49,840 –> 00:01:52,880
volume, transaction and density of a project

39[Melvin Lim]
00:01:52,880 –> 00:01:54,080
is because in Singapore,

40[Melvin Lim]
00:01:54,080 –> 00:01:56,800
when we look at how valuation is being determined.

41[Melvin Lim]
00:01:56,800 –> 00:01:59,160
Firstly, from the valuer’s point of view

42[Melvin Lim]
00:01:59,160 –> 00:02:00,440
and the bank’s point of view.

43[Melvin Lim]
00:02:00,440 –> 00:02:02,720
This will give us a clear idea

44[Melvin Lim]
00:02:02,720 –> 00:02:06,720
on whether: end of the day is really 99 years very important?

45[Melvin Lim]
00:02:06,720 –> 00:02:08,600
Is really freehold very important?

46[Melvin Lim]
00:02:08,600 –> 00:02:10,000
When we are selecting a condominium

47[Melvin Lim]
00:02:10,000 –> 00:02:11,360
or apartment status project.

48[Melvin Lim]
00:02:11,360 –> 00:02:13,760
Before we talk about the main topic proper,

49[Melvin Lim]
00:02:13,760 –> 00:02:17,080
I want to bring your attention to this new tool that we have

50[Melvin Lim]
00:02:17,080 –> 00:02:19,960
and it’s available for everyone to visit

51[Melvin Lim]
00:02:19,960 –> 00:02:21,600
our PropertyLimBrothers.com website.

52[Melvin Lim]
00:02:21,600 –> 00:02:24,040
So all you need to do is just click on this Insights button.

53[Melvin Lim]
00:02:24,040 –> 00:02:26,640
So hover your mouse over it, scroll down a little bit,

54[Melvin Lim]
00:02:26,640 –> 00:02:28,280
and then you will find that you actually have

55[Melvin Lim]
00:02:28,280 –> 00:02:29,480
four different tabs right here.

56[Melvin Lim]
00:02:29,480 –> 00:02:30,840
So of course, if you click on the first tab

57[Melvin Lim]
00:02:30,840 –> 00:02:32,200
and you head into Insights,

58[Melvin Lim]
00:02:32,200 –> 00:02:34,760
that’s going to bring you to our article bank,

59[Melvin Lim]
00:02:34,760 –> 00:02:37,200
where you’ll be able to look at different articles

60[Melvin Lim]
00:02:37,200 –> 00:02:38,760
where we talk about our research,

61[Melvin Lim]
00:02:38,760 –> 00:02:39,800
and of course our writings

62[Melvin Lim]
00:02:39,800 –> 00:02:42,480
and analytics on some of the key things,

63[Melvin Lim]
00:02:42,480 –> 00:02:44,280
when it comes to sign and buy your property.

64[Melvin Lim]
00:02:44,280 –> 00:02:46,880
When you go back, click on mortgage calculator,

65[Melvin Lim]
00:02:46,880 –> 00:02:48,640
that’s going to bring you to tools

66[Melvin Lim]
00:02:48,640 –> 00:02:50,280
that you can calculate your mortgage as well.

67[Melvin Lim]
00:02:50,280 –> 00:02:52,000
And of course we have some further tools also.

68[Melvin Lim]
00:02:52,000 –> 00:02:53,800
But I want to bring your attention to the second one,

69[Melvin Lim]
00:02:53,800 –> 00:02:55,440
which is the Analytics button.

70[Melvin Lim]
00:02:55,440 –> 00:02:59,400
So once you click in, there’s this tool that you can utilise

71[Melvin Lim]
00:02:59,400 –> 00:03:01,880
on your free time, or you just try to do some research.

72[Melvin Lim]
00:03:01,880 –> 00:03:04,560
You will be able to enjoy this tool for free.

73[Melvin Lim]
00:03:04,560 –> 00:03:07,000
So there’s something that we want to share

74[Melvin Lim]
00:03:07,000 –> 00:03:08,200
with all of our audiences

75[Melvin Lim]
00:03:08,200 –> 00:03:10,040
when you come to our PropertyLimBrothers.com website.

76[Melvin Lim]
00:03:10,040 –> 00:03:12,320
So basically what we have done is that our data team,

77[Melvin Lim]
00:03:12,320 –> 00:03:15,800
we have consolidated data over the past 10 years,

78[Melvin Lim]
00:03:15,800 –> 00:03:17,840
and you will be able to come here,

79[Melvin Lim]
00:03:17,840 –> 00:03:20,800
track back from 2011 all the way to current date.

80[Melvin Lim]
00:03:20,800 –> 00:03:22,960
We want to look at some of the properties that has been

81[Melvin Lim]
00:03:22,960 –> 00:03:25,800
launched year-on-year basis across different districts.

82[Melvin Lim]
00:03:25,800 –> 00:03:28,440
So just for example, if I were to click on 2011,

83[Melvin Lim]
00:03:28,440 –> 00:03:31,240
what this is going to show me is that it’s going to automatically

84[Melvin Lim]
00:03:31,240 –> 00:03:33,600
rank by the percentage change

85[Melvin Lim]
00:03:33,600 –> 00:03:35,680
in terms of the PSF change

86[Melvin Lim]
00:03:35,680 –> 00:03:38,040
from the date that it was launched

87[Melvin Lim]
00:03:38,040 –> 00:03:41,600
to today’s pricing, which is basically

88[Melvin Lim]
00:03:41,600 –> 00:03:45,560
we want to look at the PSF transacted in the latest sale year.

89[Melvin Lim]
00:03:45,560 –> 00:03:47,480
Let’s take for example, please omit the first one,

90[Melvin Lim]
00:03:47,480 –> 00:03:49,680
because Eunosville has been en bloc.

91[Melvin Lim]
00:03:49,680 –> 00:03:52,000
The project has already been en bloc and completed.

92[Melvin Lim]
00:03:52,000 –> 00:03:53,920
So this data, it takes to the consideration,

93[Melvin Lim]
00:03:53,920 –> 00:03:55,880
the key transaction volume and API.

94[Melvin Lim]
00:03:55,880 –> 00:03:58,400
For example let’s take a look at this, The Scala.

95[Melvin Lim]
00:03:58,400 –> 00:04:00,560
So The Scala launched in the year 2011

96[Melvin Lim]
00:04:00,560 –> 00:04:03,760
and then latest transacted year was in 2021.

97[Melvin Lim]
00:04:03,760 –> 00:04:06,080
And if you look at the percentage change,

98[Melvin Lim]
00:04:06,080 –> 00:04:09,400
there’s about 40.4% in terms of PSF percentage change

99[Melvin Lim]
00:04:09,400 –> 00:04:12,040
from the date launch till date. So over the 10 years period,

100[Melvin Lim]
00:04:12,040 –> 00:04:16,760
PSF has moved up to 40.4% price appreciation.

101[Melvin Lim]
00:04:16,760 –> 00:04:18,160
Okay going back to Eunosville,

102[Melvin Lim]
00:04:18,160 –> 00:04:19,160
I suddenly recall which project is that.

103[Melvin Lim]
00:04:19,160 –> 00:04:21,920
So it has been on en bloc into Euhabitat.

104[Melvin Lim]
00:04:21,920 –> 00:04:23,760
So, suddenly I had a brain freeze, I’m so sorry.

105[Melvin Lim]
00:04:23,760 –> 00:04:24,600
All right. So it has been en bloc.

106[Melvin Lim]
00:04:24,600 –> 00:04:25,920
into Euhabitat, of course,

107[Melvin Lim]
00:04:25,920 –> 00:04:27,120
don’t take that into consideration

108[Melvin Lim]
00:04:27,120 –> 00:04:28,080
because that was based

109[Melvin Lim]
00:04:28,080 –> 00:04:29,960
on the en bloc PSF pricing.

110[Melvin Lim]
00:04:29,960 –> 00:04:31,240
If you were to scroll down a little bit,

111[Melvin Lim]
00:04:31,240 –> 00:04:35,400
look at Waterfront Gold, District 16, launch year 2011

112[Melvin Lim]
00:04:35,400 –> 00:04:38,320
and $939 average launch PSF.

113[Melvin Lim]
00:04:38,320 –> 00:04:39,880
Now averagely is transacting

114[Melvin Lim]
00:04:39,880 –> 00:04:41,000
At about $1,200+ PSF.

115[Melvin Lim]
00:04:41,000 –> 00:04:42,600
Of course, the disclaimer is that

116[Melvin Lim]
00:04:42,600 –> 00:04:44,160
PSF that is shown right here

117[Melvin Lim]
00:04:44,160 –> 00:04:45,440
is a median PSF.

118[Melvin Lim]
00:04:45,440 –> 00:04:47,080
PSF is very different

119[Melvin Lim]
00:04:47,080 –> 00:04:49,600
when we talk about 1-bedroom, 2-, 3-

120[Melvin Lim]
00:04:49,600 –> 00:04:52,400
and 4-bedders because bigger units, theoretically

121[Melvin Lim]
00:04:52,400 –> 00:04:54,960
they transact at a slightly lower median PSF

122[Melvin Lim]
00:04:54,960 –> 00:04:57,560
compared to smaller units, like 1-bedder and 2-bedder.

123[Melvin Lim]
00:04:57,560 –> 00:04:59,000
They transact at a much higher PSF

124[Melvin Lim]
00:04:59,000 –> 00:05:00,400
because the quantum is smaller.

125[Melvin Lim]
00:05:00,400 –> 00:05:02,200
So there are some differences in that.

126[Melvin Lim]
00:05:02,200 –> 00:05:05,320
So basically what does this help to serve you

127[Melvin Lim]
00:05:05,320 –> 00:05:07,360
in your research when you’re hunting for a property?

128[Melvin Lim]
00:05:07,360 –> 00:05:09,520
Basically you want to look at projects to see

129[Melvin Lim]
00:05:09,520 –> 00:05:12,480
how are they performing in terms of appreciation

130[Melvin Lim]
00:05:12,480 –> 00:05:14,640
because this is actually a reverse effect.

131[Melvin Lim]
00:05:14,640 –> 00:05:17,000
Even though let’s say a project has appreciated

132[Melvin Lim]
00:05:17,000 –> 00:05:18,840
by a certain percentage over the years,

133[Melvin Lim]
00:05:18,840 –> 00:05:21,480
this will actually tell you the psychology

134[Melvin Lim]
00:05:21,480 –> 00:05:22,800
of the existing owners.

135[Melvin Lim]
00:05:22,800 –> 00:05:25,360
That’re still currently holding onto their properties

136[Melvin Lim]
00:05:25,360 –> 00:05:26,520
in those projects.

137[Melvin Lim]
00:05:26,520 –> 00:05:29,760
Because for example, if somebody has purchased the property

138[Melvin Lim]
00:05:29,760 –> 00:05:32,280
at let’s say $1,000 PSF, 10 years ago,

139[Melvin Lim]
00:05:32,280 –> 00:05:34,880
and then right now is at about $1,500 PSF,

140[Melvin Lim]
00:05:34,880 –> 00:05:37,840
the existing owners are actually sitting on paper gain

141[Melvin Lim]
00:05:37,840 –> 00:05:39,960
that has not been unlocked or utilised

142[Melvin Lim]
00:05:39,960 –> 00:05:40,800
because they’re still holding

143[Melvin Lim]
00:05:40,800 –> 00:05:41,760
onto the properties right there.

144[Melvin Lim]
00:05:41,760 –> 00:05:43,520
So what does this tell you about the psychology

145[Melvin Lim]
00:05:43,520 –> 00:05:44,920
of the existing owner that is that.

146[Melvin Lim]
00:05:44,920 –> 00:05:46,680
Firstly, they are not urgent to sell

147[Melvin Lim]
00:05:46,680 –> 00:05:47,640
because they know that they

148[Melvin Lim]
00:05:47,640 –> 00:05:50,400
are sitting on appreciated property value.

149[Melvin Lim]
00:05:50,400 –> 00:05:52,520
Number two, some of the owners might have

150[Melvin Lim]
00:05:52,520 –> 00:05:55,520
gone through a refinance process to extract equity

151[Melvin Lim]
00:05:55,520 –> 00:05:57,440
out of that, which then tells you that

152[Melvin Lim]
00:05:57,440 –> 00:05:59,520
they might be holding onto their property

153[Melvin Lim]
00:05:59,520 –> 00:06:02,000
for a longer term or more mid-term.

154[Melvin Lim]
00:06:02,000 –> 00:06:03,680
Thirdly is that maybe the owners,

155[Melvin Lim]
00:06:03,680 –> 00:06:05,680
because of the holding power,

156[Melvin Lim]
00:06:05,680 –> 00:06:08,160
in terms of still owning the properties

157[Melvin Lim]
00:06:08,160 –> 00:06:09,800
that has already appreciated.

158[Melvin Lim]
00:06:09,800 –> 00:06:11,840
They are not in the urgent need to sell

159[Melvin Lim]
00:06:11,840 –> 00:06:14,680
at depressed prices or maybe distress prices.

160[Melvin Lim]
00:06:14,680 –> 00:06:17,080
Should that be an economic downturn? For example.

161[Melvin Lim]
00:06:17,080 –> 00:06:19,520
So this actually tells you the confidence level

162[Melvin Lim]
00:06:19,520 –> 00:06:21,400
of the existing owners right there.

163[Melvin Lim]
00:06:21,400 –> 00:06:23,120
It tells you also about the holding power

164[Melvin Lim]
00:06:23,120 –> 00:06:24,800
of the existing owners right there.

165[Melvin Lim]
00:06:24,800 –> 00:06:27,640
You want to have this in one of your checkboxes

166[Melvin Lim]
00:06:27,640 –> 00:06:28,880
when selecting a property.

167[Melvin Lim]
00:06:28,880 –> 00:06:31,760
Some projects they have seen maybe a down trend,

168[Melvin Lim]
00:06:31,760 –> 00:06:33,120
in terms of their PSF changes

169[Melvin Lim]
00:06:33,120 –> 00:06:33,920
over the past couple of years,

170[Melvin Lim]
00:06:33,920 –> 00:06:37,040
over the past 10 years, 2011 until 2021.

171[Melvin Lim]
00:06:37,040 –> 00:06:39,280
What does that mean is that, it means two things.

172[Melvin Lim]
00:06:39,280 –> 00:06:41,400
Number one, the owners right there,

173[Melvin Lim]
00:06:41,400 –> 00:06:44,080
maybe because of the fact that they have not seen a rise

174[Melvin Lim]
00:06:44,080 –> 00:06:45,640
or a gain in their PSF.

175[Melvin Lim]
00:06:45,640 –> 00:06:48,480
Firstly also they are not motivated to sell.

176[Melvin Lim]
00:06:48,480 –> 00:06:51,120
And that could also result in the lower transaction volume

177[Melvin Lim]
00:06:51,120 –> 00:06:52,160
because they don’t want to sell

178[Melvin Lim]
00:06:52,160 –> 00:06:54,360
at the price that is lower than their purchase price.

179[Melvin Lim]
00:06:54,360 –> 00:06:56,760
Number two is that. for you to look at this,

180[Melvin Lim]
00:06:56,760 –> 00:06:59,880
it is also a very good chance to study these properties

181[Melvin Lim]
00:06:59,880 –> 00:07:01,000
in-depth a little bit more

182[Melvin Lim]
00:07:01,000 –> 00:07:03,440
because this could also mean that in the next

183[Melvin Lim]
00:07:03,440 –> 00:07:06,280
three, five, eight to 10 years, these properties

184[Melvin Lim]
00:07:06,280 –> 00:07:08,600
might have a higher chance to grow as well

185[Melvin Lim]
00:07:08,600 –> 00:07:10,320
because they have not been moving

186[Melvin Lim]
00:07:10,320 –> 00:07:12,000
for the past five to 10 years

187[Melvin Lim]
00:07:12,000 –> 00:07:13,720
and maybe the PSF pricing

188[Melvin Lim]
00:07:13,720 –> 00:07:16,040
of the surrounding projects, surrounding new launches

189[Melvin Lim]
00:07:16,040 –> 00:07:18,240
around all these developments is already

190[Melvin Lim]
00:07:18,240 –> 00:07:19,400
at a higher threshold,

191[Melvin Lim]
00:07:19,400 –> 00:07:21,640
or at a higher PSF benchmark.

192[Melvin Lim]
00:07:21,640 –> 00:07:24,080
And that could mean that if you were to enter

193[Melvin Lim]
00:07:24,080 –> 00:07:25,760
into this project after studying

194[Melvin Lim]
00:07:25,760 –> 00:07:27,480
other factors that could be a higher chance

195[Melvin Lim]
00:07:27,480 –> 00:07:29,160
for you to appreciate faster

196[Melvin Lim]
00:07:29,160 –> 00:07:31,040
or maybe there could be a chance for you to appreciate

197[Melvin Lim]
00:07:31,040 –> 00:07:31,880
a little bit more.

198[Melvin Lim]
00:07:31,880 –> 00:07:34,960
So there are of course, various kind of permutations

199[Melvin Lim]
00:07:34,960 –> 00:07:35,800
that could happen.

200[Melvin Lim]
00:07:35,800 –> 00:07:38,400
Most importantly is that, when you scroll down,

201[Melvin Lim]
00:07:38,400 –> 00:07:40,840
you click on different project launch years.

202[Melvin Lim]
00:07:40,840 –> 00:07:42,800
You can also further dive into several Districts.

203[Melvin Lim]
00:07:42,800 –> 00:07:44,840
We have District 2, 3, all the way

204[Melvin Lim]
00:07:44,840 –> 00:07:49,040
to District 28 for you to study the price action movement.

205[Melvin Lim]
00:07:49,040 –> 00:07:51,880
We think that this will give you a little bit more better

206[Melvin Lim]
00:07:51,880 –> 00:07:54,560
insight to see specifically on some of the projects

207[Melvin Lim]
00:07:54,560 –> 00:07:56,840
that has the highest gain or the highest losses.

208[Melvin Lim]
00:07:56,840 –> 00:07:58,400
So that’s all about this tool

209[Melvin Lim]
00:07:58,400 –> 00:08:00,920
and we want to let you come back and enjoy.

210[Melvin Lim]
00:08:00,920 –> 00:08:02,440
Anytime that you want to refresh it

211[Melvin Lim]
00:08:02,440 –> 00:08:04,480
back to the entire Singapore,

212[Melvin Lim]
00:08:04,480 –> 00:08:05,880
you just click on the refresh button.

213[Melvin Lim]
00:08:05,880 –> 00:08:08,080
You will come back, reload the page,

214[Melvin Lim]
00:08:08,080 –> 00:08:11,840
you’ll get to see 2011, all the projects in Singapore

215[Melvin Lim]
00:08:11,840 –> 00:08:12,760
in different districts.

216[Melvin Lim]
00:08:12,760 –> 00:08:14,520
You can click on 2012 as well.

217[Melvin Lim]
00:08:14,520 –> 00:08:15,520
I hope you enjoyed the tool

218[Melvin Lim]
00:08:15,520 –> 00:08:18,080
and now let’s move on to our topic proper.

219[Melvin Lim]
00:08:18,080 –> 00:08:20,120
For our topic, basically we want to talk about

220[Melvin Lim]
00:08:20,120 –> 00:08:21,880
this very important question

221[Melvin Lim]
00:08:21,880 –> 00:08:24,400
that a lot of people will usually hover

222[Melvin Lim]
00:08:24,400 –> 00:08:27,480
and ask about which is, “Buying 99-year versus

223[Melvin Lim]
00:08:27,480 –> 00:08:30,800
freehold or maybe 999-year, which one is better?

224[Melvin Lim]
00:08:30,800 –> 00:08:33,400
Should I go straight cut into freehold properties

225[Melvin Lim]
00:08:33,400 –> 00:08:34,560
or 999-year property?

226[Melvin Lim]
00:08:34,560 –> 00:08:37,200
Or should I go straight cut to the 99-year property?”

227[Melvin Lim]
00:08:37,200 –> 00:08:39,400
and what are the key fundamental differences?

228[Melvin Lim]
00:08:39,400 –> 00:08:41,520
Let me just bring out this chart from 99.co.

229[Melvin Lim]
00:08:41,520 –> 00:08:43,360
So basically you will be surprised to know that

230[Melvin Lim]
00:08:43,360 –> 00:08:45,480
actually in Singapore, a lot of properties

231[Melvin Lim]
00:08:45,480 –> 00:08:47,600
and the projects in Singapore they are largely freehold.

232[Melvin Lim]
00:08:47,600 –> 00:08:51,280
And 99 years actually has evolved over the past 30 years.

233[Melvin Lim]
00:08:51,280 –> 00:08:53,040
In fact right now, over the past 10 years,

234[Melvin Lim]
00:08:53,040 –> 00:08:54,200
most of the launches,

235[Melvin Lim]
00:08:54,200 –> 00:08:57,120
and I would say almost all the launches, government land sale,

236[Melvin Lim]
00:08:57,120 –> 00:08:59,400
they’re all 99-year in nature.

237[Melvin Lim]
00:08:59,400 –> 00:09:01,520
For freehold projects, brand new launch

238[Melvin Lim]
00:09:01,520 –> 00:09:02,480
will happen in the market.

239[Melvin Lim]
00:09:02,480 –> 00:09:05,080
Definitely it has to undergo an en bloc process

240[Melvin Lim]
00:09:05,080 –> 00:09:06,200
for that to happen.

241[Melvin Lim]
00:09:06,200 –> 00:09:08,840
So 99-year of course, over the past 30 years,

242[Melvin Lim]
00:09:08,840 –> 00:09:11,160
it has gained a lot of popularity.

243[Melvin Lim]
00:09:11,160 –> 00:09:13,480
A lot of people own 99-year properties.

244[Melvin Lim]
00:09:13,480 –> 00:09:16,080
And in fact, the stigma in the past of 99-year property

245[Melvin Lim]
00:09:16,080 –> 00:09:18,200
has already vanished, I would say.

246[Melvin Lim]
00:09:18,200 –> 00:09:20,920
But the key fundamental difference here is that

247[Melvin Lim]
00:09:20,920 –> 00:09:23,080
in Singapore, the way we look at

248[Melvin Lim]
00:09:23,080 –> 00:09:25,360
whether to buy a 99-year property or freehold property,

249[Melvin Lim]
00:09:25,360 –> 00:09:28,520
it has to be based on several other factors.

250[Melvin Lim]
00:09:28,520 –> 00:09:30,840
And I need to bring out the MOAT analysis.

251[Melvin Lim]
00:09:30,840 –> 00:09:32,440
So what is the MOAT analysis?

252[Melvin Lim]
00:09:32,440 –> 00:09:34,480
Let me just show you our MOAT analysis.

253[Melvin Lim]
00:09:34,480 –> 00:09:38,200
All right, so this is our PLB condominium MOAT analysis.

254[Melvin Lim]
00:09:38,200 –> 00:09:39,680
Just wanted to share with you about

255[Melvin Lim]
00:09:39,680 –> 00:09:41,920
a few key points that we talk about.

256[Melvin Lim]
00:09:41,920 –> 00:09:43,320
So when you are deciding whether

257[Melvin Lim]
00:09:43,320 –> 00:09:45,120
between 99-year or freehold properties,

258[Melvin Lim]
00:09:45,120 –> 00:09:47,080
very important to note that in Singapore,

259[Melvin Lim]
00:09:47,080 –> 00:09:48,600
the very first thing that we want to look at

260[Melvin Lim]
00:09:48,600 –> 00:09:51,240
is we want to look at this thing called the volume effect

261[Melvin Lim]
00:09:51,240 –> 00:09:54,200
because the volume effect basically pertains

262[Melvin Lim]
00:09:54,200 –> 00:09:55,360
to many different factors.

263[Melvin Lim]
00:09:55,360 –> 00:09:56,680
So for example, let’s say

264[Melvin Lim]
00:09:56,680 –> 00:09:58,200
when you want to purchase a property,

265[Melvin Lim]
00:09:58,200 –> 00:09:59,560
the very first thing that you need to do

266[Melvin Lim]
00:09:59,560 –> 00:10:01,080
is that you need to call your bankers,

267[Melvin Lim]
00:10:01,080 –> 00:10:02,200
because you need to make sure that

268
00:10:02,200 –> 00:10:04,480
whatever price that the seller is asking for,

269
00:10:04,480 –> 00:10:06,600
it has a valuation to support asking price.

270[Melvin Lim]
00:10:06,600 –> 00:10:07,920
So for example, let’s say you have seen this

271[Melvin Lim]
00:10:07,920 –> 00:10:10,240
condominium $2 mil, 3-bedder.

272[Melvin Lim]
00:10:10,240 –> 00:10:12,320
You love it a lot and you want to make an offer.

273[Melvin Lim]
00:10:12,320 –> 00:10:15,080
Before you even put down the 1% option fee,

274[Melvin Lim]
00:10:15,080 –> 00:10:17,840
you must call your banker to ask whether

275[Melvin Lim]
00:10:17,840 –> 00:10:20,800
does the valuation support asking price of $2 mil.

276[Melvin Lim]
00:10:20,800 –> 00:10:21,680
When you call your banker,

277[Melvin Lim]
00:10:21,680 –> 00:10:23,200
they will usually ask you a few key questions,

278[Melvin Lim]
00:10:23,200 –> 00:10:25,440
they will ask you for the full address, unit number,

279[Melvin Lim]
00:10:25,440 –> 00:10:26,800
the number of bedrooms,

280[Melvin Lim]
00:10:26,800 –> 00:10:28,640
and they will ask you the size of it.

281[Melvin Lim]
00:10:28,640 –> 00:10:30,680
And then they will do their background check with the valuer

282[Melvin Lim]
00:10:30,680 –> 00:10:32,160
that works with the banks closely.

283[Melvin Lim]
00:10:32,160 –> 00:10:34,200
So of course, when you call different banks,

284[Melvin Lim]
00:10:34,200 –> 00:10:35,120
you get different results.

285[Melvin Lim]
00:10:35,120 –> 00:10:36,800
Before making an offer, it’s very important

286[Melvin Lim]
00:10:36,800 –> 00:10:39,400
to firstly talk to your own relationship manager,

287[Melvin Lim]
00:10:39,400 –> 00:10:41,400
if you’re loyal customer of a certain bank.

288[Melvin Lim]
00:10:41,400 –> 00:10:43,640
If not, of course you can call various different banks

289[Melvin Lim]
00:10:43,640 –> 00:10:45,280
to ask for a fair valuation.

290[Melvin Lim]
00:10:45,280 –> 00:10:47,360
And this is what we call the desktop valuation.

291[Melvin Lim]
00:10:47,360 –> 00:10:48,840
Because if you want a very quick result,

292[Melvin Lim]
00:10:48,840 –> 00:10:50,680
everybody goes through a desktop valuation.

293[Melvin Lim]
00:10:50,680 –> 00:10:52,840
And why is the desktop valuation important

294[Melvin Lim]
00:10:52,840 –> 00:10:54,920
is because when you get the desktop valuation

295[Melvin Lim]
00:10:54,920 –> 00:10:56,600
from that particular bank,

296[Melvin Lim]
00:10:56,600 –> 00:10:57,920
when you want to get a loan,

297[Melvin Lim]
00:10:57,920 –> 00:10:59,520
in the event if you were to successfully

298[Melvin Lim]
00:10:59,520 –> 00:11:01,880
purchase a property, that bank is going to

299[Melvin Lim]
00:11:01,880 –> 00:11:03,920
honour the valuation that they quoted you

300[Melvin Lim]
00:11:03,920 –> 00:11:05,160
for that particular property.

301[Melvin Lim]
00:11:05,160 –> 00:11:06,800
So let’s say this bank calls back and says,

302[Melvin Lim]
00:11:06,800 –> 00:11:09,120
“Hey, I did the desktop valuation for the property

303[Melvin Lim]
00:11:09,120 –> 00:11:12,560
that you intend to buy and we can match $2 mil.”

304[Melvin Lim]
00:11:12,560 –> 00:11:14,880
Now, what does that mean is that you can then

305[Melvin Lim]
00:11:14,880 –> 00:11:16,480
safely go ahead to make the offer

306[Melvin Lim]
00:11:16,480 –> 00:11:18,000
for that $2 mil property.

307[Melvin Lim]
00:11:18,000 –> 00:11:20,880
The bank is going to be able to loan you 75%

308[Melvin Lim]
00:11:20,880 –> 00:11:22,240
of that valuation.

309[Melvin Lim]
00:11:22,240 –> 00:11:24,720
And of course your 25% will be the down payment

310[Melvin Lim]
00:11:24,720 –> 00:11:25,600
that you need to pay.

311[Melvin Lim]
00:11:25,600 –> 00:11:26,800
Before you even do that as well,

312[Melvin Lim]
00:11:26,800 –> 00:11:28,000
you need to go to the second step,

313[Melvin Lim]
00:11:28,000 –> 00:11:30,360
is to make sure that you have an Approval

314[Melvin Lim]
00:11:30,360 –> 00:11:32,440
in Principle that’s already been completed

315[Melvin Lim]
00:11:32,440 –> 00:11:34,320
before you even put down the down payment.

316[Melvin Lim]
00:11:34,320 –> 00:11:36,200
But that’s another topic altogether.

317[Melvin Lim]
00:11:36,200 –> 00:11:38,480
Coming back to the valuation sequence is that

318[Melvin Lim]
00:11:38,480 –> 00:11:42,600
because of this sequence, it is extremely important

319[Melvin Lim]
00:11:42,600 –> 00:11:44,960
to know the valuation before you even purchase

320[Melvin Lim]
00:11:44,960 –> 00:11:46,960
for a property because for example,

321[Melvin Lim]
00:11:46,960 –> 00:11:48,280
if all the banks call back and say,

322[Melvin Lim]
00:11:51,080 –> 00:11:52,480
That means if you want to go ahead

323[Melvin Lim]
00:11:52,480 –> 00:11:53,800
and buy the $2 mil property,

324[Melvin Lim]
00:11:53,800 –> 00:11:56,560
that $200k difference from $1.8 mil to $2 mil,

325[Melvin Lim]
00:11:56,560 –> 00:11:57,720
you have the top up in cash

326[Melvin Lim]
00:11:57,720 –> 00:12:00,160
because no bank is going to match up to $2 mil

327[Melvin Lim]
00:12:00,160 –> 00:12:02,200
and to loan you the 75% of the $2 mil.

328[Melvin Lim]
00:12:02,200 –> 00:12:05,320
They are going to loan you 75% of the $1.8 mil

329[Melvin Lim]
00:12:05,320 –> 00:12:07,080
valuation that they have quoted to you.

330[Melvin Lim]
00:12:07,080 –> 00:12:09,080
So it’s an extremely important process.

331[Melvin Lim]
00:12:09,080 –> 00:12:12,000
And this translates to the topic

332[Melvin Lim]
00:12:12,000 –> 00:12:13,240
that we’re going to talk about,

333[Melvin Lim]
00:12:13,240 –> 00:12:16,440
which is the valuation, volume, transaction volume

334[Melvin Lim]
00:12:16,440 –> 00:12:18,280
and the density of the property.

335[Melvin Lim]
00:12:18,280 –> 00:12:19,600
So in the first place,

336[Melvin Lim]
00:12:19,600 –> 00:12:21,920
how did the banks come back with this valuation

337[Melvin Lim]
00:12:21,920 –> 00:12:24,240
of $1.8 mil, $2 mil is that

338[Melvin Lim]
00:12:24,240 –> 00:12:26,320
they’re going to look at all the transactions

339[Melvin Lim]
00:12:26,320 –> 00:12:28,600
that has happened over the past six to 12 months

340[Melvin Lim]
00:12:28,600 –> 00:12:31,200
of this particular project that you’re talking about.

341[Melvin Lim]
00:12:31,200 –> 00:12:35,000
If they were to see that there are a range of transactions,

342[Melvin Lim]
00:12:35,000 –> 00:12:37,480
then it’s easier for the bank to come back

343[Melvin Lim]
00:12:37,480 –> 00:12:39,080
with a determined valuation.

344[Melvin Lim]
00:12:39,080 –> 00:12:41,440
They can also help you to stretch the valuation

345[Melvin Lim]
00:12:41,440 –> 00:12:43,920
if you really saw a property that you love.

346[Melvin Lim]
00:12:43,920 –> 00:12:46,480
Maybe this property is a very unique penthouse,

347[Melvin Lim]
00:12:46,480 –> 00:12:48,440
but there’s not been enough penthouse transactions,

348[Melvin Lim]
00:12:48,440 –> 00:12:50,960
but there has been a lot of 3-, 4-bedders transactions

349[Melvin Lim]
00:12:50,960 –> 00:12:51,800
over the past year.

350[Melvin Lim]
00:12:51,800 –> 00:12:53,280
Than there’ll be able to help you to also

351[Melvin Lim]
00:12:53,280 –> 00:12:55,320
determine based on that penthouse valuation,

352[Melvin Lim]
00:12:55,320 –> 00:12:57,440
how big is the roof terrace and things like that,

353[Melvin Lim]
00:12:57,440 –> 00:12:58,840
using that calculation.

354[Melvin Lim]
00:12:58,840 –> 00:13:01,560
And of course, their regression approach or hedonic approach,

355[Melvin Lim]
00:13:01,560 –> 00:13:03,480
than they can come back with valuation

356[Melvin Lim]
00:13:03,480 –> 00:13:05,040
with a host of transactions.

357[Melvin Lim]
00:13:05,040 –> 00:13:06,800
But, if let’s say this project

358[Melvin Lim]
00:13:06,800 –> 00:13:08,920
that you’re trying to purchase a unit from,

359[Melvin Lim]
00:13:08,920 –> 00:13:10,840
does not have enough transaction volume,

360[Melvin Lim]
00:13:10,840 –> 00:13:13,640
maybe over the past 12 months, there’s only one transaction.

361[Melvin Lim]
00:13:13,640 –> 00:13:15,400
Then very likely the bank

362[Melvin Lim]
00:13:15,400 –> 00:13:17,240
and the valuer that they are working with

363[Melvin Lim]
00:13:17,240 –> 00:13:20,160
are going to base the valuation that they’re quoting you

364[Melvin Lim]
00:13:20,160 –> 00:13:22,360
on that one particular transaction.

365[Melvin Lim]
00:13:22,360 –> 00:13:26,360
So transaction volume in Singapore is extremely important

366[Melvin Lim]
00:13:26,360 –> 00:13:28,520
because the more transactions there are,

367[Melvin Lim]
00:13:28,520 –> 00:13:30,680
the better and easier it is

368[Melvin Lim]
00:13:30,680 –> 00:13:33,720
for the banks and valuers to quote you with the valuation.

369[Melvin Lim]
00:13:33,720 –> 00:13:36,160
So what does that mean for you when you are a buyer

370[Melvin Lim]
00:13:36,160 –> 00:13:39,680
and you’re selecting between A project or B project or C project,

371[Melvin Lim]
00:13:39,680 –> 00:13:41,600
is that on top of looking at the

372[Melvin Lim]
00:13:41,600 –> 00:13:44,120
99-year and the freehold tenure,

373[Melvin Lim]
00:13:44,120 –> 00:13:47,600
you need to look at the amount of volume on transaction

374[Melvin Lim]
00:13:47,600 –> 00:13:49,920
that happened on the year-on-year basis.

375[Melvin Lim]
00:13:49,920 –> 00:13:51,800
Because if you’re entering into a project

376[Melvin Lim]
00:13:51,800 –> 00:13:53,400
with very little volume,

377[Melvin Lim]
00:13:53,400 –> 00:13:56,360
then very lightly in terms of price movement,

378[Melvin Lim]
00:13:56,360 –> 00:13:59,280
it’s going to be not as buoyant as projects

379[Melvin Lim]
00:13:59,280 –> 00:14:00,720
with a large number of volume.

380[Melvin Lim]
00:14:00,720 –> 00:14:02,440
It acts a little bit similar

381[Melvin Lim]
00:14:02,440 –> 00:14:04,680
to how stock counter works as well.

382[Melvin Lim]
00:14:04,680 –> 00:14:07,040
So for example, let’s sidetrack a little bit.

383[Melvin Lim]
00:14:07,040 –> 00:14:08,480
If let’s say you’re trying to invest in

384[Melvin Lim]
00:14:08,480 –> 00:14:09,680
two different stocks,

385[Melvin Lim]
00:14:09,680 –> 00:14:11,520
and you look at this Stock A,

386[Melvin Lim]
00:14:11,520 –> 00:14:15,280
it has a very turbid volume over the past three years

387[Melvin Lim]
00:14:15,280 –> 00:14:16,880
compared to this stock,

388[Melvin Lim]
00:14:16,880 –> 00:14:20,120
which has a very high volume over the past three years.

389[Melvin Lim]
00:14:20,120 –> 00:14:21,520
Very likely speaking is that,

390[Melvin Lim]
00:14:21,520 –> 00:14:24,520
the stock counter with a higher level of transaction volume

391[Melvin Lim]
00:14:24,520 –> 00:14:26,320
with people purchasing and selling,

392[Melvin Lim]
00:14:26,320 –> 00:14:27,840
it has a better popularity,

393[Melvin Lim]
00:14:27,840 –> 00:14:29,520
people are more interested in that stock.

394[Melvin Lim]
00:14:29,520 –> 00:14:30,920
So the chances of it, of course,

395[Melvin Lim]
00:14:30,920 –> 00:14:32,600
appreciating is also much higher.

396[Melvin Lim]
00:14:32,600 –> 00:14:35,200
Stocks is a very different, so-called like comparison

397[Melvin Lim]
00:14:35,200 –> 00:14:37,880
compared to property because it is of course more volatile

398[Melvin Lim]
00:14:37,880 –> 00:14:41,040
because it’s very liquid, it’s very sensitive to market news

399[Melvin Lim]
00:14:41,040 –> 00:14:44,120
and market situation, recession, or the economy booming

400[Melvin Lim]
00:14:44,120 –> 00:14:44,960
and stuff like that,

401[Melvin Lim]
00:14:44,960 –> 00:14:46,440
which is also a host of different topics.

402[Melvin Lim]
00:14:46,440 –> 00:14:48,600
But when we look at property transactions,

403[Melvin Lim]
00:14:48,600 –> 00:14:50,160
it is then very different.

404[Melvin Lim]
00:14:50,160 –> 00:14:52,880
So let’s have a look at project A and project B.

405[Melvin Lim]
00:14:52,880 –> 00:14:55,720
Project A maybe there’s only about 50 units here

406[Melvin Lim]
00:14:55,720 –> 00:14:57,280
and over the past one year,

407[Melvin Lim]
00:14:57,280 –> 00:14:59,080
maybe there’s only one transaction

408[Melvin Lim]
00:14:59,080 –> 00:15:01,320
because maybe the existing owners here are very comfortable

409[Melvin Lim]
00:15:01,320 –> 00:15:03,160
with the project and they are not selling it.

410[Melvin Lim]
00:15:03,160 –> 00:15:04,560
And maybe over the past one year,

411[Melvin Lim]
00:15:04,560 –> 00:15:06,760
one transaction. Compared to project B

412[Melvin Lim]
00:15:06,760 –> 00:15:09,520
with 500 units, over the past one year,

413[Melvin Lim]
00:15:09,520 –> 00:15:12,400
maybe there are, let’s say 30+ transactions.

414[Melvin Lim]
00:15:12,400 –> 00:15:15,240
Now what is potentially going to happen is that

415[Melvin Lim]
00:15:15,240 –> 00:15:18,640
these 30 transactions in a normal stabilised market,

416[Melvin Lim]
00:15:18,640 –> 00:15:21,080
it’s going to see a gradual uptrend

417[Melvin Lim]
00:15:21,080 –> 00:15:24,400
because a transaction volume in a project

418[Melvin Lim]
00:15:24,400 –> 00:15:26,400
has to deal with human psychology.

419[Melvin Lim]
00:15:26,400 –> 00:15:28,320
So what do I mean by human psychology is that,

420[Melvin Lim]
00:15:28,320 –> 00:15:29,640
let’s say for example,

421[Melvin Lim]
00:15:29,640 –> 00:15:33,080
I am an owner of one of the 3-bedders in project B.

422[Melvin Lim]
00:15:33,080 –> 00:15:36,680
I intend to sell my property, but before I sell my property,

423[Melvin Lim]
00:15:36,680 –> 00:15:39,240
I’m going to look at, over the past six to 12 months,

424[Melvin Lim]
00:15:39,240 –> 00:15:41,160
how many 3-bedder owners

425[Melvin Lim]
00:15:41,160 –> 00:15:42,720
have successfully exited from the project.

426[Melvin Lim]
00:15:42,720 –> 00:15:45,080
I want see what price has my neighbours sold.

427[Melvin Lim]
00:15:45,080 –> 00:15:47,400
So I go on to public data, URA

428[Melvin Lim]
00:15:47,400 –> 00:15:49,800
or maybe I go to EdgeProp and things like that.

429[Melvin Lim]
00:15:49,800 –> 00:15:50,600
Let’s have a look.

430[Melvin Lim]
00:15:50,600 –> 00:15:53,240
So in a normal market or maybe in a seller’s market,

431[Melvin Lim]
00:15:53,240 –> 00:15:55,400
in an uptrend market, what we’re going to see is that,

432[Melvin Lim]
00:15:55,400 –> 00:15:57,240
If let’s say I want to sell my 3-bedder.

433[Melvin Lim]
00:15:57,240 –> 00:15:58,760
And I know my neighbour,

434[Melvin Lim]
00:15:58,760 –> 00:16:00,320
that is one level below me

435[Melvin Lim]
00:16:00,320 –> 00:16:02,400
that has just successfully sold last month.

436[Melvin Lim]
00:16:02,400 –> 00:16:05,560
And they have sold at, let’s say $1.8 mil.

437[Melvin Lim]
00:16:05,560 –> 00:16:07,880
I, who has a similar size unit

438[Melvin Lim]
00:16:07,880 –> 00:16:08,800
also 3-bedder.

439[Melvin Lim]
00:16:08,800 –> 00:16:11,240
And I’m, let’s say one level on top of my neighbour.

440[Melvin Lim]
00:16:11,240 –> 00:16:13,320
I definitely don’t want to sell at $1.8 mil,

441[Melvin Lim]
00:16:13,320 –> 00:16:15,360
I don’t want to sell at the same price as my neighbour,

442[Melvin Lim]
00:16:15,360 –> 00:16:17,200
because the market is doing okay.

443[Melvin Lim]
00:16:17,200 –> 00:16:20,320
I want to try and put my asking price at maybe $1.95 mil.

444[Melvin Lim]
00:16:20,320 –> 00:16:21,760
I want to try and hit $1.9 mil.

445[Melvin Lim]
00:16:21,760 –> 00:16:24,080
So that would be my psychology.

446[Melvin Lim]
00:16:24,080 –> 00:16:25,920
And when I do that,

447[Melvin Lim]
00:16:25,920 –> 00:16:29,680
basically it raises the asking price of the 3-bedder

448[Melvin Lim]
00:16:29,680 –> 00:16:31,360
in the entire development.

449[Melvin Lim]
00:16:31,360 –> 00:16:33,240
And it will spur on the effect

450[Melvin Lim]
00:16:33,240 –> 00:16:35,520
to other owners that might want to put their properties

451[Melvin Lim]
00:16:35,520 –> 00:16:36,560
in the market as well.

452[Melvin Lim]
00:16:36,560 –> 00:16:39,800
So this is the human psychology effect that we will see

453[Melvin Lim]
00:16:39,800 –> 00:16:41,600
when there are enough units

454[Melvin Lim]
00:16:41,600 –> 00:16:42,920
and there’s a large number of units

455[Melvin Lim]
00:16:42,920 –> 00:16:44,280
right there in the development.

456[Melvin Lim]
00:16:44,280 –> 00:16:47,080
So if I were to successfully lease at $1.95 mil

457[Melvin Lim]
00:16:47,080 –> 00:16:52,440
and eventually, maybe I successfully exited at $1.88 mil,

458[Melvin Lim]
00:16:52,440 –> 00:16:54,080
which is higher than my neighbour

459[Melvin Lim]
00:16:54,080 –> 00:16:55,800
who had transacted at $1.8 mil.

460[Melvin Lim]
00:16:55,800 –> 00:16:59,120
I’m going to raise the valuation of the entire project

461[Melvin Lim]
00:16:59,120 –> 00:17:00,280
by this level.

462[Melvin Lim]
00:17:00,280 –> 00:17:02,000
And then maybe two months later,

463[Melvin Lim]
00:17:02,000 –> 00:17:04,480
somebody else with a same layout,

464[Melvin Lim]
00:17:04,480 –> 00:17:07,520
around the same size as me, they might want to exit as well.

465[Melvin Lim]
00:17:07,520 –> 00:17:09,920
And they saw my transaction at $1.88 mil,

466[Melvin Lim]
00:17:09,920 –> 00:17:10,760
my neighbour’s transaction at $1.8 mil,

467[Melvin Lim]
00:17:10,760 –> 00:17:13,560
then maybe they now want to try for a higher price

468[Melvin Lim]
00:17:13,560 –> 00:17:16,080
and they’re starting to ask at $2 mil negotiable.

469[Melvin Lim]
00:17:16,080 –> 00:17:18,880
And they managed to exit at let’s say $1.91 mil.

470[Melvin Lim]
00:17:18,880 –> 00:17:22,000
That is then also going to raise the valuation as well,

471[Melvin Lim]
00:17:22,000 –> 00:17:24,200
in an uptrend or maybe in the stable market.

472[Melvin Lim]
00:17:24,200 –> 00:17:25,800
So when that happens,

473[Melvin Lim]
00:17:25,800 –> 00:17:30,280
the gradual progression of valuation increase happens.

474[Melvin Lim]
00:17:30,280 –> 00:17:32,280
And the next owner technically

475[Melvin Lim]
00:17:32,280 –> 00:17:34,680
benefited from our transactions.

476[Melvin Lim]
00:17:34,680 –> 00:17:38,000
So basically speaking, the valuation would then rise

477[Melvin Lim]
00:17:38,000 –> 00:17:39,800
because valuers and bankers

478[Melvin Lim]
00:17:39,800 –> 00:17:43,040
take the transaction figures from the past 12 months

479[Melvin Lim]
00:17:43,040 –> 00:17:45,520
to determine what will be the valuation

480[Melvin Lim]
00:17:45,520 –> 00:17:46,920
that they can match,

481[Melvin Lim]
00:17:46,920 –> 00:17:49,160
following of other units in the same project.

482[Melvin Lim]
00:17:49,160 –> 00:17:51,320
And sadly of course to say is that,

483[Melvin Lim]
00:17:51,320 –> 00:17:53,080
in Singapore, most of the time

484[Melvin Lim]
00:17:53,080 –> 00:17:57,000
a high percentage of determining the valuation of projects,

485[Melvin Lim]
00:17:57,000 –> 00:17:58,920
let’s say project A, B or C is that

486[Melvin Lim]
00:17:58,920 –> 00:18:02,240
the huge influence will come from the transactions

487[Melvin Lim]
00:18:02,240 –> 00:18:04,840
that happen in that project itself.

488[Melvin Lim]
00:18:04,840 –> 00:18:06,880
And not as much as what is happening

489[Melvin Lim]
00:18:06,880 –> 00:18:08,320
in the surrounding projects.

490[Melvin Lim]
00:18:08,320 –> 00:18:11,000
So most of the time banks and valuers,

491[Melvin Lim]
00:18:11,000 –> 00:18:14,200
they look at what has happened within that same project.

492[Melvin Lim]
00:18:14,200 –> 00:18:17,160
The key rationale is because every project is so different.

493[Melvin Lim]
00:18:17,160 –> 00:18:18,960
And the number of units is different.

494[Melvin Lim]
00:18:18,960 –> 00:18:21,480
Project status is different in terms of tenure,

495[Melvin Lim]
00:18:21,480 –> 00:18:24,080
the age is different, the demographic is different,

496[Melvin Lim]
00:18:24,080 –> 00:18:26,000
the sizes and layout are all different.

497[Melvin Lim]
00:18:26,000 –> 00:18:28,680
So the easiest way and the most fundamental way

498[Melvin Lim]
00:18:28,680 –> 00:18:30,800
for valuers and banks to look at valuation

499[Melvin Lim]
00:18:30,800 –> 00:18:33,200
is to look at transaction figures and performance

500[Melvin Lim]
00:18:33,200 –> 00:18:34,880
of that particular project.

501[Melvin Lim]
00:18:34,880 –> 00:18:38,680
So compared to project A, with 50 units, one transaction.

502[Melvin Lim]
00:18:38,680 –> 00:18:41,000
If I let’s say, I want to exit then

503[Melvin Lim]
00:18:41,000 –> 00:18:43,240
most of the time. banks and valuers,

504[Melvin Lim]
00:18:43,240 –> 00:18:46,320
they might only look at that one transaction figure

505[Melvin Lim]
00:18:46,320 –> 00:18:48,880
as a threshold because of a low transaction volume,

506[Melvin Lim]
00:18:48,880 –> 00:18:52,320
maybe sometimes over a period of 5, 10, 8 years,

507[Melvin Lim]
00:18:52,320 –> 00:18:54,120
the level of PSF movement

508[Melvin Lim]
00:18:54,120 –> 00:18:56,520
might be pretty turbid in a sense.

509[Melvin Lim]
00:18:56,520 –> 00:18:59,240
In Singapore, it is not just about 99-year,

510[Melvin Lim]
00:18:59,240 –> 00:19:02,120
freehold or 999-year, it is actually more about the

511[Melvin Lim]
00:19:02,120 –> 00:19:03,600
amount of volume on transaction

512[Melvin Lim]
00:19:03,600 –> 00:19:06,160
that relates and correlates to the density of the project

513[Melvin Lim]
00:19:06,160 –> 00:19:08,240
in terms of the number of units,

514[Melvin Lim]
00:19:08,240 –> 00:19:10,560
which can then affect the transaction volume

515[Melvin Lim]
00:19:10,560 –> 00:19:12,080
and price gradual movement.

516[Melvin Lim]
00:19:12,080 –> 00:19:13,880
So this is the very important thing

517[Melvin Lim]
00:19:13,880 –> 00:19:16,680
that everybody will need to, so-called put in

518[Melvin Lim]
00:19:16,680 –> 00:19:19,280
in one of the decision factors when you select a project.

519[Melvin Lim]
00:19:19,280 –> 00:19:20,680
Of course, there are pros and cons

520[Melvin Lim]
00:19:20,680 –> 00:19:22,200
living in a huge development versus a boutique project.

521[Melvin Lim]
00:19:22,200 –> 00:19:24,360
Boutique project, you have more privacy.

522[Melvin Lim]
00:19:24,360 –> 00:19:26,280
Most of the time, depending on districts,

523[Melvin Lim]
00:19:26,280 –> 00:19:27,880
most of the freehold projects,

524[Melvin Lim]
00:19:27,880 –> 00:19:29,600
they are boutique developments.

525[Melvin Lim]
00:19:29,600 –> 00:19:32,280
Of course there are large scale freehold projects as well,

526[Melvin Lim]
00:19:32,280 –> 00:19:35,800
but most of the 99-year projects actually belonging

527[Melvin Lim]
00:19:35,800 –> 00:19:38,200
if let’s say it happens through a government land sales,

528[Melvin Lim]
00:19:38,200 –> 00:19:39,760
they will be large scale development.

529[Melvin Lim]
00:19:39,760 –> 00:19:42,800
So sometimes you might see a very strange result is that

530[Melvin Lim]
00:19:42,800 –> 00:19:43,840
maybe in the same district,

531[Melvin Lim]
00:19:43,840 –> 00:19:46,280
this large size 99-year project

532[Melvin Lim]
00:19:46,280 –> 00:19:50,160
maybe has a higher price PSF compared to

533[Melvin Lim]
00:19:50,160 –> 00:19:52,320
a boutique freehold project in terms of PSF.

534[Melvin Lim]
00:19:52,320 –> 00:19:54,960
Maybe this is doing at about $1,600 PSF,

535[Melvin Lim]
00:19:54,960 –> 00:19:57,240
but a freehold boutique project that is nearby

536[Melvin Lim]
00:19:57,240 –> 00:19:59,440
to this 99-year is doing at about $1,300 PSF.

537[Melvin Lim]
00:19:59,440 –> 00:20:01,560
There might be a $300 PSF difference.

538[Melvin Lim]
00:20:01,560 –> 00:20:04,000
And that is extremely common in Singapore.

539[Melvin Lim]
00:20:04,000 –> 00:20:06,080
The key rational is of course based on the reasons

540[Melvin Lim]
00:20:06,080 –> 00:20:08,360
that we have just shared with everybody.

541[Melvin Lim]
00:20:08,360 –> 00:20:10,240
All right, so that is just one factor

542[Melvin Lim]
00:20:10,240 –> 00:20:13,360
on our MOAT analysis, which is called the volume effect.

543[Melvin Lim]
00:20:13,360 –> 00:20:16,160
And before we end off, we want to share with you on Bala’s Curve.

544[Melvin Lim]
00:20:16,160 –> 00:20:19,280
So the Bala’s Curve basically looks at 99-year projects

545[Melvin Lim]
00:20:19,280 –> 00:20:21,080
based on this price trend.

546[Melvin Lim]
00:20:21,080 –> 00:20:24,160
So in Singapore, there are a few key things to take note,

547[Melvin Lim]
00:20:24,160 –> 00:20:26,400
is that at the point of 60-year mark,

548[Melvin Lim]
00:20:26,400 –> 00:20:28,720
you have to take note that once it…

549[Melvin Lim]
00:20:28,720 –> 00:20:29,960
(background shouting)

550[Melvin Lim]
00:20:29,960 –> 00:20:31,440
Somebody is shouting downstairs.

551[Melvin Lim]
00:20:31,440 –> 00:20:33,200
Okay, so you have to take note that

552[Melvin Lim]
00:20:33,200 –> 00:20:37,160
once your property balance lease drops below 60 years,

553[Melvin Lim]
00:20:37,160 –> 00:20:38,680
the next buyer that wants to buy,

554[Melvin Lim]
00:20:38,680 –> 00:20:41,840
they will have a slightly more limited amount

555[Melvin Lim]
00:20:41,840 –> 00:20:44,440
that they can utilise in terms of the CPF withdrawal limit.

556[Melvin Lim]
00:20:44,440 –> 00:20:46,800
So you definitely want to take note of that 60-year mark,

557[Melvin Lim]
00:20:46,800 –> 00:20:48,320
if any property that you’re purchasing,

558[Melvin Lim]
00:20:48,320 –> 00:20:50,520
and it has a balance of below 30 years,

559[Melvin Lim]
00:20:50,520 –> 00:20:52,880
what’s going to happen is that no banks would then loan,

560[Melvin Lim]
00:20:52,880 –> 00:20:55,840
if let’s say there’s a balance of 30 years and below.

561[Melvin Lim]
00:20:55,840 –> 00:20:58,320
So this tool is something on the Bala’s Curve

562[Melvin Lim]
00:20:58,320 –> 00:20:59,640
that you want to take note of

563[Melvin Lim]
00:20:59,640 –> 00:21:01,720
when you’re entering into 99-year development.

564[Melvin Lim]
00:21:01,720 –> 00:21:04,720
But of course, a lot of properties have also defied the odds.

565[Melvin Lim]
00:21:04,720 –> 00:21:06,560
I mean you just look at example,

566[Melvin Lim]
00:21:06,560 –> 00:21:08,480
this beautiful project called Mandarin Gardens.

567[Melvin Lim]
00:21:08,480 –> 00:21:10,160
I mean even though now is below

568[Melvin Lim]
00:21:10,160 –> 00:21:11,600
the 60-year old threshold,

569[Melvin Lim]
00:21:11,600 –> 00:21:14,640
the price has still appreciated in the recent past two years.

570[Melvin Lim]
00:21:14,640 –> 00:21:15,800
I think one of the key reasons is

571[Melvin Lim]
00:21:15,800 –> 00:21:19,000
because the PSF is low compared to its surrounding,

572[Melvin Lim]
00:21:19,000 –> 00:21:21,600
new launches compared to its surrounding projects.

573[Melvin Lim]
00:21:21,600 –> 00:21:23,600
The project is huge in nature,

574[Melvin Lim]
00:21:23,600 –> 00:21:26,280
high volume of transaction, very family-friendly.

575[Melvin Lim]
00:21:26,280 –> 00:21:29,360
A lot of families love Mandarin Gardens and the size

576[Melvin Lim]
00:21:29,360 –> 00:21:32,640
and layout is extremely huge within every unit itself.

577[Melvin Lim]
00:21:32,640 –> 00:21:37,560
So it has a very strong popularity and demand continuously.

578[Melvin Lim]
00:21:37,560 –> 00:21:39,800
I think the mindset is that a lot of people think that

579[Melvin Lim]
00:21:39,800 –> 00:21:41,880
with a same quantum if they were to go

580[Melvin Lim]
00:21:41,880 –> 00:21:43,680
and buy maybe a newer project,

581[Melvin Lim]
00:21:43,680 –> 00:21:45,560
they can only go for a smaller size,

582[Melvin Lim]
00:21:45,560 –> 00:21:46,840
but if they come to the Mandarin Gardens,

583[Melvin Lim]
00:21:46,840 –> 00:21:49,240
even though the lease tenure is slightly lower,

584[Melvin Lim]
00:21:49,240 –> 00:21:50,560
but they can enjoy a huge size,

585[Melvin Lim]
00:21:50,560 –> 00:21:53,120
huge project for their family and kids to enjoy.

586[Melvin Lim]
00:21:53,120 –> 00:21:55,720
So there are so many factors involved right.

587[Melvin Lim]
00:21:55,720 –> 00:21:57,920
And today we’re basically just talking about two,

588[Melvin Lim]
00:21:57,920 –> 00:21:59,000
which is the volume effect,

589[Melvin Lim]
00:21:59,000 –> 00:22:00,960
as well as the Bala’s Curve effect.

590[Melvin Lim]
00:22:00,960 –> 00:22:02,560
So hope that you enjoyed this episode,

591[Melvin Lim]
00:22:02,560 –> 00:22:05,360
where we start to dive into our PLB MOAT analysis.

592[Melvin Lim]
00:22:05,360 –> 00:22:08,200
We’re going to talk about MOAT analysis analytics

593[Melvin Lim]
00:22:08,200 –> 00:22:10,160
further on in our Nuggets On The Go as well.

594[Melvin Lim]
00:22:10,160 –> 00:22:11,600
We hope that you benefited from this session.

595[Melvin Lim]
00:22:11,600 –> 00:22:13,480
My name is Melvin Lim, PropertyLimBrothers as always.

596[Melvin Lim]
00:22:13,480 –> 00:22:16,320
We’ll see you on our next episode of NOTG, let’s go.