If you ask someone what are the biggest factors that affect the value of a property, you will likely hear these three words.
Location location location.
Sure, but that’s probably an equally obvious answer to who the best soccer player in the world is.
Something something Ronaldo … (wink wink).
It’s like a unit in Orchard could be worth $ 5 million just because it’s in the middle of town.
But take the same unit and transplant it into punggol, and you can bet your dollar that it wouldn’t fetch the same price.
Besides the location, what other factors can influence the value of a property?
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Other factors can include things like economic growth, population growth, and especially in the case of government intervention in Singapore.
Or better known as cooling measures.
But these are some of the more obvious.
Today I’m going to examine some of the less discussed factors.
To be honest, some might not be that big of a factor, but as I covered in my analysis of the Tennery and Stellar RV’s unprofitable (so far), these factors could very easily add up.
Enough talk, let’s get started right away!
Six negative factors that can affect the value of a property
1. New start at a competitive price close by
This isn’t the first time I’ve spoken on the subject, and it probably won’t be my last.
Hence, most of the people would welcome a new condo development in their area.
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And for the most part, they’re right – having a new condo next door would be a positive thing.
When land costs go up, one would always expect that the price of the new start would have to be higher in order for the developer to make a decent profit margin.
But there are times when a new start next door can be a problem.
Case in point: Penrose and Sims Urban Oasis.
Sims Urban Oasis is a 1,024 unit condominium on Sims Drive that was completed in 2017.
Also on Sims Drive is Penrose, which is scheduled for completion in 2025.
Sims Urban Oasis was bought back in 2014 at a land price of 688 psf ppr.
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By comparison, Penrose was bought for 732 psf ppr in 2019 – not too far away given the five-year gap.
Do you see what the problem is?
Despite the fact that the developers clearly had room to rate Penrose in order to get a good margin, they chose to rate it very competitively, which is what Sims Urban Oasis was trading for in the resale market at the time.
Perhaps it was due to the pandemic situation, but we detailed it in our review of Penrose back at launch.
We only did it for the 1 and 2 bedroom units, but I want to show you by the 1 bed beds.
One bedroom Penrose vs. SUO
| Penrose | HIS | |
| price | $ 794,000 | $ 720,000 |
| PSF | $ 1,676 | $ 1,556 |
| size | 474 | 463 |
As you can see, Penrose is undoubtedly more expensive (it’s a bit bigger too) but the price difference is really competitive – especially considering it’s the TOP date of 2025.
That is a difference of seven to eight years.
That doesn’t necessarily mean that Penrose Sims made Urban Oasis a loss-making project, but it does limit its potential appreciation somewhat.
2. Number of tenants
Well this might be subjective and wouldn’t apply to all developments, but I saw it in my play on The Tennery.
In short, there are definitely developments you would see out there that are tailored to the investor and tenant demographics.
In the case of The Tennery, it has 338 units, of which 227 are 1-bedroom units and 111 are 2-bedroom units.
What you can sometimes see in a rental project is that once investors have made their money renting out, they have less incentive to push for a better sale price – especially if they plan to use their money on a better investment opportunity.
In contrast to projects with a higher number of own residence profiles, these homeowners usually offer a cheaper price to upgrade or plan their retirement.
3. Superstition
I would definitely love to do a study that one day, but it’s no secret that humans are naturally superstitious beings.
And if anything, Asians are one of the most superstitious races.
It is common knowledge that the number 8 is associated with wealth and a four is usually avoided because of bad luck.
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So when the number eight is in an address – like 88 Alfred St. in Sydney.
80 percent of the buyers were Chinese and the building was sold in a few hours.
Conversely, the number four (which is synonymous with death) is something that many avoid.
It’s something you’ll see in developments in Singapore where floors that end in 4 are typically used as a decor deck.
Funnily enough, I came across this recently in my review of Alex Residences (the one with that amazing rooftop pool).
It goes without saying that the sustaining of a development can play a role in the perceived value of that development.
Imagine you are a buyer looking at a resale property.
You step in only to see cracks on the walls, green moss has formed on the lower parts.
The pool looks like it hasn’t been cleaned in weeks, and fallen leaves are strewn all over the common areas.
Yes, I may be exaggerating the scenario – but it certainly doesn’t sound like an appealing place to live, does it?
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While you will expect older developments to have more and more maintenance issues and to lose their luster over the years, you really want to be proactive in management.
One that tries to fix problems and keep things from looking like they can asap.
I’ve seen developments that, while old, are incredibly well cared for.
And this combination of space and cleanliness is very appealing.
But when it’s old, looking tired, and there’s a definite lack of care.
Well, that’s on the other end of things – it’s a big turnoff.
5. Build an MRI / general construction
Let me start this point by saying that building an MRI or general construction of buildings like shopping malls etc will definitely be positive if your investment horizon or exit period is a longer period.
But if it’s short, you might want to read on.
Humans, in general, are beings of instant gratification – this is driven by the inherent tendency to see pleasure and avoid pain.
Like wanting to buy a new car right away with a tax loan instead of waiting for the tedious journey of saving enough money.
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Or in the real estate sector, this can be seen when buyers of new start-up properties are rewarded as the first to buy when the project has not yet been built.
However, once completed, they can make a profit as buyers are willing to pay the premium for moving to a new home immediately.
It’s a bit like what you’re seeing in the resale market right now.
While building an MRI and nearby amenities can be a good thing in the long run, the building process can be painful.
The drilling and hammering noises, road closures and traffic disruptions.
It can be a turnoff for potential tenants, and with Covid-19 ruining construction, deadlines may even be extended.
Another negative example would be the recent case of the old apartments at 68-74 Thomson Road.
Ryan wrote a good summary here.
In short, it had potential due to its proximity to United Square and Novena MRT station.
The construction could have an impact on the building due to the new North-South Corridor Tunnel (NSC) to be dug by Thomson.
And so, according to the Land Acquisition Act, the entire development had to be demolished.
6. Bad neighbors
This is definitely a location attribute – but I would consider it something that you need to do your additional due diligence on.
A classic example would be Tribeca by the Waterfront.
Yes, the apartment that used to be right next to Zouk (yes, if you are over 30 and under 40 you have probably spent the best parts of your weekends there).
If you visit the condo during the day, you will most likely be impressed by the serene views of the water – Great World City is close by too!
But in the late nights on Wednesdays and weekends, it becomes a hangout for many party-goers.
As you can possibly imagine with alcohol it can be very noisy and noisy and not the most peaceful environment for those who live nearby.
Well, those days are long gone with the area that Zouk used to occupy and that is now becoming the Rivière to come.
This won’t be the first or the last example – so it is a lesson for those to always do their own due diligence.
last words
While I’m always the one bringing bad news, you need to know that this doesn’t end all of the negative factors that can affect your property’s value.
This does not mean that just one factor can affect the overall result, but always a combination of factors.
Nor does it mean that the presence of a factor makes the entire property bad – not at all.
More importantly, do your homework and find out if it is appropriate for what you want your property to do.
This article was first published in Stackedhomes.
