It is always challenging to come out with a research that relies heavily on assumptions. Such reports can open up many questions on the underlying assumptions and data that support such assumptions.
SPK reads the article published in the Business Times today, titled “Developers in two main camps over how much to bid for land”, with much interest. Without the benefit of reading the full report from JLL, there are a couple of questions floating in SPK’s mind.
Are the Developers ‘in two main camps’ or are they ‘in different factions within one single camp’?
This is probably a question relating to the use of words and language. The words ‘in two main camps’ seem to give readers the impression that there are major differences in opinion between the developers. This is probably a good attention catching headline. But if we take a step back and look at the bigger picture, the research is telling us that almost all the new future projects will be launched at higher prices from the current level. In this sense, the developers are probably aligned with their outlook and it is just a matter of how hungry they are to replenish their land bank and bid for land. It might be more appropriate to say that the developers are “in different factions within one single camp”?
How meaningful is the above-mentioned observation? Probably not much, since any developers who succeed in winning the bid would obviously hold an optimistic outlook of the market. If not they would not have bid so high for the land, isn’t it?
What might be a more meaningful study? Probably a study of the winning bidders against the losing bidders, or a study of the active participants in the collective sales market or GLS tender against those developers who have sit out of the recent tender biddings.
Challenges in doing a market comparison on an adjusted basis
To be fair, a lot of effort has been made by JLL in making sure that the comparison of future launch price of new projects against 2017 transacted prices of comparable projects is done as accurately as possible. JLL has adjusted existing transacted prices for differences in age, tenure, location and median unit size. SPK applauds the team for the commendable effort.
But without the benefit of reading the full report from JLL, some questions might come to readers’ mind. How ‘comparable’ are those existing projects against the new projects? How are the 2017 transacted prices adjusted? What is the methodology for the adjustments?
Another question to consider is whether the study has taken into the account of the “market anomaly” of resale units selling at discounts to new launches. Should we factor this into the study to find out the ‘resale discount’-adjusted price increase?
Or should we also compare the expected launch price of these 26 future new projects against each other and also against the recent new launches?
These additional studies might give us further insights on the outlook for the market.