Top five gimmicks of new launch (part II)

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http://propertysoul.com/2013/10/17/t...aunch-part-ii/

Top five gimmicks of new launch (part II)

October 17, 2013


Besides gathering a crowd there and creating the urgency to buy, there are other marketing gimmicks you may find familiar at a new launch.


Gimmick 3: Make some noise

To draw the attention of potential buyers, media coverage is a better alternative than advertising. It sounds more convincing and also helps to save the budget to buy airtime.

The public relations department of property developers know when to feed the right stories to the journalists. A media report or a rumor that a celebrity, an investor or a government official just bought one unit at the sales gallery.

People all want to be seen having the same foresight as the experts in property investment or the big names in their own fields. Thus the release of these stories works to motivate other buyers to follow suit.

In order to wow the readers, the media has a tendency to pick up only unusual cases. An amateur investor may have just bought a place at a ridiculously high price. Or one particular buyer has decided to buy a flat with unique design, facing or location regardless of the asking price.

An inevitable conclusion is that prices in the property market have just set new highs. The obvious connotation for potential buyers is to take action now before prices jump again.


Gimmick 4: Dangle the carrot

Goodies given away at the sales gallery is a catalyst to close deals. Be it fee absorption, furniture vouchers, furnishing packages, or branded appliances, they are attractive concessions in the eyes of potential buyers. Never mind the fact that such offers are just peanuts compared with the price of the property.

Tempted buyers are often unaware that the value of these goodies can easily be offset by a slight drop in the property’s market value. It is therefore more practical to get an immediate discount off the list price. Ask the sales representative the estimated cost of that branded appliance or furnishing package, then request for a direct deduction from the unit’s asking price in lieu of the developer’s goodie.

Some properties are sold with ‘guaranteed rental return’. It is a scheme that promises owners a fixed percentage of the property’s price as rental income, regardless of the actual rental income, or whether the property is rented out in the first few years.

This tactic is usually deployed to move units in high-end condominiums. The rental income can be seen as a form of discount off the list price.

‘Guaranteed rental return’ is different from earning rental income from actual tenants over the years. Since the amount given has actually been factored into the price, one can also argue that buyers are actually paying for their guaranteed rental amount in advance.

Strictly speaking, the party who benefits most from giving away the carrot is probably the developer itself. It is because these goodies are usually offered when the market starts to cool down so that developers are able to move properties off the shelves without lowering the price.


Gimmick 5: Promise good return

Once the sales representatives know that you are buying the property for investment, they may claim that their units can be rented out at a certain market rate.

There are two ways to check the validity:

1. Do your own research.

Go to the Urban Redevelopment Authority website to check the latest published figures on ‘Rentals of Private Residential Properties’. Find a similar unit in a nearby project that is relatively new. Check the range of monthly rent to see whether the numbers given are too optimistic.

2. Do some mystery shopping.

Respond to the rental listings of new projects in the same district to check the popularity of properties for rent there.

The sales representative may claim that their units offer an attractive rental return of a certain percentage. It is not difficult to calculate the net monthly ROI (Return on Investment) on your own.

ROI = (monthly rental – loan repayment – maintenance fee – property tax) x 12 ÷ initial investment

Once I stepped into a sales gallery where the salesperson spoke confidently that their units offered a minimum of five percent rental return. But after I did my sums, the cash-on-cash return was actually less than one percent.

Next time before you walk into a sales gallery, remember to do your homework first. When it comes to property investment, ignorance can be very expensive.

[hopeful]

Gimmick 3: Make some noise
......

In order to wow the readers, the media has a tendency to pick up only unusual cases. An amateur investor may have just bought a place at a ridiculously high price. Or one particular buyer has decided to buy a flat with unique design, facing or location regardless of the asking price.
......

the reverse is also true when denigrating projects.
for eg.
certain forummers have been disparaging JG at 17xx psf, without mentioning that these are high floor MMs and then quoting SV at average psf price.
so when comparing the JG at 17xx vs SV 14xx, it makes JG looks over-priced.

[proper-t]

the reverse is also true when denigrating projects.
for eg.
certain forummers have been disparaging JG at 17xx psf, without mentioning that these are high floor MMs and then quoting SV at average psf price.
so when comparing the JG at 17xx vs SV 14xx, it makes JG looks over-priced.

You mean like some forumers who denigrate the landed segment when an article of a GCB being put on the market is posted or news of a housebreaking is reported?

[hopeful]

You mean like some forumers who denigrate the landed segment when an article of a GCB being put on the market is posted or news of a housebreaking is reported?

that too

[lifeline]

In addition the guaranteed rental return has to be taken in context.
Eg promise you 4.5% return = 5000 per month. But you only manage to rent out 3500. So developer only tops up 1500.

Buyers therefore affected in 3 ways:
1. Illusion of higher returns when in effect you only get 1500/5000 of that 4.5% = 1.35% and not 4.5%.
2. Additional furnishing cost... developer may have a clause for fully furnished unit so you got to top up for this.
3. Developer marked up the condo price to account for the guaranteed rental return of 4.5% !

Triple whammy! So important to look at the whole deal first. Saw this eg in a project some time back when prices were marked higher when rental return is guaranteed.

[Singleton]

In addition the guaranteed rental return has to be taken in context.
Eg promise you 4.5% return = 5000 per month. But you only manage to rent out 3500. So developer only tops up 1500.

Buyers therefore affected in 3 ways:
1. Illusion of higher returns when in effect you only get 1500/5000 of that 4.5% = 1.35% and not 4.5%.
2. Additional furnishing cost... developer may have a clause for fully furnished unit so you got to top up for this.
3. Developer marked up the condo price to account for the guaranteed rental return of 4.5% !

Triple whammy! So important to look at the whole deal first. Saw this eg in a project some time back when prices were marked higher when rental return is guaranteed.

Thought very few developers provide guaranteed rental returns nowadays.
By the same token, prices can be marketed higher with absorption of ABSD.
Sometimes, very hard to differentiate what should be actual pfs

[lifeline]

Thought very few developers provide guaranteed rental returns nowadays.
By the same token, prices can be marketed higher with absorption of ABSD.
Sometimes, very hard to differentiate what should be actual pfs

You are right that it's difficult to decide on the actual psf. In my eg it was easier for me cos I was looking at that unit from preview to launch and thereafter. So it is easier to compare and see what's happening. All things being equal, within the same project and same unit type, buyers should not pay too high a premium esp within the same time window. Eg pay much much higher for lower floor vs upper floor same stack, even /esp with guaranteed rental return in the context I highlighted earlier.

[Singleton]

You are right that it's difficult to decide on the actual psf. In my eg it was easier for me cos I was looking at that unit from preview to launch and thereafter. So it is easier to compare and see what's happening. All things being equal, within the same project and same unit type, buyers should not pay too high a premium esp within the same time window. Eg pay much much higher for lower floor vs upper floor same stack, even /esp with guaranteed rental return in the context I highlighted earlier.

probably developers jacked up the price for higher floor after good sales.

sometimes, developers have their own way of marketing high prices for low floor. sell midfloor units first, once done, very low floors can be marketed at higher prices. very confusing when they say lowest floors not for sale, one may have to pay a premium to activate them.

[lifeline]

probably developers jacked up the price for higher floor after good sales.

no la. it was that same few units but prices jacked up after implementing the guaranteed rental returns. anyway just sharing for every one to do due diligence. anyway guaranteed returns in that project to move the units after cooling measures implemented... yet after i went through the figures, realised that it was just marketing and actually worse (as shared above).

sometimes, developers have their own way of marketing high prices for low floor. sell midfloor units first, once done, very low floors can be marketed at higher prices. very confusing when they say lowest floors not for sale, one may have to pay a premium to activate them.

I saw this practised in another D1 project... sell midfloor first and launch lower floor to foreigners.

interesting to see the various innovative marketing techniques employed by different developers at different time of the market.

[ekl2ekl2]

I saw this practised in another D1 project... sell midfloor first and launch lower floor to foreigners.

interesting to see the various innovative marketing techniques employed by different developers at different time of the market.[/quote]

Think you are referring to V Shenton, some lower floors reserved for overseas market. Wonder whether all these have been taken up.

Some other "innovative" marketing include quiet soft launch with no public launch. For example, Skysuites next to Altez soft launched since march 2011 and to date no official launch.