The real estate market is not static but continually changing, and product cycles are increasingly getting shorter. Not surprisingly, any loose definitions that have been ascribed to commonly used terms might have to be revised and updated.
Take condominium names, for instance, for which there have been several faddish periods in the past. The word ‘Tower’ was popular in the early 1980s, exemplified by prominent developments such as Horizon Towers and Lucky Tower at Grange Road, Hawaii Tower at Meyer Road and Sherwood Towers in the Upper Bukit Timah area. There were also developments with names such as ‘Garden’ (Mandarin Gardens, Tulip Garden), ‘Court’, ‘Plaza’, ‘Heights’, among others. Most recently, in the economic upturn of 2006 and 2007, the popular names for residential developments included ‘Residences’, ‘Suites’, ‘Loft’, ‘One’, and even the symbol @.
The Street and Building Names Board (SBNB) is a government body under the purview of the Ministry of National Development. The SBNB authorises the use of names for condominiums and landed residential developments, and ensures that naming conventions are consistent and the names proposed are not misleading. For example, unless there are strong reasons, we would not expect to find a new apartment block in Woodlands with the name ‘Orchard Suites’.
However, that is as far as the SBNB will go. They do not have oversight regarding the consistency of the developments’ names with the eventual product design and interior layout.
For example, projects with the name ‘Loft’ in them give the impression that they are filled with dual-storey apartments, otherwise known as duplexes. In reality, most of the projects with the word ‘Loft’ in their names consist of single storey apartments. When we say ‘Suite’, what comes to mind are large rooms. While a few condominium projects with ‘Suites’ in their names have large apartment units, most of these projects are filled entirely with apartments that are less than 1,000 sq ft. Investors must exercise caution and keep an open mind when discussing projects they are not familiar with.
The term ‘penthouse’ refers to a dwelling unit on the top floor of a building. Such units are sometimes set back from the outer wall and are usually different in design to the units below them. Commonly, they are duplexes or maisonettes and have twice as much floor area to the units directly beneath them. Up until recently, penthouses are usually large-sized apartments of over 2,000 sq ft of built-in area. However, within the last three years, there has been a proliferation of small developments each with between 50 and 100 apartments that are touted as penthouses. With each apartment sized at an average 400 sq ft, there will be over a hundred new mini-penthouses in Singapore. This will take a bit of getting used to.
“Call now for exclusive VVIP previews and discounts!” It is easy to find such tempting invitations advertised by agents who represent developers for new launches. But how exclusive is the preview when everyone is invited to call up in order to attend the event? Can any caller become a VVIP immediately to receive the invitation for the event? In that case, what is the meaning of VVIP?
There are also ‘previews’ even after developers have opened up their projects for public sale.
I would consider a project ‘launched’ once the first advertisement has been placed by the developer and once the developer is willing to accept any member of the investment public into its sales office (or showflat), whether by appointment or simply walking in.
In that case, what differentiates the ‘preview’ from the ‘launch’? Is there a clear cut-off date which defines a project as ‘launched’? The exact meaning of the word ‘launch’ is unclear.
Furthermore, some projects are never actually ‘launched’ as can be seen from the Urban Redevelopment Authority’s (URA) mid-month data release for “Prices of Residential Units Sold”. This set of data is compiled from developers’ submissions and we can see that for some of the projects that are selling slowly, the “Units launched in the month” is the same as the “Units sold in the month”. Why is this so?
The explanation given is that the developers of these projects are left with unsold units and they have classified the unsold units as units not yet launched for sale. For example, if two units were purchased within a particular month, the developer will classify the two units as launched in that month, and two units sold in that month. This leads to confusion as to how many apartment units are actually launched and available for people to buy in the whole market.
Many analysts are interested in the number of units launched by developers but unsold, and will carefully track the figures. Since the August 2010 cooling measures were announced, the number of units launched for sale on a monthly basis has exceeded the number of units sold. The cumulative units launched, but unsold, have increased from 3,409 in August 2010 to 5,399 in February 2011 — a 50 per cent rise in six months! These are for private residential units launched by developers, including Executive Condominiums.
It is thus timely that the URA is seeking public feedback to try to bring more sense and definition to the terms used by developers and real estate agents.
On 3 March 2011, Mr Mah Bow Tan, Minister for National Development, announced in Parliament that the URA will be enhancing the Housing Developers (Control & Licensing) Act and the Housing Developers Rules to give homebuyers better access to accurate and timely information about the market and units they are buying. The consultation period will last from 17 March to 18 April 2011. (See pages 134–135 for the key proposed changes.)
In a press release announcing the public consultation, the URA stated that the “launch date of a project refers to the first day when units are made available to prospective homebuyers (that is, issue of the Option-to-Purchase) including private previews or any other occasion which may take place before the official launch of the project.” However, the statement is still unclear, as we now need to understand the difference between ‘launch’ and ‘official launch’.
Clarity of definitions will enhance the transparency of the market. It will bring about better investor confidence especially for first time investors and foreign investors. I have sought clarifications and asked questions about the various terms used by developers and real estate agents, and in most cases I do not have the answers myself.
What I really wish is for investors and members of the public to understand that many of the terms used are confusing (although they are not meant to confuse) and most terms have been used loosely (such as the seemingly degrading term ‘shoebox’). As investors, we should seek clear definitions whenever we feel muddled, so that we can enter the transaction with eyes wide open.