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Comparison of 1 and 2-hand price increases over the past 10 years
Mar 17, 2023
Comparison of 1 and 2-hand price increases over the past 10 years Singapore
By   shicheng
  • City News
  • 1 handed houses
  • 2 handed houses
  • house price increase
Abstract: Generally speaking, if it is a pure investment, then 1-hand price increase is higher, the disadvantage is that it needs time to wait for the melon to ripen; if it is mainly for owner-occupation, then 2-hand does not need to wait, but the price increase is more limited.

Data is the most objective, Rhubarb extracted the past 10 years of 1-hand compared to 2-hand house price data, the price increase of 1-hand is 141%, 2-hand price increase is 25%.

 

February 2013 ~ February 2023, 1 ring CCR, 1-hand average increase of 91%, 2-hand average increase of 22%

 

Feb 2013 ~ Feb 2023, 2 ring RCR, 1 lot average increase of 67%, 2 lot average increase of 10%.

 

February 2013 ~ February 2023, 3 ring OCR, 1 lot average increase of 87%, 2 lots average increase of 33%.

 

In general, regardless of the area, the increase of 1 lot is generally much higher, but this can not be achieved by holding 1 lot for 10 years without moving. 1 lot has a bonus period of about 3~4 years, from the opening to the handover price will have a certain increase (about 15~30%), after the handover price will level off, after that, if you want to continue to grow, you need to keep replacing to reach it.

 

Generally speaking, the unit price of 1 lot in the same period is 30% higher than the surrounding 2 lots, it seems to be more cost-effective to buy 2 lots. Those who have bought houses should have the experience, why buy the unit price of cheap 2 lots does not rise, but the expensive 1 lot is rising higher and higher, what is the underlying logic?

 

The 1 hand buy is the first hand price, all buyers' holding costs are similar, the chips are concentrated, there is a consensus to sell at a premium, easy to form a synergy and monopolize the market.

 

At the same time, there is only one seller, the developer, who will help raise the price. The developer's sales strategy is usually to lowball the inventory upfront to meet the minimum sales target for bank financing, and then raise the price later to protect profits. Generally speaking, 1-hand properties have a plateau period of 2-3 years, after which prices will "spike" within 6 months to 1 year of delivery, and many owners will choose to change hands during this time.

 

The 2nd hand buy is the second hand price, the meat has been eaten by the first owner, take over the plate is to drink soup. Then some friends ask, why is 2-hand only soup, I also want to eat meat! This is a matter of chip distribution. In the same project, there are 1-hand owners and 2-hand owners. 2-hand owners buy at a premium and if they want to sell at a higher price, they are easily suppressed by 1-hand owners.

 

It is like buying Apple shares, let's say the cost of a 1-hand buyer is $100 and the cost of a 2-hand buyer is $130. Making the same $30, the 1-hand buyer only has to sell for $130 and the 2-hand buyer has to sell for $160, so naturally there will be pressure not to sell. Unless the 2nd lot buyer can contact all the 1st lot buyers and sell for $160, which is not possible in reality.

 

However, this is not to say that all 1-handed buyers can make money if they don't have a brain. The key to getting the most value out of a first-hand investment is product strength, entry price, and leverage, all of which are essential. The following examples review the price performance of several star properties in the past.

 

Example 1: JadeScape

 

JadeScape Shun Fu Hin, the price rose from an average opening price of 1665 psf to 2106 psf in February 2023, an increase of 26.5%, with a loan of 75%, or 4 times leverage, and a capital gain of 106%. (Subject to deduction of loan interest and other miscellaneous charges, but not much). 106% rise over 4 years gives a compound annual return of 19.8%.

 

Example 2: Stirling Residence

 

Stirling Residence, price rose from an average opening price of 1764 psf to 2174 in February 2023, an increase of 23.2%, on a 75% loan, or 4x leverage, for a 92.8% profit on principal. (Subject to deduction of interest on the loan and other miscellaneous charges, but not much). 92.8% rise over 4 years gives a compound annual return of 17.8%.

 

Example 3: Tre Ver

 

Tre Ver, price rose from an average opening price of 1546 psf to 1887 in February 2023, an increase of 22% on a loan of 75%, or 4 times leverage, for a profit of 88% on the principal. (Loan interest and other miscellaneous charges are deducted, but not by much.) The 88% increase over 4 years represents a compound annual return of 17.1%.

 

This shows that investing in a quality 1-hand property is, in essence, like buying a big blue chip, which can earn a compound return of around 15-20% per year. The difference is that this big blue chip has a large amount of capital and is less liquid, avoiding the risk of blind manipulation and forcing it to sit still for 4 years and wait for the flowers to blossom.

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Comparison of 1 and 2-hand price increases over the past 10 years
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