At any given moment in any given property market, there are properties that are overpriced and properties that are underpriced. The trick is to know the difference. In Singapore, it’s easy to spot the difference.
According to SRX Property, this week alone, there are 818 properties for sale or rent that have asking prices below their X-ValueTM.
This week in Singapore, real estate agents are advertising 320 homes at rents below their X-Value.
In 25 of those cases, the asking rents are 20-30% below their X-Value.
As you can see from the Private Property Hotspots graphic, many of those rentals are concentrated in the Core Central Region.
X-Value is a computer-generated estimation of a home’s market value. Developed with government and private funding, it sources from the nation’s most comprehensive property database and instantaneously calculates a single value for every home using best practices methodologies, including comparable market analysis.
X-Value factors in all comparables and adjusts for differences in important variables like location, size, floor, and age.
As a result, identifying an undervalued home is easy (and fun).
Go to SRX.com.sg and get the unit’s X-Value. Subtract the X-Value from the listing’s asking price. A negative result is a good result.
For example, one 3-room HDB resale in Jurong West Street 92 is asking $285,000. But, it’s X-Value is $309,000.
$285,000 minus $309,000 equals a negative $24,000. But, in this calculation, a negative means potential savings to you, as the real estate agent is asking $24,000 below the X-Value.
The good news for HDB buyers is that, this week, real estate agents are advertising 275 flats with asking prices below their X-Value.
As with any important transaction, you never want to act without analyzing the numbers. Never take numbers at face value. Drill into them.
In the case of bargain hunting to buy or rent homes, it’s important to be sceptical and ask the tough question, “What’s so wrong with this property that the seller is willing to discount it below its X-Value?”
In some cases, like in a declining market with lots of competition, the seller and her agent might have no choice but to discount the property, especially if they want to move it in the short-term.
In other cases, it might turn out that the discounted price is there for a reason. Maybe the unit is sub-standard and dilapidated when compared to the similar, recent transactions that went into the X-Value calculation.
Another reason for a disparity might have to do with the accuracy and legitimacy of the listing. In the benign case, the real estate agent might have made an innocent mistake in uploading the asking prices.
In the cynical case, the real estate agent might be trying to lure you in with a low price and then encourage you to bid higher by warning you of “strong interest from another serious buyer”.
In the pitiful case, the real estate agent may have forgotten about the listing and the market value moved away from the asking price that he had originally posted online.
The point is that there are good and bad reasons for differences between the asking price and the market value, as determined by X-Value.
However, by starting with X-Value, you have a quick and accurate way to identify undervalued and overvalued property. Once you have done that, the next step is to understand the reason for the discrepancy.
In a few lucky cases, the difference between the asking price and X-Value will work in your favor.
But, act quickly. As soon as other people recognize the good deal you’re about to get, they’ll bid up the price and your discount will disappear into thin air. Poof!
Sam Baker is co-founder of SRX Property, an information exchange formed by leading real estate agencies in Singapore to disseminate market pricing information and facilitate property listings and transactions. For more Property Hotspots, visit SRX.com.sg/research.