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For a homebuyer or homeowner, undervalued homes simply mean that the purchase price of the property you are buying or selling is less than the home’s actual value, market value, or the amount that is indicated by its bank valuation.No comparable sold property values
This is the most common reason for your property to be undervalued is that it simply isn’t worth what you are looking to pay for it. You may think if you can afford to buy it, then this is what the property is worth.It’s about quality…
Wong says, “Overall, given Bartley’s central location, low density and nearby transport links and amenities, it would be a good area for both owner-occupiers as well as investors. If you consider the upcoming Bidadari area as well, the entire region is still largely undeveloped.
- Examine saturated areas first.
- Work out the new launch / resale price gap.
- “Worst house in the best area” strategy.
- Don’t ignore new launches just because it’s a later sales phase.
- For HDB properties, dodge the five-year mark.
Contents
How do I find out if a property is undervalued?
For a homebuyer or homeowner, undervalued homes simply mean that the purchase price of the property you are buying or selling is less than the home’s actual value, market value, or the amount that is indicated by its bank valuation.
What does it mean when a house is undervalued?
No comparable sold property values
This is the most common reason for your property to be undervalued is that it simply isn’t worth what you are looking to pay for it. You may think if you can afford to buy it, then this is what the property is worth.
Is Bartley a good area to invest?
It’s about quality…
Wong says, “Overall, given Bartley’s central location, low density and nearby transport links and amenities, it would be a good area for both owner-occupiers as well as investors. If you consider the upcoming Bidadari area as well, the entire region is still largely undeveloped.
Is property prices going down in Singapore?
The most recent economic contraction in Singapore was in 2020 where the gross domestic product (GDP) declined for two consecutive quarters. Property prices were surprisingly resilient, declining by 1.0% a quarter before climbing up again, ahead of economic growth.
What do surveyors look for when valuing a property?
In general, they will examine the exterior and interior condition of the property, assessing any renovations or extensions and looking for any potential issues, such as damp, electrical problems, missing roof tiles or leaking guttering.
Do estate agents undervalue properties?
As mentioned, some disreputable estate agents might purposefully undervalue your home so they can boast about a quick sale. If you get a few valuations, their low price will stick out for all the wrong reasons. It’s also useful to get a local estate agent to value your property.
What does a valuer look for when valuing a house?
The valuer will examine the size of the building, condition, fittings, age, fixtures, layout and design. Ease of vehicle access, garages and out buildings are considered and pictures are taken of the property highlighting important features.
Which part of Singapore is Bartley?
Bartley MRT station is an underground Mass Rapid Transit (MRT) station on the Stage 3 of the Circle line, located on the boundary of Serangoon and Toa Payoh planning areas, Singapore.
Will house prices crash in 2022?
Based on this data, Capital Economics has forecast house prices to rise throughout 2022, before falling by 5% in 2023.
Will house prices go down in 2022 Singapore?
“With global infl ation expected to persist for the rest of 2022, the yearning to hedge against it using residential properties will remain strong, despite expectations that interest rates are expected to rise further,” Savills noted in its May 2022 Singapore residential sales report.
Will property prices fall in 2022?
Will house prices crash in 2022? It is unlikely that house prices will crash, but they could fall.
What is better overvalued or undervalued?
Undervalued stocks are expected to go higher; overvalued stocks are expected to go lower, so these models analyze many variables attempting to get that prediction right. However, the data point that all the models have in common is a stock’s price-to-earnings ratio.
Why would a house be sell less than it’s worth?
The prime reason that any real estate investment will sell for less than what it is worth is seller duress. When we assume free market prices for properties, we make an underlying assumption that neither the buyer nor the seller are in any rush to close the deal.
Can I sell below market value?
You can sell your house for any price a buyer agrees to pay for it, even if that price falls short of your home’s market value. However, selling your home for a price below the market value does not relieve you of your duty to satisfy any liens on the property.
Are estate agent valuations accurate?
Are estate agent valuations accurate? Since estate agents are professionals, you should expect their valuation to be accurate. However, since they are in business, they will want to earn as much as possible from your house sale and may overprice your property.
6 Super Useful Tips To Spot An “Undervalued” Property In 2021 – Property Blog Singapore – Stacked Homes
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6 Super Useful Tips To Spot An “Undervalued” Property In 2021
2021 is a bit of a conundrum, to investors and homeowners alike. While home prices are rising across the board, it’s a little painful not to take advantage of super-low interest rates; or face the prospect of prices going even higher if you wait. Even in the current high-priced environment, however, there are ways to spot an “undervalued” property in the Singapore private property market. Here’s a checklist relevant to 2021:
Examine saturated areas first
Work out the new launch / resale price gap
“Worst house in the best area” strategy
Don’t ignore new launches just because it’s a later sales phase
For HDB properties, dodge the five-year mark
Check out older listings, including rental listings
1. Examine saturated areas first
Prices tend to dip when there is a lot of supply, within a given area. This is, for example, currently the case in Holland Village, where we’ve had seven new launches in a short time.
Pick out spots where you find multiple residential properties, of different ages, within a one-kilometre radius. This won’t be detailed enough to make any final decisions, but it gives you a point from which to start.
Take, for instance, the packed area around Tanah Merah MRT station. Within 1,000 metres, you can find the following:
Development Average Price Lease TOP Date Urban Vista $1,343 99-years 2016 Grandeur Park Residences $1,562 99-years 2021 The Tanamera $904 99-years 1994 Optima @ Tanah Merah $1,216 99-years 2012 East Meadows $974 99-years 2001 The Glades $1,453 99-years 2017
As all of the above are in the same general area, there will not be a huge disparity in quality of location (barring a longer or shorter walk to the MRT). However, we can already see some interesting developments to focus on.
Grandeur Park Residences, which is four years newer than Urban Vista, comparatively isn’t priced all that much higher than The Glades.
If we’re willing to settle for older properties, we can see that East Meadows is priced only about 7.7 per cent higher than the Tanamera, although it’s newer by seven years.
From here, you can take a closer look at the properties, to note the discrepancies. For example, Grandeur Park Residences is bigger and much more crowded than Urban Vista, with 722 to 582 units; so you will be in a squeeze with more people.
The Tanamera is only 500 metres (seven minutes’ walk) to the MRT station, whereas East Meadows is further at 700 metres (eight minutes’ walk).
You can decide later if these discrepancies justify – or don’t justify – price differences.
These sorts of comparisons are tougher in areas with only a handful of developments (e.g. only J Gateway and Ivory Heights are within one kilometre of Jurong East MRT; and there’s no real comparison to make for value).
It’s best to use a tool like Street Directory as you are able to really hone in on developments that might have otherwise gone under the radar. While most people would default to Google Maps, we find that it isn’t as comprehensive in showing you the developments (and upcoming MRT stations as well).
2. Identify the new launch / resale price gap
We have a more detailed explanation of this in an earlier article. Without repeating too much of it here, the idea is to identify the price gap between a new launch and resale property in the same area (somewhat related to point 1).
Here are 3 simple steps:
Find a resale condo with a number of new launches around it Look at the price gap between the new launch and resale If it’s a big enough gap (for that district), then it’s worth taking a closer look
The resale property that shows the biggest price gap often represents the best overall value, as you’re getting in the same location for cheaper. Do see the above link for a more detailed breakdown.
3. “Worst house in the best area” strategy
This is old real estate advice, and works best if applied in moderation.
This argument is that – if you look for a stigmatised or run-down property in a desirable location (e.g., an old flat in Bishan, or Peace Mansion in Dhoby Ghaut) – you are most likely to find an undervalued property.
There is a kernel of truth to this, such as in the aforementioned Peace Mansion. This is a condo that’s one of the oldest in the Dhoby Ghaut area (in fact, one of the oldest in Singapore, with a completion date in 1976). Here’s how it compares in price to nearby properties:
Development Average Price Lease TOP Date Peace Mansion $583.25 99-years 1976 Sophia Residence $1,557 Freehold 2014 Liv on Sophia $72,427.87 99-years 2018
Peace Mansion is in worse shape, as you would expect than Sophia Residence and Liv on Sophia. But take a look at how its prices have moved in comparison:
On a 10-year basis, Peace Mansion has held off depreciation far better than its newer counterparts, even the freehold Sophia Residence. Prices have fallen by about eight per cent, whereas Sophia Residence has seen a drop of 9.25 per cent, and Liv on Sophia (completed quite recently in 2018) has seen a drop of 13.45 per cent.
Buyers of Peace Mansion in 2016 would have spent far less, and taken a smaller hit, than buyers of the neighbouring units; and given Peace Mansion’s gross rental yield of 3.54 per cent (2.78 per cent for Sophia Residence and 2.63 per cent for Liv on Sophia), a landlord might consider a Peace Mansion purchase to be a win.
However, be careful not to oversimplify this approach
It is not always true that the “worst” property in a neighbourhood is a value buy. A degree of common sense has to apply.
For example, Geylang is a high-demand neighbourhood that’s a 10-minute drive to the city. This does not mean a run-down, landed property in the red-light area is “undervalued”. The house would be almost impossible to resell, there would be no financing, etc.
You should always compare price movements to surrounding properties (as we have above). Just because a home is older and in a better location, doesn’t necessarily mean it will be undervalued. There’s just a better chance that it will be, compared to a new launch or a better maintained home nearby.
You also need to factor in restoration costs, for older properties. This may effectively remove any discount.
4. Don’t ignore new launches just because it’s a later sales phase
It’s generally true that, the earlier you buy, the cheaper a property will be. However, there are exceptions to this.
As we show in regular updates, there are instances where new launches have actually become cheaper rather than more expensive. Some buyers may be surprised to learn, for example, that even developments like Marina One Residences actually saw developer prices dip in later sales ($2,400 to $2,340 psf).
New launches sometimes even have fire sales on the last few units; such as we saw with 38 Jervois last year. This is quite rare though, and often due to factors like developers rushing to meet their five-year ABSD deadline.
So instead of the early buyers making a profit, it would be the later buyers that would stand to gain. An example of this would be at Sky Habitat.
Sky Habitat unprofitable transactions
All those who bought in 2012 during the first few months of launch..
Sky Habitat profitable
As compared to most who bought during the price drops in 2014. While obviously 2021 is a great time to exit, the lower purchase price does give you that buffer to play with.
5. For HDB properties, dodge the five-year mark
For reasons we’ve explained in this article, five-year old HDB flats are a perennial favourite. Because they’re already completed, new home buyers don’t need to wait for construction time.
The eventual time to upgrade is also shorter, as the Minimum Occupancy Period (MOP) starts from the key collection and not purchase (a BTO flat might mean waiting eight to nine years to upgrade, after taking into account construction).
The lease decay is also negligible, at this stage.
Sellers of five-year old flats tend to be (1) aware of all the above (2) are often aiming for an upgrade. This prompts them to ask for higher prices, and the odds of getting an undervalued flat from them are slim to none.
The same applies to Executive Condominiums (ECs) that have just reached their five-year MOP. In fact, ECs are expected to see their biggest price surge after five years, as they’re also half-way to full privatisation.
As such, you’re least likely to spot an undervalued property in this age range; and you’re better off researching older units.
6. Check out older listings, including rental listings
If you already have a particular development in mind, do check out listings that have been around for a while. Most sellers have a given time frame in which to sell their property; as they near the time limit, they may become more amenable to negotiation.
It’s common for realtors to advise their clients to drop the price, if no one responds after about three months.
Note that home buyers should check rental listings as well. Sometimes, if a unit has been vacant for some time, the landlord might be ready to dispose of it for less.
While none of these methods guarantees you’ll find an undervalued property, they provide a good place to start looking
You may need to make regular checks for the above. Finding an undervalued property is a time-consuming activity; but we advise homeowners and investors to do it if they can. The reason is that – even if you don’t end up finding a missed gem – the process will familiarise you with existing developments and prices.
This knowledge could even help with the sale of your existing home if you’re in the process of upgrading. For more in-depth looks at specific developments, follow us on Stacked. We’ll keep you up to date on the latest trends and movements in the Singapore private property market.
Everything You Need to Know About Undervalued vs Profitable Properties
Undervalued Properties
Put simply, an undervalued property is one that is being sold in the market for less than its worth. For a homebuyer or homeowner, undervalued homes simply mean that the purchase price of the property you are buying or selling is less than the home’s actual value, market value, or the amount that is indicated by its bank valuation.
Because undervalued properties are typically older, they are great options for those who are looking for higher rental yield.
Identifying Undervalued Properties
There are four main features that you can look out for in order to identify undervalued properties.
1. Difficulty in selling
Properties that are difficult to sell will likely be undervalued in order to entice buyers to purchase them.
2. Low transaction volume
Transaction volumes can help us to understand the current sentiment of any real estate market. To identify undervalued properties, look out for those with low transaction volumes.
3. Desperate seller
One great way for you to identify undervalued properties is to look out for motivated sellers. Because it is difficult to sell and has low transaction volume, owners of such properties would usually want to let go of these properties as quickly as they can.
Perhaps the owners have already purchased a property elsewhere, or they are in financial trouble! The homeowner may be in distress and needs to sell quickly, accepting a discount for a quick closing.
Either way, these sellers will more likely accept lower offers and sell their properties below the bank valuation. Therefore, it is good for you to try to discern how desperate sellers are in trying to get the property off their hands.
4. Age of property
Undervalued properties are usually 10 to 15 years old. They are typically more than 10 years old
Bank Undervalued Property
A bank undervaluing your property can be fatal to a house purchase as it means that the mortgage lender doesn’t agree with the property value you offered.
You may disagree with the house valuation, however the mortgage lender has employed a qualified Royal Institute of Chartered Surveyors (RICS) valuer to undertake the mortgage valuation so you will find it hard to challenge their opinion.
Is it a bad thing that the house valuation is less than your offer? Could this open up the opportunity to negotiate or does it mean you have to fight with the lender because you disagree with house valuation? We cover all of this in our article below.
How does the bank value the property?
The mortgage valuer decides the current market value of the property based on:
recently completed sales of similar properties in the area;
the current condition of the property; and
their opinion of the local housing market.
If the mortgage lender undervalued property then they would confirm the price they feel the property is worth and any factors affecting the value.
This is reported to the lender within the RICS surveyors Mortgage Valuation . However, if the mortgage valuation comes back under what you offered, is this such a bad thing for you?
Not only could the mortgage lender be protecting you from buying a property over the asking price, it also proves the actual price you should be offering the seller for their property, not based on an estate agent’s estimate, but by a trained third party.
Read on to find out why mortgage lenders undervalue property and what you can do about it including our tried and tested email template to help you negotiate on your property price with the estate agent.
Why do banks undervalue properties?
No comparable sold property values
This is the most common reason for your property to be undervalued is that it simply isn’t worth what you are looking to pay for it.
You may think if you can afford to buy it, then this is what the property is worth.
Sadly mortgage lenders don’t have the same opinion and they value your home differently.
The mortgage lender’s main concern is to protect their loan in the event they have to repossess.
In these cases they need to market the property cheaper for a fast sale.
If the property was priced higher than the market will pay then they may end up having to sell the property at a loss looking then to try and get the balance repaid from you.
This is the reason why banks value properties based on what properties in the local area to yours have sold for , and not using valuations for under offer properties and marketed rates.
If the property hasn’t sold then a mortgage lender won’t consider the property value in their calculations for how much your property is worth.
If your bank undervalued your property then ask the bank for evidence of the comparables they used to help them calculate their value.
Then go to Rightmove or Zoopla and use their ‘sold houses’ search in your local area and find comparables for property prices. Remember your comparables must:
have sold within the last 6 months
be within your local area – preferably on your street
be for the same size, size and condition as yours (see below)
Property in poor condition
We’ve all heard of buying a house that is a ‘doer upper’ however buying a property in disrepair may mean that you can’t achieve the maximum mortgage value you would like.
You may be thinking this won’t affect your house, however even those properties that are in a reasonable condition may not be in the mortgage valuers eyes. Here are some conditions that may affect your mortgage valuation:
In cases like this your mortgage lender will note how much the property would be valued in a good condition, however it will then state what the property is valued in its current condition.
The mortgage lender may agree to lend the full amount; part paying an amount and then paying the balance once the property has been brought up to a good condition and re-valued by their mortgage valuer.
Click to book your Home Buyers Survey: Competitive Fees – RICS Qualified – Fast Bookings: or call 0333 344 3234
Breaking the news to the seller
No seller wants to find out that their property isn’t worth what they though it was and worse still it could mean they have under budgeted what they could afford on their onward purchase.
This may mean that your offer falls through as the seller is no longer able to afford the purchase of their new home – there is little you can do to prevent this other than to pay the balance of what the property is currently worth according to the mortgage lender and you offer.
(BEWARE – if you do this then you are paying above what the market thinks the property is worth and there is no guarantee the property will go up in value to be actually worth what you paid for it).
If, however, the seller can still afford to sell to you at a lower value then you’ll need to use our following example to help you get your new offer agreed. Keep the email positive, factual and focused on the solution of still being able to buy the property.
Example email to the selling estate agent
Dear {ESTATE AGENT NAME},
Re: {Property Address}
I hope you are well.
We are progressing well with the conveyancing and have the property searches, property survey and mortgage valuation complete. We have however encountered a challenge that we are going to need your help with.
The Mortgage Lender has returned their assessment of the property valuation and they state it is only worth £250,000. This falls £40,000 under our offer price of £290,000.
The challenge we face is that the mortgage lender won’t lend me the required mortgage to fund the purchase at the current agreed price. This also means that any other buyer getting a mortgage isn’t going to be able to buy the property at this price.
This is very disappointing because I was happy to pay the asking price, however I am sure you’ll appreciate that I can’t purchase a property that exceeds its current worth in the current market.
I do want to continue to buy the property and have invested a lot of time and money to date to achieve this. In order to proceed could you discuss the mortgage valuation with the seller and confirm if they’d be happy to proceed at the current market value of £250,000.
If this can be agreed then we can move to exchange over the next couple of weeks.
I look forward to hearing from you.
Kind regards
YOUR NAME
There are no guarantees that the seller will accept your new offer which can create a stalemate and if you proceed, you risk going into negative equity (buying a property which is not worth what you paid for it).
Have a plan B
The feeling of only having one property to go for makes the loss of it even harder if you have to pull out because the property is overpriced.
The best advice is to keep an eye on the property market and don’t stop viewing new properties even once your offer is agreed.
This doesn’t mean you have to put offers on other properties you find, however it does mean that if something goes wrong and you find another property you like, it makes the decision of pulling out less emotional and more based on facts.
These tips will give you the best chance of negotiating a reasonable reduction in the purchase price of your new home. Remember, every pound you pay over the current asking price in its current condition, will mean the property will have to go up in value, otherwise you will be in negative equity.
For more conveyancing support call our team of specialists on 0333 344 3234.
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