- Clive Foo
7 Reasons why Clavon @ Clementi was 70% sold on Launch Day
Updated: Dec 18, 2020
Potential investors in the property market usually lack a rigorous analytical approach in selecting properties with significant capital appreciation potential. Often times, buyers adopt a herd mentality in buying into projects which have high take-up. More important is understanding the reasons why such projects are well-coveted, so the potential home-buyer can decide whether this project is worth the buzz that abounds with the development.
In this article, I will be exploring 7 reasons why the recent newly launched Clavon @ Clementi was 70% sold on Launch Day, amid the economic uncertainty surrounding the outcome of the Covid-19 Recovery Phase. This was reported on Business Times: https://www.businesstimes.com.sg/real-estate/uol-sells-about-70-of-clavons-640-units-at-average-price-of-s1640-psf
What was even more remarkable is that there were 1330+ cheques vying for the 442 units sold on Launch Day @ Clavon, implying that the project is > 3 times oversubscribed for the units sold. Evidently, there appears to be substantial smart money flows going to the newly-launched projects which are priced sensitively.
Reason #1: Attractive Pricing
Investors looking for a well-priced newly launched property will find Clavon a compelling buy at the average price of $1640 psf as they start comparing developments in other parts of Singapore.
For the layman, there are 3 regions in Singapore - Core Central Region (CCR), Rear of Central Region (RCR), Outside of Central Region (OCR). Generally speaking, the prime districts are in CCR while the suburban districts are in OCR. Though Clementi is in OCR, it is near the prime districts (aka CCR areas) of Holland, Orchard or even Bukit Timah. Hence, Clementi is probably the most well-coveted mature estate in OCR for investors.
Investors scanning the property landscape will find the average psf prices for newly-launched condominiums in nearby CCR areas such as One Holland Village @ Holland is $2560 psf, and Fourth Avenue Residences @ Bukit Timah is $2270 psf. As such, the $1640 psf price point appears very reasonable.
Reason #2: Reputed Developer in UOL
United Overseas Land (UOL) Group has a strong track record of developing high-quality residential developments such as One North Residences and WaterBank at Dakota. The completed projects have strong resale values due to the reputed quality of UOL's developments. In fact, UOL also developed the condominium close to Clavon, which is called Clement Canopy. Clement Canopy has so far registered 6 profitable resale transactions and no unprofitable resale transactions (which i will analyse further in the next point). Thus, investors have faith in an quality UOL product that has strong capital appreciation potential.
Reason #3: Strong Capital Appreciation Potential
Resale Transactions @ Clement Canopy
Recent purchasers of UOL's nearby project, Clement Canopy has logged in 100% profitable resale transactions with the highest profit logged at $358,000 (before relevant stamp duties), translating to an annualised 6.6% annual return or overall 20.6% on the initial investment.
Assuming a leverage ratio of 400% (downpayment of 25%, loan of 75%), the sell could have earned up to 82.4% (20.6% x 4) gross overall capital gains on their initial investment.
Investors saw value in Clavon, especially when Clavon is a newer project, since the avg price of $1640 psf is lower than the $1731 psf transacted for a 19th floor resale unit in Clement Canopy on 13 Dec 2019. Thus it is noteworthy that Clavon would have strong capital appreciation potential, especially during the post Covid-19 Recovery period.
Reason #4: Strong Rental Yield Potential
Investors who are buying Clavon also saw the strong rental yield potential due to the stellar performance of Clement Canopy in rental market.
Rental Transactions @ Clement Canopy
The average monthly rental for Clement Canopy is around $4 psf. Investors of Clavon would perceive that the rental is likely to be even higher during the post Covid recovery period, which will be a strong indicator of its appreciation potential. Generally, capital appreciation potential of a property hinges on rental yield.
Suppose Clavon would be fully completed in 2024 when the Covid-19 Pandemic would highly likely have subsided, avg rental for units for Clavon may even hit $5 psf. Therefore, the gross rental yield for initial investors for Clavon would have been higher than 3.5%.
Assuming a leverage ratio of 400% (downpayment of 25%, loan of 75%), the investor could earn up to 3.5% x 4 = 14% gross yearly rental yield on their initial investment.
Reason #5: Profile of Buyers mainly Singaporeans who are likely to be less speculative
Buyer Profile @ Clement Canopy
Investors who have chosen Clavon are also referencing the profile of buyers who are mainly Singaporeans (see image above) - 86.3% of the total buyers. Generally, Singaporean investors will not be as speculative as foreign investors and this will help protect the downside risks for future resale transactions since many Singaporeans finance their property instalments during CPF and are likely to hold their property for the long term (>5 years) since there is lower default risk. This is unlike foreign investors who may decide to park their funds elsewhere should economic conditions become more rosy in other cities. That explains why resale transactions in prime districts in the Core Central Region (CCR) are likely to be more volatile.
Reason #6: Location, Location, Location
I have mentioned earlier that Clementi is a well-coveted area for property investors. This is because Clementi is 1 stop to Jurong East, which is slated to be the Central Business District of the West. Located within Jurong East is the Jurong Lake District, a 360-hectare area featuring the largest mixed-use business district outside the city centre, with quality offices, housing, amenities and abundant green spaces.
Reason #7: Economical Layout of the Units
Layout of 1-Bedroom + Study @ Clavon (527 sqft)
The best-selling units @ Clavon are the one-bedders and two-bedders, due to its popularity with potential investors who prefer smaller units due to its higher rental yield potential. For the 1 Bedroom + Study unit, there is no wasted space with any foyer and the entrance of the unit leads directly to the kitchen. There is even an study room located besides the master bedroom which makes the unit ideal for work-from-home (WFH) purposes.
To conclude, the 70% sales record for Clavon on Launch Day would not have been so surprising once you have analysed the reasons on a closer basis. In the post Covid-19 Recovery, many investors would be positioning their property purchases to position optimally for the higher expected economic growth and inflation which comes with the massive liquidity in the market.