If you are looking to purchase a condo or other real property, it helps a great deal if you can estimate just how much the properties will go for once they are launched. You will be better able to plan your budget with such estimation. But how exactly can you estimate the new launch price of the property you have being eyeing? Basically, there are three main considerations to keep in mind; the cost of the land, the cost of construction and other expenses related to administration and marketing.
Examples of New Launch Price Estimates
There is a simple formula of estimating the launch price of a new property. First, you need to know the cost of the land. You also need to know the cost of constructing the condo. Add them up to get the base cost, find 30% of that cost to cover for other expenses such as paying the staff, advertising as well as a profit margin. The sum of all these figures is your estimated launch price.
One of the best examples of how to estimate price is the Gem Residencies. The developers got the tender to develop the land in 2015, and the land cost S$345.86 million. This translates to about $755 per square foot per gross floor area. The construction cost was $ 350 psf. 30% of the base cost amounted to $331. Adding it all up, the estimated launch price was $ 1, 436 psf, which fell right within the range of the actual launch price.
Another new launch estimate price that backs up this formula relates to the sale of the Forest Woods condos. The cost of the land was $710 psf, with the average construction cost of a block of condos at $ 350 psf, and the expenses estimated to cost $318 psf. This therefore leads to a launch estimate price of $1,378. Or you might consider the Queens Peak Condos, where the cost of land stood at $871 psf, construction cost $350psf and the expenses cost an estimated $366. This led to an estimated launch price of $ 1, 587.
Factors to Keep in Mind
This estimation works well when there isn’t much change in the cost of land from the inception of the development plan to its conclusion. If the price of land goes up within this duration, you should expect developers to raise the cost of the condos in order to rake in more profits. If on the other hand the value of land plummets, this will be reflected in the cost of the condos as developers try to keep up with the competition.
On average, the cost of constructing a condo stands at $350 psf. If it is a luxury condo, the average construction cost is $ 450. An ultra- luxury condo will most definitely cost more than that. Therefore when calculating the estimated launch price, you should vary the construction cost in accordance to the kind of condo being built.
Finally, it is not wise to assume that cheap condos always point to low quality. Sometimes, the developer could be just more efficient. Before you write off a cheap condo as unworthy of your attention, take your time to research about the developer. You may be surprised by what you find.