A quick check with recent transacted rented properties reveals that as of July 2008, rental prices still hold firm and given the shortage of quality rental projects, residential rents look set to sustain their strong position for at least another six months.The table below layouts the rental prices of 2-bedroom apartments at various popular locations in Singapore.
I have recently conducted a simple case study using all the 3-room flat listings and closing in Ang Mo Kio as a basis to ascertain agent’s cost effectiveness in their marketing effort.
(a).Objective of the case study
The objective is to impress upon new agents the importance of cost savings and effectiveness in pricing the listings right. The failure to do the above will quickly lead to ‘cash flow dislocation’ even in a bull-run market, what more during a period of massive inflation.
(b).Critical success factor – Cash Flow
In time of great difficulties such as now, agent’s Cost Efficiency becomes a critical success factor. With the raging inflation, any agent can suddenly experience a ‘cash flow dislocation’, when the next commission cheque does not arrive on time. Having no cash to roll is as bad as bankruptcy because in the meantime the agent is unable to campaign using flyers, advertisements, tele-marketers etc – and business leads will stop.
One of the common causes of ‘cash flow dislocation’ is when advertisement bills pile up against the agents but their commission cheques are nowhere in sight because of fewer closing (which results from insufficient listings). A good way to avoid being in such a dire straits is to have ‘high capital reserves’ set aside for rainy days (which can only be done if the agents save during sunny days). Those who do not have the ‘reserve’ would suffer from stoppages in their marketing campaign when cash flow suddenly stops.
This is the reasons why I have been emphasising ‘doing it yourself’ right from 2002 through to even during the 2007 bull-run (of course, in 2007 nobody would listen to me) My ‘doing it yourself’ marketing methods can be learned from one of my older books titled “Double Your Listings Double Your Income” where I share many ‘poor man’s’ methods in Prospecting.
(c).Findings of the case study
My research on the HDB resale flat listings in Ang Mo Kio in June 208 has surfaced the following findings.
- Low advertising hit rate (too many unsold listings with high asking prices)
The advertisement hit rate for all the current listings in Ang Mo Kio estate was 15.84%.
This does not mean that every agent has a 15.84% chance of closing something in Ang Mo Kio. Unfortunately, it means that only 15.84% of the agents who have at least one active listing in Ang Mo Kio had sold something there in June 2008.
That also means the vast majority, i.e. 84.16%, of the agents plying their trade in the Ang Mo Kio did not have a closing in (and therefore did not earn any income from) that estate in June 2008.
- Agents’ Pricing techniques need polishing (so as not to end up with cash flow dislocation themselves)
When supply far exceeds demand – in Ang Mo Kio’s case, 122 transactions out of 770 advertisements of active listings – the listings with the correct pricing will be sold first. While it is incorrect to equate correct pricing with the ‘lowest price’, the listing that is priced at the lowest range will be sold first – everything being equal. In other words, if there are 5 listings within the same block and all the listings are on the high floor, the cheapest unit will be sold first and the most expensive last – everything being equal.
(d). Methods of the case study
Facts established
Flat type |
No. of adverts |
No. of closings |
Asking price |
Transacted price |
3-room |
394 |
75 |
$200k - $300k |
4 units sold at or above $300K
41 units sold below $230K (of which 7 sold at or below $200k)
The rest sold at in-between price |
4-room |
164 |
30 |
$300k - $370k |
6 units sold above $400k
19 units sold at or below $350k (of which two sold below $290k)
The rest sold at in-between price |
5-room |
164 |
15 |
$410k - $515k |
1 unit sold above $500k
4 units sold below $400k
The rest sold at in-between price |
Executive |
18 |
2 |
$580k - $700k |
1 unit sold at $571k
1 unit sold at $620k |
Verdict on agent’s cost effectiveness
For the two E-flats transacted, they were sold at $571,000 and $620,000 respectively. However, the majority of the advertisements had much higher asking prices than the eventual sale prices.
It appears many agents are still struggling with the pricing process – which is never going to be easy – because we are dealing with the property sellers’ aspirations, egos and imagination.
It has become very obvious from this case study that the agents who are able to convince the property sellers, who have the need to be the pricing champion, to sell at the market equilibrium would be able to help the property sellers fulfil their housing plans without wasting too much time.
In time of high inflation, a longer waiting time may cost the property sellers who intend to move on to a better property dearly due to the speedy loss of purchasing power (when the prices of his target property goes up faster than his old property).
However, how to educate the sellers is a separate matter altogether. [Read my new book on “Pricing it Right – Selling it Fast (2008)]
