Me too strategy is a plan of action that hardly has any differentiation from the mainstream. In other words, one follows what looks popular, or do what everybody else is doing. The reason to adopt me too strategy is often the effect of herd mentality. Me too strategy is widely adopted in the Little Red Dot, especially during property purchase.
Why do Singaporeans like to follow the herd? Because our mentality is: If everyone is going for it, it must be good. If everyone says it is good, we also want the same thing.
We are all familiar with the sense of security of being a crowd follower. If everybody is doing the same thing and we follow suit, at least nobody will say we are doing something wrong. If we are doing what everybody else is doing, at least we will not be questioned.
When it comes to selling new homes, the marketers have to give buyers the same reassurance that everyone is buying. Just follow the herd, and it can’t be wrong.
– Vina Ip, Behind The Scenes of The Property Market
Dumping shoebox units for spacious homes
The newly released Knight Frank Global Buyer Survey 2021 finds that Singapore homebuyers desire more living space, both indoors and outdoors. The study shows that:
• 70% prefer a home study or office;
• 69% want homes with more indoor space; and
• 50% who have not moved plan to do so next year at suburban locations.
God knows whether staying near the East Coast Park is safer or healthier. A friend staying nearby complained that it is swamped with park-goers, especially during weekends. But the pandemic has driven homebuyers to district 15 and 16, driving up resale and rental prices there, especially bigger size units.
Suddenly, apartments with oversized balconies, roof tops in penthouses and PES on ground floor that used to be shunned by homebuyers all can find takers.
We forgot that, just three years ago in 2018, we were still reading news about happy shoebox unit buyers. Below is an abstract from a TODAY article titled “Despite downsides, heartlanders continue their love affair with shoebox units” (TODAY, 27 October 2018):
“There is low resale demand for such units given their location, and they are too small to raise a family in. Even so, shoebox units in new projects in the heartlands continue to sell like hot cakes — often thanks to good marketing and persuasive property agents. These units at some of the recent launches were the most popular among buyers, developers told TODAY.”
Since 2011, property agencies helping developers to market shoebox projects told us that shoebox units are in demand. Buyers are snapping up shoebox units. As Singapore family size is getting smaller, Singaporeans don’t need so much space. Smaller size condo units is the trend now.
There were tons of pro-shoebox-unit articles in the local media during that time:
• “HDB dwellers think outside the shoebox – Many snapping up tiny units to invest or to live in”, The Business Times, 15 February 2011
• “Shoebox flats continue to be popular”, The Straits Times, 21 March 2012
• “Shoebox flats rake in higher rental yields”, The Straits Times, 20 April 2012
• “There’s value in shoebox units”, The Straits Times, 13 June 2012
• “Shoebox units lead gains in resale home prices The Straits Times, 1 March 2013
• “Shoebox units offer higher rental yield’, The Business Times, 16 November 2013
• “Sub-800 sq ft units’ share of new sales hits record”, The Business Times, 25 March 2014
• “Ratio of HDB owners buying shoebox units up: Report”, The Straits Times, 27 February 2014
• “Shoebox units remain popular with developers and buyers alike”, The Business Times, 15 November 2018
Property market trend or marketers’ trend?
With the start of the new year, there are articles on 2022 property trends. How do we define property trends? Is it consumer trends that we homebuyers are embracing? Or is it just marketers’ trends – what developers are going to sell to us in the market, like shoebox units selling between 2011 and 2018?
Amid escalating land prices, developers are coming up with more and more shoebox units in new non-landed residential developments. To maximize profits, a limited land plot is optimized to build as many units as possible. It increases the total number of units available for sale. Their lower price quantum also makes shoebox units easier to sell compared with bigger size units.
– Vina Ip, Behind The Scenes of The Property Market
Being a crowd follower with a me too strategy is often risky rather than safe. Such is the case of buying shoebox units to live in or for investment.
1) The lower quantum of shoebox units may sound attractive to first-time buyers, HDB upgraders and people who are ineligible to buy HDB flats. But the psf price of shoebox units is high. They offer low value-for-money for low-budget buyers.
2) Whenever the rental market is soft, the net return of shoebox units is the lowest among private residential units. From October 2012 to October 2018, rental prices slipped 15.6 percent. For shoebox units, rents fell much deeper at 31.2 percent during the same period.
3) People are forced to work from home under a prolonged pandemic. Shoebox unit owners want to sell and move out. But there is low demand for such units in the resale market. These units may be most profitable for developers during new launch. Unfortunately, the opposite is true in the resale market, especially for projects in neighborhood districts.
HDB me too strategies
At different times, there are different me too strategies followed by the herd in the HDB resale market. Still remember them?
1. Bishan flats were most sought after in 1990s to mid-2000s
Bishan was once a large burial ground for the dead. Then the Bishan Park was built in 1988 and Junction 8 was opened in 1993. In November 1994, under the master plan Bishan was chosen to develop into “a prime residential area comparable to districts 9, 10 and 11”.
The next year Bishan was named “queen of the new towns” by the papers. Bishan HDB flats topped the resale charts, pricing 20 to 25 percent over counterparts in other new towns. A Knight Frank study in August 2003 showed that Bishan flats commanded the highest premiums of 9.1 percent against an overall average of 2.9 percent. Another study in 2005 found Bishan with the richest HDB residents. It led HDB towns in monthly household income.
However, Bishan’s top position was taken over by Bukit Merah from the year 2007. Districts with the highest median resale prices today are Queenstown, Clementi, Bukit Merah and Toa Payoh.
When I came to Singapore in 1998, I was staying in Bishan for some time. I often saw middles class couples with school going children moving into the block because of the good schools nearby. I visited the old place three years ago. The neighbors were now mainly retired couples in their 60s.
2. Bukit Panjang flats were hottest in 2009
Bukit Panjang was once notorious for gangsters. Then construction of Downtown Line 2 started in 2009. I could still recall the marketing message “Bukit Panjang to Orchard in less than 20 minutes”. HDB flats and condo units were selling like hot cakes. The cash-over-valuation (COV) of Bukit Panjang HDB resale flats spiked up to $25,000 or even $40,000.
Downtown line 2 has been in operation since 2016. The hype has long died down. Till today, the median resale prices of HDB flats in Bukit Panjang are still among the lowest transactions alongside flats in Woodlands and Jurong.
3. A change of heart from old to new HDB flats
Before Lawrence Wong’s famous speech “not all old HDB flats are eligible for SERS” in 2017, many young couples opted for old HDB flats. They were betting on the big jump in their home value after upgrading by the Housing & Development Board. With future redevelopment highly subsidized by the government, homebuyers didn’t mind paying high COV and renovation cost.
But reality kicked in when Singaporeans were told that only four percent of HDB flats were identified for SERS over the years.
People woke up to the fact that the prices of HDB flats would drop with expiring leases. Only the selected lucky ones would see a big jump in their home valuation after redevelopment. The thought shattered the dream of owners in aging HDB flat who were waiting or speculating for SERS. Prices of older flats started to fall. After buyers found out about the age of the flats, they didn’t even bother to go for flat viewings.
– Vina Ip, Behind The Scenes of The Property Market
Even the announcement of VERS, HIP scheme and relaxation on financing of old flats cannot save the changed heart of homebuyers. (Read “Can this ‘CPF Key’ truly unlock the value for old flats?“)
These days resale flat buyers all flock to view new resale BTO flats that just passed their 5-year MOP period. People are excited by the media report of 261 million-dollar flats sold in 2021. Never mind the fact that the number is barely 0.9 percent of total HDB resale transactions last year.
Why can’t we buy what we really like?
Some people like to share with others exactly what their agents tell them or what the media want them to know, even if they are not earning any commission or advertising dollars.
Many buyers lack the ability to think for themselves and differentiate whether the information presented to them is true or false. Instead of evaluating risk and return, they go along with others, thinking that it is safe to follow the majority. And the herd goes around like parrots repeating what everyone else is saying.
– Vina Ip, Behind The Scenes of The Property Market
Homebuying in Singapore is uniquely Singaporean. We tend to put strangers’ preferences at that time over our own likings.
Buying a home is a big-ticket item priced at least a few hundred thousands. It is also a long-term commitment with a 30-year mortgage to pay. We will be staying there for years to come. Aren’t personal needs or preferences more important than anything else? For instance, it is absolutely fine to buy older HDB flats if one likes the layout, location, neighborhood or nostalgia of old flats in mature districts.
What exactly is important to us can be completely different from others. Afterall, an important quality that defines an independent and mature adult is the ability to tell what others want that I don’t need, and what I like even if others don’t.
Seth Godin knows kiasu originates from Singapore
Did you know that Singapore is so famous for kiasu that even best-selling author Seth Godin had to credit this unique practice to us? In his 2020 book The Practice: Shipping Creative Work, Godin cites the Singapore example of kiasu to describe the fear of falling behind:
“It’s a common affliction, not only in Singapore, where the phrase originates, but around the world. Far more than FOMO, it’s a grasping insufficiency that drives many people forward.
We’ve simplified a feeling of scarcity to encourage people to comply, to get them to buy more stuff (before it’s all gone), to work even harder (because someone is going to overtake you), and to live in fear. It leads to panic buying and hoarding.”
– Seth Godin, The Practice: Shipping Creative Work
The most unbearable thing in life is not our failure or mistakes. It is our fear – fear of the unknown, fear of being different, fear of what others might say, and fear of missing out.
There are boundless investment news and recommendations out there. But we have limited time. Any information that tries to reach us, make a generation assessment first before deciding whether it worth our time to go into deeper analysis. Don’t be afraid to miss one or two opportunities. In this world, there are always more crises than opportunities.
Tired of unrelated people giving us unsolicited advice? Enough of the vested media telling us what to do? Sick of salespeople saying what’s best for us? Me too. It’s time to take things into our own hands. Stop buying anything with the me too approach. Only buy what we really need.
If you need advice on property matters or residential properties in Singapore, you can check out my personal consultation service.
My new book Behind The Scenes of The Property Market is now available for preview and order online. You can also check out my online courses.
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