Singaporean homebuyers have an innate trust in charts, graphs and anything that suggests “hard hard data”. But while a salesperson is unlikely to outright lie to you, some will use selective presentation of data to mislead you. They can also interpret data in biased ways – sometimes without even meaning to (although we have sometimes been guilty of this).
We also saw presentation slides with characters selected to show a certain narrative. Take this illustration below as an example:
Presented this way, it may appear that the highlighted property is reasonably priced. But dig a little deeper and you’ll find that the surrounding properties actually show the highest prices, while the highlighted property shows the average prices. Not a very fair comparison, is it?
Nevertheless, here are some of the other dangers to watch out for:
1. Using the average (average) price when there has been a recent outlier
When we compare house prices, we usually look at the past six to 12 months (anything after that could give a distorted picture). However, it may happen that during this period there was a significant outlier – a unit that traded well above or below the value.
When this happens, we usually exclude the outlier or rely on the median rather than the average. Here’s why:
Suppose there were 10 fictitious trades in a given block, with nine units selling for $1.5 million. One unit sold for an unusually low price (possibly a rush sale), of just $1.2 million.
The average of the 10 transactions would then be $1.47 million, less than the transaction price of 90% of the units.
The same can happen with the reverse, where a single abnormally high trade skews the average. To avoid this, it is useful to quickly scan through transactions to ensure that there are no radical outliers; or maybe just ask for the median.
(Note: Realtors may not do this on purpose. They sometimes use automated systems, such as those provided by real estate sites, that calculate averages for them).
2. Percentages of the rate of change
The reason for using percentages, instead of just giving you the absolute number, is that the recovery may seem larger.
For example, if we were to tell you that a new launch condo only had two sales last month and then four sales this month, you probably wouldn’t be impressed. But you might be if we told you there was a 100% increase in trading volume over a month, which is true (2 + 100% = 4).
So when you see reports of rapid take-up rates or information that “buyers of property type X increased by 70%,” you might want to check the actual number. Coming from a slow month, the percentages can do anything appear as a huge trend, even if it’s only a handful of buyers or sellers involved.
3. Manipulating the XY axis on a chart to create visual impact
This is not unique to the real estate market; it’s a trick invented by marketing firms for many other products. However, that means you can also see it in fancy “quarterly reports” sales brochures.
Most people look at the visual element (lines) on a chart, but don’t check the X and Y axis numbers. By manipulating the numbers along the axis (the increments), the seller can create the impression visual of a larger change.
For example, suppose we have a price change between $1,600 to 1,700 pc over a 10 year time frame. The price is on the Y axis, while the 10s are on the X axis.
A change of $100 is not much. However, if we change the Y axis to increase in $20 increments, instead of $100 increments, it looks more dramatic:
If you pay attention to the real numbers on the X and Y axes, it’s pretty easy to see through this; but since most people only take a superficial look at it, it’s a good (visual) marketing trick. Note that this can also be achieved by reducing the range. By setting a minimum and maximum value closer to the data, you can also create a more pronounced visual effect.
4. The floor of the unit is ignored, for comparison purposes
A higher-floor unit will almost always cost more (although there are a few exceptions, such as introductory deals where all floors were the same price).
However, when presenting transaction data, some sellers may omit the fact that they only show you units on the upper floors, even when the unit they are selling is on the lower 10 floors.
Once you are done haggling the price, you can end up with the average price of your floor – just you To feel you got a good deal.
The same trick is sometimes used on sellers, to convince them that their unit is worth a little less than they expected (deals for lower floor units are shown instead).
And so, out of context, prices at Rivière might seem high at over $3,000 psf.
But when looking at them with the unit numbers, you can see that all of these units are upper floors.
5. The data is accurate, but the larger context is glossed over
By now, most veteran property buyers know to ignore the “sharp increases in transaction volume” around March.
They already know the background: most people delay property purchases around Chinese New Year, so March’s numbers can look like a huge uptick from January or February.
New home buyers, unfamiliar with the market, may not be aware of the significance of dates like 2013 (Mortgage Servicing Ratio put in place for HDB properties) or December 2021 (enhanced cooling measures).
These periods may result in unusually low or high transactions and prices; such as when the market is in “wait and see” mode after cooling measures.
However, if you don’t understand the larger context, it’s easy to fall for the explanation given by a seller – such as claims that a certain type of property is no longer popular (all property segments may have been also affected), or that prices are “bottoming out”.
6. Ignore low trading volumes
When the number of transactions is low, prices can become quite volatile. For example:
This might suggest that the average unit price at Bleu @ East Coast is around $990 psf (this was the median given for March 2022).
But here are the actual asking prices:
|Date||Unit size||Approximately. PSF Price|
|4 Dec. 2021||2,077 square feet||$1,396|
|November 30, 2021||2,949 square feet||$1,204|
|November 12, 2021||1,012 square feet||$1,542|
|October 31, 2021||1,066 square feet||$1,482|
|October 29, 2021||2,551 square feet||$1,243|
The reason for this discrepancy is the very small number of units. Blue only has 62 units – and if you look at the transaction history, you’ll see transactions can be as few as one or two per year. It is possible that the very last sale, which was the only one of its kind, was an outlier.
With so few units and such infrequent sales, it becomes much more difficult to estimate how much you will really pay.
(That’s why we include footnotes to warn you when trading volumes are low, in Stacked articles).
Always be a bit skeptical when you see surprisingly low prices for boutique developments.
7. Use different start and end dates
We’ve already covered this in a freehold versus lease debate, but in short, changing start and end dates can really influence a narrative.
Here is the example:
If it’s too hard to see, the green line means leasehold condos, and the red line shows freehold condos, over a 10-year period between March 2010 and March 2020.
Based on this graph, the simple conclusion would be that leasehold condos are appreciating better. 73% versus 25%.
But if we change the November 2014 start dates instead (keeping the same March 2020 end dates), see how the narrative would change. So, if we were to look at this chart in isolation, the conclusion would be that freehold condos are appreciating better than leasehold condos (albeit marginally).
Remember that even though the numbers don’t lie, they can be manipulated to mislead with half-truths. Most buyers know not to take a sales pitch at face value, which is a healthy attitude. But don’t be fooled by visually appealing data presentations, which can also be a marketing tool. For a more hands-on approach to property comparison, speak to one of our licensed experts at Stacked. You can also view our detailed reviews of new and resale properties.