Let’s start off by examining the list of 99 years leasehold projects within the vicinity of Irwell Hill Residences. It is not difficult to notice a distinction in prices between the older and newer projects.
The huge difference in pricing however does not come as a surprise with the growing home prices within the vicinity, rising land cost and increasing standard of living over the years.
For standard of living; what we expect from a luxury condo in 2021 would definitely be quite different from those built in the early 1990s and 2000. Developers would need to constantly improve on the projects to meet the increased standards of living. Therefore, cost of units would naturally be higher as well.
For the rising land cost; we can take a technical point of view to observe the change in the Development Charge (DC) incurred by the developers.
DC can be seen as a cost to the developer, which can be transferred to the consumers via sale price. However, there is still a limit to what the developer can do. When the market force is at work and the price goes too high, buyers will simply shy away from the project. Therefore, the DC does have an effect on managing developer’s land purchase activities while having a relatively differing effect on the sale price.
It is worth noting that the plot of land that Irwell Residences is built on was experiencing an uptrend in DC since Jun 2016. It is likely that the developer (CDL) incurred a relatively high DC as the land was bought in Jan 2019; and the submission of the planning permission which follows thereafter should incur DC between $12,950 psm and $13,330 psm.
Likewise, we observe a higher breakeven price for Irwell Hill Residences and therefore a launch price of approx $2,6xxpsf (10% margin). It is likely that the higher DC that the development incurred was taken into account.
A few takeaways from rising DC:
- It is an indication of increasing home prices within the vicinity. DC for an area tends to change in tandem with the property prices in the area; or
- The area surrounding Irwell Hill Residences may be expecting hot developments. Hence, a high DC can pose as a barrier to entry for developers. DC can likewise act as a mechanism to dampen potential En Bloc within the area; as redevelopment of the En Bloc estate will usually incur DC.