Price Vs Value

“What is the price of your property? Hmm… A million!”
“What is the value of your property? Huh I beg your pardon?!”

Price is not equal to value. It can be overvalue or undervalue. Value may not be represented by its price or in dollar terms. It is almost invisible to your naked eyes. It is usually intangible.

What is the price of a diamond? $10,000.
What is the value of the diamond? It makes my sweetheart happy! And in return it makes me happy!
Value = $10,000 + Happiness.

A can of Coke cost $1 in the convenient stores.
But the same can of Coke would cost $10 in a luxurious hotel cafe setting.
Value = $10 + Luxurious hotel setting.

Transacted prices or Asking prices may not always reflect true value. How do you determine the underlying value of a real estate property then?

Using bank’s valuation to value a property is most commonly used in the industry. It is based on historical past transactions, location, unit size, layout, commanding views, interior decor and most importantly the potential income of the property. However this can also be subjective and a bias method.

There are no actual scientific methods to go about looking for value as we know. But if you can fill up the simple formula using the diamond and coke examples then it is easier for you to determine if there is any hidden value in a real estate property

Assuming Property’s asking price is $1 million. $1 million + What Value? What could be the underlying value in this property?

Examples

  • A vacant plot of land beside your development was bid up by a property developer to record price.
  • A new retail & commercial development is being planned by the local authorities.
  • A prestigious international school plans to set up in the neighborhood with 10,000 foreign students.
  • The High Speed Rail is being planned to pass through your condo development
  • Las Vegas Sands is secretly putting up a proposal to build a 3rd Casino in Singapore and that is beside your house’s backyard! Hoolala! Jackpot!
  • Urban Redevelopment Authority (URA) proposed rezoning parts of Geylang on 13 Jan 2015 from Residential / Institution to Commercial / Institution

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New proposed zoning bounded by Geylang Road, Lorong 22 Geylang, Guillemard Road and Lorong 4 Geylang

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You would have hit a bigger jackpot if the planning authority, URA decides to increase the plot ratio further from the current 2.8.

Can you see the value now if these underlying developments are secretly taking place within your estate and properties?

The property market is an inefficient market.
Go study URA’s Masterplan carefully.
Go uncover and unlock the value.
Don’t just look at price.

Price is Nothing. Value is Everything!