Dynamic Pricing in the Singapore Condominium Market

March 6, 2018

What pricing strategies are used by developers in Singapore condominium market?

Durability, price transparency and long sales period are the features that mark the Singapore condominium market. Given these features, dynamic pricing strategies are likely to be the most important consideration of Singapore condominium developers. Dr Eric Fesselmeyer (Senior Lecturer, Department of Economics) and his co-researcher, A/P Liu Haoming, study the dynamic pricing model in the Singapore condominium market to investigate the relationship between new sales prices and time of purchase. Thereafter, they try to find the relation between quality-adjusted price increases and the quality of units purchased over the new sales period.
Developers start selling the units even before the construction is completed. Fesselmeyer and Liu, in their paper, ‘Dynamic Pricing in the Singapore Condominium Market’ (first published in Economic Letters, 2014), define the market for sales between a buyer and developer as “new sales” and sales between owner and buyer as “resales”. They obtain data on private residential property transactions in Singapore from the Real Estate Information System (REALIS). The study sample includes condominiums completed between 1999 and 2009 and takes into account only new sales and first resale transaction information. The results of the study reveal that there was no systematic relation between new sales prices and time of purchases. However, the study provides evidence of relationship between quality-adjusted price increases and the quality of units. Fesselmeyer and Haoming show that higher quality units are sold the earliest at a discounted price and they also appreciate faster in price in the resale market as compared to the lower quality units. Underpricing during the early new sales period helps the developer to stimulate demand and increase sales volume at the launching stage. The developers gradually increase prices, selling the lower quality units at a higher price to the later buyers.