This is a preview on what to expect for Clavon when it eventually opens to the public. My calculations are usually done when I have more information on the floor size and the asking price of the various available units for the said condominium.
See the review of Parc Clematis for an example of how the calculations are done.
As we do not have this information yet, we have to make do with what other information we are currently given and based on that, we will know how much the asking price should be and then decide accordingly.
If you just want to know the answer now. It’s 1737.12 psf.
So with a standard 5 percent margin of error at 95% confidence level, simply because no one can predict the future, an appropriate price range of the psf would be between $1650.26 psf to $1823.98 psf
Depending on your risk tolerance and at this price range, you will be buying a development that should be at a good value investment-wise because we are working on the worst case scenario.
If you are interested to know how I come out with this number and the range, please read on.
What we know
Here’s a list of what we already know about Clavon (May 2020).
Clavon will be 99 year leasehold. Same with the Clement Canopy. Calculations-wise, we will be comparing a leasehold development with another leasehold development.
Clavon will be built right next to the Clement Canopy. And similar to the above point, this would be the best comparison to do, the Gross Rent Multiplier number should be roughly the same.
Land Price PSF
This might be the biggest draw of Clavon. UOL bought the land at 788 psf as compared to Parc Clematis who bought it at 850 psf.
This also means that Clavon might potentially be sold at a lower asking price than Parc Clematis. However, Covid-19 might negate this benefit. I will keep you updated.
It is a joint venture with UOL Venture Investment Private Ltd and UIC Homes Private Ltd.
Here are the assumptions I’ve made regarding Clavon. This will be corrected once we have the full information from the developer and reflected on the upcoming review of Clavon.
I am assuming the floor plan and sizes are the same. If the numbers change when the information are out, I will adjust accordingly in the upcoming review for Clavon.
Type of Buildings and Units Available
It is expected to be a twin building similar to Clement Canopy with 640 available units.
Comparison with The Clement Canopy
I’ve chosen to compare Clement Canopy and Clavon due to the close proximity of both land sites and the multiple similar features between the 2 developments.
This means that the Gross Rent Multiplier and Income Capitalisation Method should be as close as it can get.
Transacted Record of the Clement Canopy
Clement Canopy just received their TOP status in 2019, so there are not many transacted records as of now. However, there’s one record shown for Clement Canopy
|5 March 2017||4-Bedroom #04-XX||1346 sq ft||1,622,000|
|15 April 2020||4-Bedroom (Same Unit)||1346 sq ft||1,980,000|
In 3 short years, it has achieved a gross capital gain of $358,000 with an annual growth rate of 6.49%.
This surpasses the annual growth rate of the west region, which is at 3.33%.
However, we will use 3.33% as we are working based on the worst case scenario.
The transacted rental records (lowest and highest) for similar units are as follows
|1st Jan 2020||4500|
|1st July 2019||5500|
We shall use the lowest rent receivable at 4500 SGD per month
GRM of the Clement Canopy
The Gross Rent Multiplier (GRM) for Clement Canopy is calculated as
GRM = Sales Price / (Annual Rent of Unit)
= 1,980,000 /(4500 x 12)
= 36.6667 (Rounded to 4 decimal space)
With the following assumptions taken
- Sales Price of 1,980,000 SGD taken for the unit #04-XX 4 bedroom which was sold on 15 April 2020
- Assumption of Annual Rent of 4500 SGD taken for the lowest rent transacted on 1st Jan 2020
Income Capitalisation Rate
The Income Capitalisation Rate formula is as follows
Cap rate = Annual Net Operating Income / Market Value
= (Rent Income – Property Tax – Property Insurance – Annual Maintenance Fees – expected Maintenance and Repair – Vacancies Loss) / Market Value
= (54,000 – 6060 – 120 – (400 * 12) – (2 * 4500)) / 1,980,000
Assuming the following
- Expected Maintenance and Repair is 0
- Maintenance Fee for the Clement Canopy is assumed to be 400 SGD
Calculation for Clavon using Gross Rent Multiplier and Income Capitalisation Rate
As we are assuming the same numbers for Clavon, we can calculate the future value of Clavon by using the worst case scenario growth rate of 3.33% with the knowledge that it is expected to TOP in 2024.
The future value of Clavon in 2024 with a 3.33% growth rate is then projected to be
Dividing by the 1346 sqft size of the unit, we get the price psf of
With a 5 percent margin of error at a 95% confidence level, we get a price range of
$1650.26 psf to $1823.98 psf
My thoughts on the Market Value of Clavon
Let me stress that one transaction record does not determine the GRM and ICR of the development. I try to work on 9 other transactional records from 3 different developments for a more accurate number for my clients.
And also that we do not know the floor size, price and floor level of the upcoming Clavon. All of this, which will play a factor in the real estate investing calculations.
The upcoming review of Clavon, when we have more information from the developer, will further determine if it’s a good investment for your next home.
Congratulations! If you’ve read to this point, you are probably really looking at checking out the show flat for Clavon and knowing more about this upcoming development at Clementi Avenue 1.
This is just a brief thought process on how I would go through with clients who are interested in buying a unit in Clavon
There are several advantages when I represent you in buying a new launch
- NO COMMISSION REQUIRED. Probably the biggest advantage. If I sell this development, the developer pays me the commission, not you.
- Free Real estate investing report with calculations on your preferred unit will be done for you upon meetup. Not only will you have all the necessary information, I will also pass you all the floor plans, the images, the pricing and launch price discounts (if any).
- If you are looking to buy a unit for investment, I will research the best unit type this condo has to offer to provide you with the maximum returns from your investment money. If you are looking to buy for home living, I will research and let you know the best floor level and direction facing to get to maximise your sales price. Basically, I will study these units and provide you with the highest chance of increasing the future capital appreciation potential of your unit
- My obligation is only to you. You can look for me for advice for anything real estate related, any time and any day. I don’t work for Clavon. I have no obligation to sell this development for them and therefore, I have no need to pressure you to buy this unit. If you want to buy, buy, otherwise, we move on and will look out for another unit that is more suited for your needs.
- I am part of a team that is very strong in financial calculations. If you are really looking to buy, my team will find different ways and different means to make sure you will be able to afford it. Throw us questions and problems you are currently facing and which your previous agents are unable to answer, let us impress you with what we can do to get you your preferred unit
Buying a condominium (especially a new launch) for anyone is most probably one of the biggest ticket purchase in their lifetime
Think of me as your friendly and knowledgeable real estate investor friend who’s doing you a favour to make sure the purchase of your new condo is really something worthwhile to purchase or at the very least, something that won’t lose you money in the future.
What are you waiting for? Let’s start!
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