Does Better Facing Equate to Higher Profitability?

When it comes to new property launches, developers often charge premium prices for units with desirable facings, such as those overlooking a pool, compared to those with unattractive views. This raises an important question; do sellers achieve better prices when reselling units with better facings? Perhaps the more question pertinent is, do they achieve better profits with premium units?

To explore this, we’ll examine a project that has enough transaction data within the development to provide meaningful comparisons. In this article, we compare the difference in the perceived better view of a pool view.

I’ll be picking other projects to analyse perceived undesirable views like substations and directional facings like the infamous west (sun) facing units and put that into another article. Let me know in the comments if there is any project you would like to me analyse!Projects We Will Dive Into

For the purpose of this analysis, the Return on Investment (ROI) was calculated by taking [(profit – 2% agent fees for selling) divided by (purchase price + buyer’s stamp duty) ] x 100%.

I also threw in the annualised gains because personally, I feel that it is unfair to say that a 18% gain is more than a 12% gain if the 18% gain was made over 5 years while the 12% gain was made over 3 years. If it takes 5 years to get a total return of 18%, it means you’re getting a return of 3.6% per year (18÷5) whereas the 12% gain would translate to 4% per year. Makes sense? Alrighty lets dive into the numbers.

Coco Palms

Pool Facing vs Non-Pool Facing

1 Bedroom Units

Pool facing units are boxed up in blue, while non pool facing units are boxed up in red.
Pool Facing StacksNon Pool Facing Stacks
26, 34, 6724, 14, 10, 04, 40, 54, 58

Here are the results of lots of filtering and number crunching in google sheets.

Pool Facing StacksNon Pool Facing StacksDifference
Average Purchase Price*$561,235$525,018$36,217 (6.9%)
No. of Transactions1235 ↑
Lowest % Gain1.34%8.49% ↑7.15%
Highest % Gain19.53%37.97% ↑18.44%
Average % Gain15.26%22.07% ↑6.81%
Average Absolute Gain$92,938$129, 031 ↑$36, 093
Average holding period (years)5.96.2
Lowest % Gain (Annualised)0.32%1.37% ↑1.05%
Highest % Gain (Annualised)4.61%5.95% ↑1.34%
Average % Gain (Annualised)2.74%3.67% ↑0.93%
Average Absolute Gain (Annualised)$15, 887 $20,621 ↑ $4,734
*Average of all units bought directly from developer.

The average price of pool facing units is about $36,217 more than non-pool facing units. This translates to a 6.9% premium for a unit with “better facing”.

The volume of subsale and resale transactions for non-pool facing 1-bedroom units was almost 3 times that of pool facing units, which is not surprising since there are many more non-pool facing 1-bedroom units in the first place. What might come as a surprise is that whether in terms of lowest, highest or average gain for annualised and absolute figures, the units without pool view actually did better. In fact, non-pool facing units did better than pool facing units in all aspects!

The difference in average annualised gain is $4,734. In simple terms, it means that there is a high chance that you would make an additional $4,734 per year if you had chosen a non-premium facing unit. Or you can think of it as paying $4,734 per year to enjoy the view you like, if the property is for your own stay. If it was for investment, in order to cover this difference, you will have to obtain a rental rate of extra $395 per month.

I did a quick check on the rental transactions of pool and non-pool facing units and found that the average monthly rental for a pool facing unit averaged a grand total of $6 more per month. This means that generally, tenants are not willing to pay extra for a better view.

Using the same format, I repeated the analysis on the 3-bedroom standard units.

3 Bedroom Units

Pool facing units are boxed up in blue, while non pool facing units are boxed up in red.
Pool Facing StacksNon Pool Facing Stacks
18, 65, 52, 48, 45, 43, 42, 35, 33, 3015, 09, 05, 61, 64, 57, 41,

And here are the results.

Pool Facing StacksNon Pool Facing StacksDifference
Average Purchase Price*$943,448$941,456$1,992 (0.21%)
No. of Transactions48 ↑26
Lowest % Gain10.99% ↑8.38% 2.61%
Highest % Gain46.37%47.17% ↑0.8%
Average % Gain24.88% ↑22.56% 2.32%
Average Absolute Gain$264,651 ↑$240,079$24,572
Average Holding Period (years)6.26.2
Lowest % Gain (Annualised)2.17% ↑1.47% 0.7%
Highest % Gain (Annualised)8.41% ↑6.27% 2.14%
Average % Gain (Annualised)4.15% ↑3.64% 0.51%
Average Absolute Gain (Annualised)$42,600 ↑$38,698 $3,902
*Average of all units bought directly from developer.

Surprise surprise. Once we get to the 3-bedroom units, the data varies significantly from the 1-bedroom units. The average price of a pool facing unit is only $1,992 more than a non-pool facing unit. That’s an almost negligible “premium” of 0.21%. The volume of resale and subsale transactions as compared to its non-pool facing counterpart is the reverse, ie more pool facing transactions, simply because there are more pool facing units for 3-bedders.

Other than a slight edge in the highest percentage profit attained for non-pool facing units, the pool facing units performed better overall. If you had a pool facing unit, the lowest possible ROI you’d have gotten would be 10.99%, 2.61% more than a non-pool facing unit. Your capital profit would also be more than your non-pool facing neighbour by an average of $24k or close to $4000 a year. This time round, you not only get to enjoy a better view, but you get a higher return on your money when you sell off your property!

This phenomenon perhaps would be that generally, 3-bedroom units are bought by families for own stay, rather than for the purpose of getting rental income. Since it is for their own stay, the view naturally matters more and they second owners are more willing to pay a higher price for these units.

Summary

Results

1-bedroom: Non Pool Facing Units profit more by 6.81% or $36,093 on average over a 6-year period.

3-bedroom: Pool Facing Units profit more by 2.32% or $24,572 on average over a 6-year period

The data from Coco Palms has shown that 1-bedroom owners profit an average of $36,093 more from buying a non-pool facing unit. This is because pool facing owners pay a premium of around 6.9% or $36,217 when they bought the unit direct from the developer, but are unable to obtain a higher selling price to make up for the extra paid. This is likely due to the fact that second owners of 1-bedroom units are unwilling to pay extra for a better view, either because they are not using it for their own stay, or because their budget does not allow them room for the extra cost.

On the other hand, when it comes to the 3-bedroom units for Coco Palms, the premium for a pool facing unit is just a little under $2,000, or 0.2% more than a non-pool facing unit. At the same time, second owners are willing to pay a higher price for pool-facing units, making pool-facing units more profitable by an average of $24,572.

Conclusion

From the data above, we can conclude that deciding whether to pay extra for a unit with a better facing depends primarily on the following:

1. Purpose for purchasing the property; are you buying for own stay or investment purposes?

2. The extra price for a “better” view; is the difference significant?

3. Your exit target market; who are the people you are going to sell to in future? Does the view matter to them? Will they be willing to pay a premium for the view?

If you are buying the unit purely for investment, it is better to set aside personal preferences and focus on the numbers, especially when the premium for a good facing is significant.

However, if the property will also serve as your home, it’s important to choose a unit that you will enjoy living in. Unlike other intangible investment assets, a property is not just a valuable investment but also a place to call home. In such cases, you need to consider how much a better view will enhance your living experience and determine how much you’re willing to pay for that benefit. If your exit plan is 10 years or more, the premium for a better view, when divided over the years and months, may not amount to much extra per month for a significantly enhanced living experience.

I hope this article has helped you have better clarity when it’s time for you to do your unit selection. If you’re seeking a good property and need some insights, you can book a call with us here!

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