Buying a home: The emotional factor

July 8, 2011

It is not a trade secret and developers have long been aware of this. Except for the buyers it seems, or most of them anyway.

A home purchase, especially by potential owner occupiers, is almost always an emotional buy. This notwithstanding the fact that it is more likely than not the purchaser’s largest single amount he will spend in his entire life. It is an irony because this is the time when buyers should be the most objective, that they act emotionally and sometimes irrationally.

How else then, do you explain why, despite the intense negative publicity, have 40 per cent of Centrale 8 units – as reported by The New Paper yesterday – been sold and so soon after sales opened?

The report also stated that of the more expensive five-room units, about a third was sold as of Wednesday.

Centrale 8 is the latest of a string of Design, Build and Sell Scheme (DBSS) projects to be launched. Located in Tampines, it created a huge public outcry for its record-breaking prices for its five-room flats before they were subsequently slashed.

Did it not bother these buyers that many in the market, including several Housing and Development Board (HDB) property experts, believe that these units were probably over-priced? Would not the stigma of being suckered into buying these expensive units deter some of the buyers?

Yes, it did matter to the pool of potential buyers. That is why the oversubscription rate was only twice and not several times as was the case for previous DBSS projects. But for the 1,400 odd applicants, it did not matter.

It does not help that Singaporeans are obsessed with property. Since our economy took off four decades ago, the track record for most buyers has been good or very good. How do you tell someone to be extra vigilant when their past purchases or buys by people they know or are close to, have often proven to be lucrative – the best investment these people ever made.

If you have been following the personal success stories in the papers, you will find that, invariably many have bought into property and made money off them. Yes these stories are skewed as they tell only of the successes and none of the failures. Tell this to the readers. They read and hear only of the successes. Who do we blame?

It did not help that most of these novice home buyers are more probably more familiar with the more basic HDB flat – whose designs are more functional than aesthetically pleasing to the eye – they lived in with their parents.

It is like a family car owner who is suddenly shown a luxury car. He is probably overwhelmed and has no notion of what is a fair price for such a unit unless he does his homework and compared prices of other luxury cars. There are very few existing DBSS units in the market to shop around.

So, the prospective buyer steps into the showflat and he is overwhelmed by the higher quality and the extras. The polished brochures are exquisitely done with an expensive feel and the narrative pushes all the right buttons, tapping on all the emotions, of course.

Singapore developers have long recognised that the show flat is the single most crucial component in their marketing strategy. Many have no qualms in spending millions of dollars on the show unit and their furnishings.

That is why visiting showflats have become such a favourite pastime among Singaporeans since the country experienced its first property bull run, even if they do not intend to buy a unit.

The proposals by the authorities to make property buying more transparent mooted some time back could not have come at a better time. Maybe it should be fast-tracked and implemented as soon as possible.

But if we are realistic, we will know that home buying in Singapore will always be an emotional purchase because it also confers status and provides that sense of having arrived.

By Colin Tan – head of research & consultancy at Chesterton Suntec International