Developers aim at coming up with a product that will please the consumers, as well as yield good profits. The consumer will always want value for his money. As such, it will always be very vital for him to be able to estimate the price of the property.
The first and most expensive component is usually land. The cost of land will always include all the legal expenses during acquisition, plus the initial improvement cost. The other very important and expensive component to look at is the construction cost. The new launch price or new condo pricing not only includes the cost of land and construction, but also the costs of administration, finance costs, sales, and marketing together with the profit margin.
For example, calculating the base cost entails the total sum of the amount for which the developer acquired the site together with the construction costs which include the architectural costs. The expenses and profits for the developer are covered by 30% of the total base cost. In which case, if a developer acquires a site for $ 1000 and the total construction cost amounts to $ 500, the base cost then becomes $ 1500. To get the cost of other expenses and the developer’s benefits, 30% of $ 1500 this is $ 450. The sum of all these gives you the new launch price estimate. That is $ 1000 + $ 500 + $ 450 which totals to $ 1950 new condo pricing. All these costs are estimated per square foot (psf) of development.
In the example above, the expenses and profit cost ($ 450) covers the following expenses:
- Costs of financing
Financial institutions that finance the development are paid some interest that fall under this category of finance costs.
- Administrative costs
This includes the money paid to staff, rented offices and other such like expenses
- Expenses for sales and marketing
This includes the costs of advertising, hiring a lawyer for conveyance, real estate agencies’ commissions and other related expenses for putting up the estate to the market.
- Profit margin
The percentage profit that the real estate developer is entitled to out of the successful real estate project.
This new launch price, which is preferable in the calculation of new condo, is most effective in a financial environment that is stable and has low price volatility. If in any case, a change occurs in costs between the time of the price launch and the time of implementing the development; say construction costs increases or reduces; the developer reviews the pricing in order to secure benefits accordingly without either party feeling overburdened.
Market study is also essential for the developer to ensure highly competitive pricing to be able to match and surpass competitors in selling the real estate units. The new launch price also varies depending on the condo type since ultra-luxury condo pricing is higher than luxury condo pricing. The new launch price estimate is merely a guide to your budget considerations and does not necessarily imply the value of your property. Do not rate your developer using the new launch condo pricing but rather study their record and make informed decisions.