Selling New Condos More Efficiently
By TAN Kee Wee
(MediaCorp 938LIVE’s Money Talks, Thursday, 6 August
2009, 7.50 am and 7.20 pm)
The price mechanism should resolve most issues between buyer
and seller. When it does not, there will be
For instance, when demand exceeds supply in the launch
of a condominium, we queue and apply the “first come first
served” principle. There are many pros and cons of this
Buyers at the back of the queue, who want to pay more,
will be unhappy. Property developers will also be unhappy
because they could have asked for higher prices.
One way around this is to conduct a lucky draw, or
“ballot”. Here, the lucky ones get their units. However, there
are still the unhappy ones who were not picked.
The developer’s unhappiness is not any less. But at
least, knowing his customers better in a lucky draw, he could
adjust prices upwards in the second phase of the
Of course, the ideal situation for the developer would
be if he knows exactly how much each buyer is willing to pay.
Then he would sell them at those prices and maximize his
profit. In effect, two buyers could pay different prices for
This process of selling each unit at the price each
buyer is willing to pay can be considered more efficient.
However, it is only possible if the developer can read the
Over in the stock market, or in markets with
computerized trading platforms, reading the buyer’s mind is
possible using super computers. This is the world of high
frequency trading. It is the hot new thing on Wall Street,
accounting for half of all trades.
In this new marketplace, Wall Street’s super computers
can scan dozens of markets simultaneously and execute millions
of orders a second before we can even blink.
Most importantly, these super computers can probe into the
counter party’s computer and gather information on his
For instance, let's say that you want to buy 100,000 shares
of XYZ company at any price up to $8.50, or a limit order of
$8.50. But the market price is $8.30.
Immediately after you key in your intention, these
super computers will probe and detect your limit order and move
the price up. Within the blink of an eye, enough XYZ shares
will appear for you to buy at $8.50.
A couple of years ago, before high frequency trading,
if you entered a limit order, most of your order would be
filled near the lower price. Today, your order would be filled
near the higher price.
These super computers make enormous profits buying low
and selling investors like us high, over and over again. It’s
like insider trading in split seconds.
Retail investors can’t compete. Some say it’s not a
level playing field. But this is what we face today. Those who
support high frequency trading say that it’s more efficient
because buyers are paying what they want.
If such efficiency is desired in the property market, then
the next condo should be launched through a bidding process on
the internet. Before the bidding date, anyone can view the
showroom and inspect the plans. But the transactions happen
from the bidding date.
The good thing is that many rich buyers who are willing to
pay more will get the units they want. The advantage to the
developer is that his profits will be maximized. The
disadvantage is that many people, who are just surviving, will
say “It’s daylight robbery!”