RES exam question on Real Estate Market: principle best explains their offers
Mr Seah asks $1,900,000 for his three-bedroom resale condominium unit in Bedok. A near-identical unit of the same size and age in the next-door project is listed at $1,780,000 and can complete on the same timeline. Viewers keep offering around $1,780,000. Which principle best explains their offers?
- AAnticipation: buyers are discounting his unit because they expect prices in Bedok to fall
- BContribution: buyers pay only for the features of his unit that exceed those of the other
- CSubstitution: a buyer will not pay more than the cost of an equally desirable alternative
- DRegression: his unit is pulled down in value by the cheaper project next door to it
Show answer & explanation
Answer
C. Substitution: a buyer will not pay more than the cost of an equally desirable alternative
Explanation
Answer: Substitution. A buyer will not pay more than an equally desirable alternative, and the unit next door is $120,000 cheaper.Rule: Under the principle of substitution, a buyer will not pay more than the cost of acquiring an equally desirable substitute. The other unit matches on size, age and timing, so buyers anchor on it.Source: RESPrep /learn/property-valuation-methods-singapore, current at 1 October 2026, key valuation principles
Why the other options are wrong
- Anticipation of falling Bedok prices: Nothing in the facts says buyers expect prices to fall. Anticipation concerns expected future benefits.
- Contribution of extra features: The units are near-identical, so there are no extra features to price. Contribution concerns what a component adds to the whole.
- Regression from the cheaper project: Regression concerns a superior property among inferior ones. Here there is no superior-inferior relationship.
Study the concept behind this question: Property Valuation: The 5 Methods (with worked examples)
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