Getting burnt over high-end homes

However, 90% of sub-sale transactions still turned a profit.

Wed, Nov 17, 2010
The Business Times

By Uma Shankari

SINGAPORE - A handful of private homes nearing completion in the prime Orchard Road area have been re-sold at a loss.

A Savills analysis of caveats captured by the Urban Redevelopment Authority's Real Estate Information System (Realis) as at Oct 19 showed that nine units bought in 2007 were sold in 2010 at a loss in the sub-sale market.

But the bulk of homes bought from 2006 to 2009 - 78 out of 87 - were sold for a profit, the analysis found.

The sellers who lost money sold units in the following developments: three in Scotts Square, two in Parkview Eclat and one each in Grange Infinite, Leonie Parc View, Orion and Paterson Linc. Eight of the nine units were bought from developers. Size was not a factor - the units sold at a loss ranged from 818 to 3,250 square feet.

The two biggest losses were at Parkview Eclat, where two sellers were $1.75 million and $1.72 million poorer. Both owners bought the units from developer Chyau Fwu Group in 2007.

Steven Ming, executive director for prestige homes at Savills Singapore, said that the high-end market has not recovered to the peak levels of 2007 and 2008 and homes are still generally trading at discounts of 10-15 per cent.

The fact that all nine losses were on units bought in 2007 'may be due to the high prices the owners paid when the residential market reached its peak in 2007', Mr Ming said.

In contrast, units bought in 2006, 2008 and 2009 were re-sold at a profit in 2010. Mr Ming also noted that more owners suffered losses in the second and third quarters of this year than in the first.

Ku Swee Yong, chief executive of International Property Advisor, said that some owners could just be 'weary' of holding on to their properties, especially as tenants have become harder to find after an outflow of expatriates in 2009.

'If you were a tenant with a monthly budget of $9,000-12,000, there will be many vacant brand new properties to choose from - Ardmore II, CityVista, BelleVue, St Thomas Suites and Latitude, just to name a few - and these new projects will be competing with older, more established and larger-sized units such as those in Ardmore Park and Grange Residences,' Mr Ku said.

As of now, the number of loss-making transactions remains very low, Savills' Mr Ming noted. Ninety per cent of sub-sale transactions this year still made profits, ranging from $3,620 to $1.92 million.

By project, St Thomas Suites led the number of gains, with all 17 units sold at profits ranging from $3,620 to $1.36 million.

Ardmore II ranked second with 13 gains. A 34-storey unit in the development made the highest profit of $1.92 million among all 87 matched sub-sale transactions, followed by a 27-storey unit with a gain of $1.9 million.

The first unit was purchased in the sub-sale market at $3.74 million (or $1,849 per sq ft) in April 2009 and flipped for $5.66 million ($2,799 psf) in August 2010.The second unit was also purchased in the sub-sale market. The buyer paid $3.75 million ($1,853 psf) in January 2009, then sold it in July 2010 for $5.65 million ($2,792 psf).

Looking ahead, more owners could be keen to sell high-end units - even at losses - as oversupply concerns loom on the back of ample new inventory in the pipeline in the prime districts 9 and 10.

'The wave of construction that began in 2007 and 2008 means we are seeing significant completions of luxury properties from 2010 to 2012,' said Mr Ku. 'Coming soon are The Marq on Paterson Hill, Cliveden at Grange, Nassim Park Residences, Helios, Hilltops, The Orange Grove and Ritz Carlton Residences, among others.'

Mr Ming added: 'Property investments are best left to those that can afford to take knocks. While the middle to long-term market outlook is bright, it is not without some degree of volatility as hot money can go as quickly as it comes.'

For its analysis, Savills only compared sub-sale transactions for which there were caveats of previous transactions. The amount of profit or loss was calculated as the difference between sale and purchase prices and does not take into account stamp duty and other expenses.

Based on caveats downloaded on Oct 19, Savills found that 108 units in 16 projects in the Orchard Road vicinity were sold in the sub-sale market in 2010.

Of these units, the firm managed to match 87 units with their previous transactions. It found that nine units were re-sold for losses in the sub-sale market.

Sub-sales - which refer to secondary market transactions involving projects that have yet to receive a Certificate of Statutory Completion - are tracked as a gauge of property speculation.

At the low point of the market in Q1 2009, only 67.5 per cent of sub-sales of private apartments and condos yielded a profit. That proportion grew to 95.1 per cent in Q1 2010.

This article was first published in The Business Times.