Losses mount in resale market in Singapore

The take-up rate of new homes, as measured by the sales-to-launch ratio, has dropped from 117% in March to 96% last month, notes Nicholas Mak, executive director of research and consultancy at SLP International. The decrease in the take-up rate in April was mainly due to the higher level of units launched relative to units sold, he says. “Still, it’s close to the equlibrium level of 100%, indicating that the transaction volume in the private residential primary market is gradually stabilising.”

Proportion of unprofitable deals continues to rise

However, among sellers in the resale market, pain continues to mount. In 1Q2017, 317 out of 1,492 transactions in the non-landed segment (condominiums and apartments) were unprofitable, translating into a rate of 21%. On a y-o-y basis, the rate is higher than the previous two years — 15% in 1Q2016 (160 out of 1,087 transactions) and 7% in 1Q2015 (60 out of 897 transactions).

The figures are computed based on the matching of URA caveat data for non-landed homes transacted as at May 9. The profit-and-loss computation excludes transaction costs such as stamp duty.

The number of unprofitable deals in 1Q2017 — 317 — is nearly double the 160 registered in 1Q2016 and a fivefold increase from the 60 recorded in 1Q2015. Likewise, the amount of losses suffered by sellers of these private non-landed homes surged to S$74.5 million (RM730.5 million), from S$46.4 million in 1Q2016 and S$29.7 million in 1Q2015 (see chart).

To be sure, the majority of deals (79%) in the non-landed housing segment in 1Q2017 were profitable. However, the average profit per transaction was lower at S$205,273, compared with S$231,720 in 1Q2016 and S$359,367 in 1Q2015.

In 1Q2017, the Core Central Region (CCR) accounted for 38% of  unprofitable deals in the non-landed housing segment compared with 28% in the Rest of Central Region (RCR) and 33% in the Outside Central Region (OCR).

Losses in CCR rise 64% y-o-y

The average profit per transaction in CCR has fallen over the last two years: It was S$171,711 in 1Q2017, compared with S$184,558 in 1Q2016 and S$378,850 in 1Q2015.

Total losses in 1Q2017 rose 64% y-o-y to S$53.8 million in CCR, with 121 out of 337 transactions unprofitable. This translates into a rate of 36% compared with 30% (72 out of 241 transactions) in 1Q2016 and total losses of S$32.8 million. In 1Q2015, 39 out of 188 deals (21%) were unprofitable, with losses of S$27.4 million.

The most unprofitable deal in 1Q2017 was the sale of a 4,069 sq ft, four-bedroom unit at Seascape, a 151-unit luxury condo in Sentosa Cove. The previous owner, believed to be a Russian national, had purchased the property for S$12.8 million (S$3,146 psf) in June 2010. The unit was put up for auction in a mortgagee sale in January 2017 for S$6.8 million, and sold in February for S$6.2 million. Based on the sale figure, the loss translated into 52% for the original buyer.

The second most unprofitable resale in CCR in 1Q2017 was that of  a 2,336 sq ft, four-bedroom unit at Orchard Scotts, which was sold for a S$4.92 million loss on Feb 15, inclusive of seller’s stamp duty. The seller had purchased the unit for S$8.46 million (S$3,620 psf) in October 2013 and sold it for S$3.68 million (S$1,575 psf). The seller had to pay a 4% SSD, or S$147,200. Excluding SSD, the loss would have amounted to S$4.78 million, or 56%. Completed in 2008, Orchard Scotts is a 387-unit, 99-year leasehold development with two apartment towers and a serviced residence tower.

Ardmore Park’s price resilience

The two most profitable deals in 1Q2017 were recorded at Ardmore Park, a 330-unit condo that has set the benchmark for the luxury condo segment since its completion in 2001. Both transactions were those of  the typical 2,885 sq ft, four-bedroom apartments. One unit was purchased for S$4.9 million (S$1,699 psf) in September 2002 and sold for S$9.5 million (S$3,293 psf) on Feb 9, according to caveats lodged. The sale recorded a gain of S$4.6 million, or 94%.

The second unit at Ardmore Park was purchased for S$5.41 million (S$1,876 psf) in August 1996, which was near the peak of the previous property boom. It was sold for S$8.9 million (S$3,085 psf) on Feb 28. Thus, it registered a gain of S$3.49 million, or 64%.

RCR — Pandan Valley’s great gains

In RCR, average profit per transaction has been knocked down to S$251,204 in 1Q2017, from S$274,228 in 1Q2016 and S$399,429 in 1Q2015. Total losses rose 22% y-o-y to S$13 million in 1Q2017, with 90 out of 426  transactions (21%) unprofitable. In 1Q2016, 50 out of 322 transactions (16%) registered losses, while only 5% (12 out of 258 transactions) did in 1Q2015.

At Aalto, a 196-unit high-end condo on Meyer Road in prime District 15, only two sales have been recorded in 2017 so far. Both units were sold at a loss. One was a 2,443 sq ft, four-bedroom-plus-study unit  purchased for S$4.82 million (S$1,974 psf) from the developer in September 2007 and sold for S$3.88 million (S$1,588 psf) almost a decade later on, March 13, 2017. The deal translated into a loss of under S$1 million.

The other unit at Aalto that recently changed hands was a 1,959 sq ft, four-bedroom unit that was purchased for S$4.58 million (S$2,336 psf) in 2008 and sold for S$3.7 million (S$1,889 psf) on Jan 23. This translates into a loss of 19%. Residents at Aalto are likely to benefit in the future, with the upcoming Tanjong Katong MRT station located opposite the condo.

In another sought-after residential district, District 21, is Pandan Valley, a 623-unit freehold condo completed in 1979. In March, a 5,231 sq ft, six-bedroom unit at Pandan Valley was sold at a S$1.92 million profit, the most profitable transaction registered in RCR in 1Q2017. The seller had purchased the unit for S$1.22 million (S$233 psf) in October 2005 and sold it for S$3.14 million (S$600 psf) two months ago.

Another unit at Pandan Valley that changed hands recently for more than S$1 million in profit (S$1.02 million to be exact) was a 1,690 sq ft, three-bedroom unit. The previous owner paid S$700,000 (S$414 psf) for the unit in January 2005 and sold it for S$1.72 million in January this year.

The second most profitable deal in RCR was recorded at The Waterside, a 502-unit freehold condo on Tanjong Rhu Road that was completed in 1992. The deal involved the resale of a 2,400 sq ft, four-bedroom unit for S$2.95 million (S$1,229 psf) on March 1. The previous owner had purchased the unit for S$1.21 million (S$503 psf) in July 2003. Thus, the sale translated into a profit of S$1.74 million for the previous owner.

OCR — Varsity Park resale units see profits above S$1 mil

In OCR, the average profit per transaction fell to S$193,947 in 1Q2017, from S$227,290 in 1Q2016 and S$328,328 in 1Q2015. Total losses surged 169% y-o-y to S$7.71 million in 1Q2017, when 106 out of 729 transactions (15%) were unprofitable. In 1Q2016, 38 out of 524 deals (7%) registered a loss, with total losses amounting to S$2.86 million. In 1Q2015, only nine out of 451 transactions (2%) were unprofitable, with losses totalling just S$645,070.

The two units that fetched profits above S$1 million in OCR in 1Q2017 were located at the 530-unit Varsity Park Condominium. The 99-year leasehold condo on West Coast Road in District 5 was completed in 2008. A 2,228 sq ft, four-bedroom unit fetched a profit of S$1.66 million on March 31. The unit was purchased for S$890,910 (S$400 psf) from the developer in November 2004 and sold for S$2.55 million (S$1,144 psf). The profit works out to 186%, or 9% a year over 12.4 years.

Another four-bedroom unit at Varsity Park — slightly smaller at 1,830 sq ft — was sold for S$1.94 million (S$1,060 psf) on Jan 9. The unit was purchased for S$824,004 (S$450 psf) in May 2006; thus, the seller realised a profit of more than S$1 million.

The most unprofitable deal in 1Q2017 was the sale of a unit at Watertown in Punggol Central. The 1,356 sq ft, four-bedroom unit was purchased for S$2.03 million (S$1,499 psf) when the project was launched in February 2012. It was sold for S$1.68 million in January 2017, at a loss of S$353,042. The 992-unit Watertown is part of a giant integrated development that includes Waterwave Point shopping mall that opened last year.

As business sentiment and the economic outlook improve, the number of unprofitable deals in the resale market could start to decline in the coming quarters.

This article first appeared in The Edge Property Singapore, a pullout of The Edge Singapore, on May 22, 2017.

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