Getting Burnt Over High-end Homes

[neubie 2]

(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.

[kalimantan 6]

Even if they lost so much, so what ? I still cannot afford Orchard road .... *sigh*

[edenstrauss 3]

We're all salivating over those properties out there but having it might mean having more financial commitments & burden. So might as well not think about it.

When those owners lost their properties, their financial woes would be alot more serious and they might end up worse-off than us ordinary, working class folks.

So let's count our blessings

[bepgof 20]

http://img209.imageshack.us/img209/2251/65138762.png

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

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. In contrast, units bought in 2006, 2008 and 2009 were re-sold at a profit in 2010.

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.

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.

Look like these 9 sellers' "umbrellas" were no big enough.

Edited November 19, 2010 by bepgof

[kalimantan 6]

heng ah ...i did not buy any from that area. hahahahaha

[Plastic3 0]

Thanks for sharing.

Talking about excess supply...

If you look at URA site, there is going to be 18,712 units expected to complete in 2013.

Comparing to 2011 (6,766) & 2012 (9,149), that is quite substantial.

I took a look at some projects that TOP-ed in 2010 the other day, their rental yields & capital appreciation, the only one that is making a loss is also from District 9 & launched in 2007:

More can be found on my blog if interested:

http://markdwg.wordpress.com/

Best,

Mark

[random_username 0]

Thanks for sharing.

Talking about excess supply...

If you look at URA site, there is going to be 18,712 units expected to complete in 2013.

Comparing to 2011 (6,766) & 2012 (9,149), that is quite substantial.

I took a look at some projects that TOP-ed in 2010 the other day, their rental yields & capital appreciation, the only one that is making a loss is also from District 9 & launched in 2007:

More can be found on my blog if interested:

http://markdwg.wordpress.com/

Best,

Mark

wah, thanks Mark aka Plastic3 for sharing your analyses.

what really caught my eye was the 6th listing on your table for your calculated rental yield and the appreciation rate tabled!

May i just clarify what your rental yield calculations are based on in this table (eg. net maintenance, interest, etc - i remember you mentioned before else where in this forum - is it the same formula?)

to the mods: there was a thread started on this earlier in this sub-forum - can merge the threads for easier reference in a single thread? thanks

Edited November 19, 2010 by random_username

[Warrior88 0]

SARS ..... ppl keep holding. Then chiong in 2007. But Lehman Brothers caught up with them.

It would be interesting if we can also see those caught in 1997. Did they recover with current level ?

[therat 18]

to the mods: there was a thread started on this earlier in this sub-forum - can merge the threads for easier reference in a single thread? thanks

done

[random_username 0]

done

fast !!! thanks for so being on top of things :)

[Plastic3 0]

wah, thanks Mark aka Plastic3 for sharing your analyses.

what really caught my eye was the 6th listing on your table for your calculated rental yield and the appreciation rate tabled!

May i just clarify what your rental yield calculations are based on in this table (eg. net maintenance, interest, etc - i remember you mentioned before else where in this forum - is it the same formula?)

Costs I used to deduct from Annual Rental Income =

Maintenance Fee, Property Tax, Estimated Income Tax (from rental income taxable), Vacant cost & Agent Fee

Cost added to Purchase price that I included =

Stamp duty, Legal fee, Minimal renovation & furnishings

(Please let me know if I missed out anything, i'm continuing trying to improve my system to be as realistic as possible, although it will never be accurate for everyone)

The only change I made to my formula is lowering the loan amount to 70% (as most investors are likely have more than 1 loan), this does not affect the projected Net Yield much, it is more significant in ROE.

Lastly to add a disclaimer:

I am not an analyst, this research is all done on my own time & not meant to be investment advise (Please use as reference only)

I am not marketing any units in any of the projects above

Data is best used as comparison of projects within the table

Best,

Mark

Edited November 19, 2010 by Plastic3

[bepgof 20]

Talking about excess supply...

No one really knows if short or excess supply, now. At end March 2011, the first wave of "after cooling measures" figures will be out. These figures (prices, qty..) will give a "better" picture.

Edited November 19, 2010 by bepgof