A Buyer's Market

THE WEEK OF AUGUST 3, 2015 688 A PULLOUT WITH Read this copy online @ theedgeproperty.com MAKE BETTER DECISIONS MCI (P) 046/03/2015 PPS 1519/09/2012 (022805) Limited and niche Portal for everyone How HDB rents fared Strata-landed homes still ‘value- TheEdgeProperty.com Kallang/Whampoa and Jurong for-money’ propositions PG3 launched in Singapore PG4 East the most resilient towns PG6 A BUYER’S MARKET More sellers incur losses in 1H2015 | BY FEILY SOFIAN & ESTHER HOON | duty but excluding other costs. In the study, high-end homes refer to projects located in the Core Central Re- Proportion of unprofitable transactions on the rise post-TDSR he proportion of unprofitable transactions gion (CCR). City fringe refers to Rest of Central Region % of private non-landed homes continued to (RCR) whereas mass-market homes are located in the 100 trend up since the implementation of the to- Outside Central Region (OCR). 98 tal debt servicing ratio (TDSR) in June 2013, Prices of high-end non-landed homes are now T 96 the measure that single-handedly reversed some 8% off their peak in 1Q2013, which explained price growth. Unprofitable transactions accounted the higher proportion of unprofitable transactions 94 for 1% to 2% of sales pre-TDSR days. The figure and bigger losses compared with the mass-market. has crept up to 3% in 2H2013, 6% in 2H2014 and On a more positive note, the proliferation of value 92 8% in 1H2015 (see chart). deals in the high-end segment is reviving demand 90 The high-end segment witnessed the highest pro- and buying activity. Resale volume in the high-end portion of transactions in the red (21%), a percentage segment jumped 39% y-o-y in 1H2015. In the city 88 1H2011 2H2011 21H012 2H2012 1H2013 2H2013 1H2014 2H2014 1H2015 that was markedly smaller in the city fringe (7%) fringe and the mass-market, resale activities grew and the mass market (4%). Among the unprofitable at a slower pace of 25% and 18% respectively over Profit Loss cases, sellers in the high-end segment also incurred the same period. the highest losses, averaging $647,776 (17%). The The question is whether the pickup in resale mo- average loss was $145,027 (9%) in the city fringe mentum is enough to save high-end prices from slip- Table 1 and $92,326 (8%) in the mass market (See Table 1). ping further. Our past study found that the affordabil- This trend might be reversed if high-end home pric- ity level — the price-to-income ratio in the high-end Gains and losses in 1H2015 by market segment es pick up in the future. segment — has returned to 2005 and 2009 levels as The study matched resale and sub-sale transactions household income continued to rise against falling GAIN LOSS NO OF AVERAGE PROFIT NO OF THE EDGE PROPERTY URA, of non-landed homes (excluding shoeboxes and en bloc prices. It therefore suggests that the existing cock- TRANSACTIONS ($/%) TRANSACTIONS AVERAGE LOSS ($/%) deals) with their previous transactions, based on URA tail of cooling measures could be an overdose in a CCR 371 653,243/36 96 647,776/17 caveat records as at July 15. Profit and loss were com- market saddled with economic headwinds, slower RCR 588 419,787/40 41 145,027/9 puted based on the difference in selling and purchase population growth and huge supply. OCR 1,124 329,379/41 44 92,326/8 prices, taking into account the prevailing seller’s stamp CONTINUES NEXT PAGE EP2 • THEEDGE SINGAPORE | AUGUST 3, 2015 THEEDGE PROPERTY COVER STORY EDITORIAL EDITOR | Ben Paul SECTION EDITOR | Cecilia Chow COPY-EDITING DESK | Elaine Lim, Evelyn Tung, Chew Ru Ju, Tan Gim Ean, Choy Wai Fong Table 2 PHOTO EDITOR | Samuel Isaac Chua Proliferation of PHOTOJOURNALIST | Bryan Tay EDITORIAL COORDINATOR | The biggest gains accrued to units bought during market downturns Rahayu Mohamad DESIGN DESK | Tan Siew Ching, value deals in BOUGHT IN NO OF GAINS AVERAGE PROFIT ($/%) NO OF LOSSES AVERAGE LOSS ($/%) Christine Ong, Monica Lim, Nik Edra, THE EDGE PROPERTY URA, Mohd Yusry, Henry Lee 1995 29 487,813/53 – – high-end segment 1996 40 427,136/41 – – 1997 51 341,064/40 – – RESEARCH TEAM 1998 39 479,440/80 – – HEAD OF RESEARCH | Feily Sofi an spurs demand and ANALYSTS | Esther Hoon, Lin Zhiqin 1999 72 591,491/73 – – 2000 46 507,631/53 – – ADVERTISING + buying activity 2001 51 602,580/78 – – MARKETING 2002 73 716,764/86 – – HEAD | Edward Stanislaus 2003 40 767,611/95 – – GROUP SALES MANAGER | Cecilia Kay SENIOR MANAGER | Windy Tan FROM PREVIOUS PAGE 2004 54 894,372/102 – – MANAGERS | Jack Lin, Mabel Wong, Danna Pusta, Elaine Tan In the city fringe and mass market, more than 2005 91 883,899/90 – – 90% of transactions in 1H2015 were still in the 2006 114 740,211/73 11 -1,238,142/-18 THE EDGE PROPERTY black. The profit margins in both segments were 2007 254 431,394/35 37 -395,179/-13 | Cowie Tan GROUP SALES MANAGER similar at roughly 40%. Quantumwise, city-fringe 2008 111 345,937/30 5 -1,095,230/-29 SENIOR MANAGERS | Diana Lim, Cheryann Yeo homes yielded a higher profit than mass-market 2009 284 413,617/37 12 -608,618/-16 homes, averaging $419,787. 2010 434 218,780/19 32 -248,101/-8 EVENTS MARKETING 2011 251 135,916/13 45 -285,964/-15 SENIOR MANAGER | Sivam Kumar Buy when prices are not toppish, in a market 2012 47 100,599/13 22 -173,965/-14 DIGITAL MARKETING ASSISTANT | Tim Jacobs with strong fundamentals 2013 2 19,200/1 12 -406,346/-20 COORDINATOR | Nor Aisah Bte Asmain All units bought in or before 2005 and subsequently 2014 – – 5 -332,640/-18 resold in 1H2015 resulted in a profit for the seller. CIRCULATION The biggest gains accrued to units bought during MARKETING MANAGER | Coleman Lim market downturns such as in 1998 and 2001 to residential sector, he notes. Supersize versus superskinny OPERATIONS 2005, which yielded an average profit margin of The study further shows that 12 of the 14 buy- Sellers of large units took the brunt of the softer MANAGER | Cesar Banzuela De Jesus, Jr between 78% and 102% (see Table 2). It is every ers who purchased their units at 2013’s peak prices market. Around 14% of transactions involving EXECUTIVES | Gerald Aw, Hannah Wong, buyer’s wish to catch the bottom of a market and resold them this year ended in the red. In ad- large units of more than 1,500 sq ft resulted in Malliga Muthusamy cycle, but we might recall how rock-bottom prices dition, all five buyers who purchased their units a loss for the seller, with an average loss margin CORPORATE and a 90% loan-to-value limit failed to entice in 2014 and flipped them this year got their hands of 17%. CHIEF EXECUTIVE OFFICER | Ben Paul buyers as retrenchment and pay-cut fears crip- burnt. Ultimately, buyers should consider their fi- At the other extreme, shoebox units measur- MANAGING DIRECTOR | Edward Stanislaus pled the market. nancial situations prudently and avoid overleve- ing less than 500 sq ft are chalking up more loss- CORPORATE AFFAIRS DIRECTOR | Ng Say Guan Alan Cheong, head of research at Savills Sin- raging, leaving themselves with no room to ma- es as well. gapore, says: “It may sound counter-intuitive noeuvre if unwanted circumstances strike. The proportion of unprofitable deals for shoe- to recommend real estate when governments A large low-floor unit at The Claymore in box units is climbing steadily, from 3% in 1H2014 PUBLISHER The Edge Publishing Pte Ltd around the world are trying to cool asset prices CCR topped the profit chart. The seller bought to 7% in 2H2014 and, finally, 9% in 1H2015. The 150 Cecil Street #08-01 and interest rates are gearing to rise. The caveat the unit in 2002 for $3.3 million and resold it in average profit has also fallen below 20% from Singapore 069543 Tel: (65) 6232 8622 is that investors should look at markets that are June this year for $8.5 million, netting a hefty earlier years. Fax: (65) 6232 8620 fundamentally sturdy, with a strong adherence profit of 158%, or $5.2 million. Meanwhile, the Shoebox units, particularly those in the to the rule of law, where supply is constrained biggest loss — amounting to more than $5 mil- mass-market segment, face competition from PRINTER by geographical factors and prices are not top- lion, or 49% — accrued to a unit in the Sea- three- and four-room HDB flats, as the latter of- KHL Printing Co Pte Ltd pish.” Singapore real estate certainly checks out scape in Sentosa Cove, also within CCR (see Ta- fer more space for a similar or lower rent, albeit 57 Loyang Drive Singapore 508968 these requirements, particularly in the high-end bles 3 and 4). without condominium facilities. E Tel: (65) 6543 2222 Fax: (65) 6545 3333 Table 3 We welcome your comments Most profi table transactions in 1H2015 by market segment and criticism: propertyeditor.sg@ bizedge.com PROJECT NAME AREA DATE PURCHASE DATE SALES SSD PROFIT (SQ FT) BOUGHT PRICE ($) SOLD PRICE ($) ($) ($/%) THE EDGE PROPERTY URA, Pseudonyms are allowed but please state your full name, address and contact Core Central Region number for us to verify. The Claymore, #1 to #5 3,348 Sept 2002 3,300,000 Jun 2015 8,500,000 – 5,200,000/158 Ardmore Park, #6 to #10 2,885 March 1999 3,720,000 May 2015 8,450,000 – 4,730,000/127 Four Seasons Park, #21 to #25 3,821 Sept 2005 6,200,000 May 2015 10,500,000 – 4,300,000/69 Rest of Central Region Teresa Ville, #21 to #25 3,972 Oct 2006 1,770,000 April 2015 3,600,000 – 1,830,000/103 Camelot By-The-Water, #1 to #5 3,186 Feb 2007 2,580,000 Jan 2015 4,350,000 – 1,770,000/69 The Waterside, #11 to #15 2,400 Oct 2005 1,690,000 Jan 2015 3,380,000 – 1,690,000/100 Outside Central Region CT Grand Duchess At St Patrick’s, #1 to #5 2,088 Dec 2006 1,288,000 Apr 2015 2,850,000 –

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