The highest sub-sales deals for the previous year is attributed to The Sail @ Marina Bay, generating the top gain, both in percentage and in absolute terms, as shown by Savills Singapore’s caveats analysis.
In total dollar terms, the 99-year leasehold project’s unit on top of the 60th floor managed to generate the largest profit of $6.66 million. It was in November 2005 when it was purchased for $1,508 per sq ft (psf) or $8.8 million, and in August 2008, it was sold in the sub-sale market for $2,650 psf or $15.5 million.
The unit situated in the 49th floor at The Sail acquired the highest percentage gain with 178 percent, being sold for $2,400 psf or $1.42 million in May 2008 in the sub-sale market and was initially bought from the developer for $862 psf or $510,400 in December 2004. Additionally, sub-sale profits of 175 percent and 176 percent were also yielded in The Sail.
The Sail saw 74 instances of gains produced from sub-sale transactions in 2008. According to market watchers, this was due to the release of the project in two phases, in 2005 and in 2004, that seemed to be “perfectly timed” prior to the rise in prices for residential property in 2006.
In terms of sub-sale deals that incurred losses for the previous year, $1.03 million was the largest loss in absolute quantum, which was due to the unit at Scotts Square’s 20th floor. The unit was sold for $3,050 psf or $3.7m in November 2008. The seller purchased it for $3,890 psf or $4.8m in August 2007 in the primary market.
The unit on the 26th floor at the Tribeca on Kim Seng Road had the biggest percentage loss of 36 percent. The owner paid for the unit for $1,553 psf or $885,800 in February 2007, and in December 2008, he sold it at $999 psf or $570,000.
“It’s reasonable to expect that subsale losses may increase this year, unless macro and global economic problems are ironed out and financing eases,” said Steven Ming, Savills Singapore director.
Peter Ow, executive director for residential marketing at Knight Frank, states that when it is the time to pay the developer, it usually makes investors slash sub-sale market losses. “An investor exposed to a few properties he has bought on deferred payment scheme may want to cut losses on the first one or two to improve his cashflow, so that when it is time to pay up for the third one, he can afford it,” added Mr. Ow.
Other developers resorted to reject the sale and buy agreement, and then sacrifice the 20 percent initial payment and finally sell the unit again, in case a buyer encounters some difficulties in obtaining bank loans and then paying up a small amount of the price when a Temporary Occupation Permit (TOP) is issued to the project. On the other hand, some developers sometimes sue their buyers and then force them in completing purchase agreement and sale at the price they had agreed on.
Mister Ow expects that for the upcoming projects in 2011 or 2012, the majority of investors are likely to retain their units since recovery in the property market is possible. “But for projects receiving TOP, say, this year, investors will have to weigh risks of whether they have the financial means to pay up. If not, it may be better to cut loss,” he said.