Investors should be prepared to fork out more cash if they wish to enter the sub-sale market.
Prices have risen during the first quarter even though the volume of sub-sale transactions of non-landed homes remained stable at 13 percent of the total non-landed sales, according to the latest report from DTZ.
The median sub-sale price of non-landed private homes increased nine percent from Q4 of 2009 to reach $1,190 psf in the first quarter.
When a buyer purchases a new apartment then resells it before it is built, a sub-sale takes place.
This kind of deal is usually used as an indicator of speculative activity in the real estate market.
The Singapore government implemented a seller’s stamp duty and lowered the loan-to-value limit for housing loans from 90 percent to 80 percent in order to lead the investors in February 2010.
According to Mr. Joseph Tan of CBRE Research, the sellers will want to increase their prices by a bit more since they will be charged an extra three percent for a stamp duty when they offload a property within a year of purchase.
But these measures would not have much impact on the market as sub-sales are already at a low level, according to DTZ.
Moreover, sub-sales contributed 35 percent of total sales, which was a lot higher during the 1995-1996 boom.
The highest number of sub-sale deals in the first quarter was seen in One Amber in the Amber Road area followed by The Parc Condominium located at West Coast Walk.
Median prices of One Amber sub-sale units increased 5.9 percent to $1,200 psf, while The Parc Condominium saw a 3.3-percent rise to $959 psf.
DTZ said that it was because the two projects are expected to have their temporary permits in the second quarter.
Interest in sub-sales is expected to increase before a development is ready for occupation.
That is when some may want to cash out their investment, while those who buy are able to move in right away to a brand new home or rent it out.
In line with the economic growth, prices are expected to increase but sub-sales should remain steady as many people buy for long-term investment, according to Ms. Chua Chor Hoon of DTZ.
Mr. Tan said that because of the school holidays, the World Cup and the Eurozone crisis, the sub-sale market may quieten down. But after July, if the response improves, then activity could return.