Speculation has all but disappeared from the Singapore property market, with the number of sub-sales recorded during January 2014 hitting an eight-year low.
Data from the Urban Redevelopment Authority (URA) analysed by PropertyGuru yesterday revealed just 37 sub-sale transactions were recorded in January 2014 – the lowest monthly total since February 2006.
The current lack of speculation and “flipping” is in stark contrast to July 2007 when some 928 sub-sale transactions happened during that month alone.
Donald Han, Managing Director of Chesterton Singapore, told PropertyGuru: “Sub-sale rates are nearing an all-time low after successive government cooling measures.
“The introduction of Seller’s Stamp Duty (SSD) and two rounds of Additional Buyer’s Stamp Duty ABSD) effectively increased a short-term speculator’s transaction costs by as much as 34 percent (15 percent ABSD assuming a foreigner plus 16 percent SSD assuming he sells within one year holding period, and a further 3 percent of usual stamp duties and legal fees).
“In the last two years price increases have been a paltry 2 percent to 3 percent per annum, and such capital gains are easily eroded by ABSD and SSD transaction costs. Those who had bought are holding assets for the long haul; short-term sellers will be lucky if they can make a decent gain in the market today.
“There is anecdotal evidence that those who sub-sold recently are looking to get out of the market, presumably in need of cash, and hence may sell in today’s market making losses.”
Han added that based on URA data there were only 147 sub-sale transactions in the last three months of 2013, the lowest since Q1 2006. He also noted that sub-sale rates (as a percentage of total resale transactions) were 3.8 percent, well below the 18 percent in 2011 or 28 percent back in 2006.
Evan Chung, Vice President, Resale Division for real estate agency DTZ, also noted the effect that successive cooling measures have had on the Singapore property sub-sale market.
He told PropertyGuru: “While all the cooling measures have had their desired effect on the broader market, what has affected the residential sub-sales market most directly are firstly the withdrawal of the Deferred Payment Scheme (DPS) in Oct 2007, secondly the removal of the Interest Absorption Scheme and Interest-Only Housing Loans in September 2009, and lastly and most of all, the three rounds of Seller Stamp Duties and LTV reductions.
“With the lack of easy financing and the increase in taxes that erode the profit of buyers who purchase units and flip them, sub-sales activities have dwindled and these have served to achieve the objectives of the authorities to reduce speculation in the local market.”
Chung noted an increase in speculation in the industrial sector from the start of 2010 until SSD was introduced for industrial properties in January 2013.
He said: “As you can guess, interest then shifted to commercial properties, however as commercial properties generally have a higher quantum the market is smaller for speculators.”
Chung predicts sub-sale activity to be greatly subdued as prices cool further.
He said: “Those who have bought off-plan prior to the four-year SSD that was implemented in January 2011 would likely be the ones still transacting in the sub-sale market, since they are mostly receiving their keys this year.
“Their target market would most likely be buyers looking for new but ready-to-move-in units. Furthermore, if the project is in a good and in-demand location they could still likely lock-in some capitals gains without incurring any SSD.”
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In January 2014 the most popular development for sub-sales was The Interlace, which saw 10 transactions at a mean average price of $1,267 per sq ft, according to URA data.
A sub-sale is defined by URA as: “The sale of a unit by one who has signed an agreement to purchase the unit from a developer or a subsequent purchaser before the issuance of the Certificate of Statutory Completion and the Subsidiary Strata Certificates of Title, or the Certificates of Title for all the units in the development.”
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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