Sub-Sales Market May Stay Active As Punters Sell Units

Source : The Business Times, June 12, 2008

Median sub-sale price fell 8% in Q1 2008, says DTZ study

SPECULATIVE buying has eased, but the sub-sale market may continue to be active as speculators dispose of units in projects as they are physically completed, DTZ says in a recent report.
























'Those who had purchased multiple units on deferred payment schemes are most likely to sell some or all units to avoid stretching their financial limits,' it added.

Typically the deferred payment schemes under which many residential projects have been sold in the past by developers run out when the projects receive Temporary Occupation Permit (TOP). That is when buyers have to pay the bulk of the purchase price to developers.

The scheme was scrapped in October last year to discourage speculative buying which had sent private home prices to dizzying heights earlier - until the US sub-prime crisis struck.

DTZ's analysis of caveats lodged for private home purchases shows that the median sub-sale price fell by nearly 8 per cent quarter-on-quarter to $1,107 per square foot in Q1 2008.

This was due to fewer high-end units being transacted in the sub-sale market. Projects which received the strongest subsale interest in Q1 2008 were Citylights, Icon and Varsity Park Condo, as TOPs for these projects were granted recently, resulting in many speculators disposing of their early purchases, the report said.

Independent of whether they bought their units on deferred payment, property investors typically tend to sell off units shortly before or after a project receives TOP as buyers are willing to pay a slightly higher price then, because units in the development can be immediately rented, DTZ executive director Ong Choon Fah explains.

Sub-sales, used as a proxy for the level of speculative activity, refer to secondary market deals in projects that have yet to receive Certificate of Statutory Completion. This may be anywhere from three to 12 months after the project receives TOP.

DTZ's report also showed that foreigners (including permanent residents) accounted for 28 per cent of caveats lodged for overall private home purchases in Q1 this year, up slightly from a 27 per cent share in the preceding quarter.

Indonesians and Malaysians continued to be the biggest buyers, accounting for 18 per cent and 15 per cent respectively of private homes bought by foreigners in Q1 2008.

Buyers from India saw their share go up from 11 per cent in Q4 last year to 14 per cent in Q1 2008. However, Koreans' share slipped from 8 per cent to 5 per cent over the same period.

'The higher earlier share was partly due to a number of projects being marketed in Korea during 2007,' DTZ said.

Projects that were popular among foreign buyers in Q1 2008 included Zenith in the Zion Road location, Waterfront Waves facing Bedok Reservoir, and Marina Collection in Sentosa Cove.