Tuesday, August 26, 2008

Subsale Property Gains Top Out At $4.2m

Source : The Business Times, August 26, 2008

But Cosmopolitan penthouse seller nurses $463,400 loss

The biggest profit in absolute dollar terms from a subsale deal in the first seven months of this year was $4.2 million, reaped for a 22nd-floor unit at The Grange.

It was offloaded in the subsale market in April for $11 million, compared with a $6.8 million purchase price in September 2005 paid to the developer.

In fact, on an average basis too, The Grange has seen the most profitable subsale deals this year, with the 13 units sold in the project between Jan 1 and July 31 generating an average profit of slightly over $2 million per unit.

In percentage terms, the average subsale gain at The Grange worked out to 52 per cent, according to Savills Singapore, which analysed caveats for subsale transactions from Jan 1 to July 31 captured by the Urban Redevelopment Authority's Realis system as at Aug 19.

The biggest subsale loss was $463,400 for a penthouse unit at The Cosmopolitan at Kim Seng Road. It was sold in April for about $2.3 million, against the $2.8 million purchase price paid in July last year.

Other projects with sub sale losses included two units at Soleil @ Sinaran, four at City Square Residences, three at Citylights and one each at One St Michael's, Park Infinia at Wee Nam and Marina Bay Residences.

Percentage-wise, some of the biggest subsale profits were recorded for The Sail @ Marina Bay. The seller of a unit on the 49th floor reaped a 178 per cent return when he disposed of it in May for $1.43 million, compared with the $510,400 he paid to buy the apartment from the developer in late 2004.

Owners of 14 other units at The Sail also doubled their money or more, when they sold their properties in the subsale market this year. However, there was also a unit in the development that chalked up a $63,000 subsale loss.

Among prime district projects, profitable sub- sales included a 17th floor unit at St Regis Residences, which yielded a handsome $2.78 million return for its seller in June, after a two- year holding period. A sub- sale deal at The Orchard Residences also generated a $1.44 million profit.

Over in the waterfront housing district of Sentosa Cove, four subsales of The Azure condo resulted in gains of at least $1 million per unit. One unit, in fact, generated a $3 million profit for a two-year-plus holding period.

However, the owner of another unit in the 99-year leasehold condo incurred a $106,000 loss when he sold his unit in the subsale market in April for about $3.4 million after a 10- month holding period.

Analysts note that, given the current weaker market sentiment, profits from subsales can be expected to shrink in the days ahead, or there may be even more loss cases, particularly for those who bought at the peak of the market in the first half of last year.

Savills Singapore director of marketing and business development Ku Swee Yong suggests that there is no reason for panic selling if investors consider that interest rates are still very low.

'So owners who have not lost their jobs can still afford to hold on to their mortgages,' he said.

Also demand for rental properties should increase by early 2009 as the Marina Bay Sands resort boosts its employment drive ahead of its planned opening late next year.

A seasoned developer highlighted the fact that subsale transactions, whether at a gain or loss, are still taking place, is a good thing.

'There's diversity of different sellers, with varying financial strengths and abilities to hold, and similarly, there's a diversity of buyers. There's still liquidity out there. That's a good thing.

'If we didn't have this diversity of behaviour and ability to buy, sell or hold, we'd have a very uni-dimensional and monolithic market.

'That wouldn't be a good thing because, then, you may have everybody wanting to sell at the same time (and nobody wanting to buy). Then the market would grind to a halt,' he said.

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