Fire sale? Don't hold your breath

[got news]

Aug 31, 2008

Fire sale? Don't hold your breath

Panic selling of homes unlikely this year and next as investors sitting on comfortable profits are in no hurry to exit market, say analysts


The panic selling of homes that some property experts had forecast months ago has not materialised after all - not this year, anyway.

Market watchers had previously warned that the negative sentiment in the property market - which stemmed from the United States sub-prime crisis late last year and persists still - might prompt property investors to offload their uncompleted units at fire-sale prices and drive home prices down.

But a recent analysis by Savills Singapore found that almost everyone who sold a private apartment or condominium unit in the sub-sale market in the first seven months of this year pocketed robust gains.

This implies that, for this year at least, property investors are still sitting on comfortable profits and are likely to be in no hurry to exit their investments, said Savills' director of business development and marketing, Mr Ku Swee Yong.

'The cost of holding on to properties is quite low right now because of low interest rates, so for those who haven't already exited the market, there's no urgency to sell,' he added.

When an individual buys an uncompleted property and resells it before it has been built, the transaction is called a sub-sale. Such sales are often used to measure property speculation, since sub-sale sellers are often short-term investors who never intended to occupy their units.

Savills' data, first published in the Business Times last Tuesday, showed that 97 per cent of sub-sale sellers this year have cashed out at a profit. On average, they reaped $417,563 per unit, or a 36.5 per cent gain.

Property consultants say this comes as little surprise, as many of the units that were sub-sold this year were in developments that were launched in 2006 or even earlier, at relatively low prices that allowed plenty of room for price gains.

Citylights in Jellicoe Road, for instance, which saw the most number of sub-sales this year, was first launched in December 2004 at an average price of $590 per sq ft (psf). Up till the development was completed earlier this year, units changed hands at steadily rising prices, topping out at $1,200 to $1,300 psf.

But while the private housing market may be spared the carnage of selling hysteria this year and even next year, some industry players caution that 2010 may be a different scenario.

The projects that will be completed then were mostly launched during the peak of the market last year and this year. Buyers bought high and are likely to register losses if they want out of their investments, experts say.

Generally, there is a rush to offload units right before a project's completion, as that is when more payment instalments are due.

So come 2010, if prices stay soft and the economy has not made a spectacular recovery from the current slowdown, buyers might start to feel a greater urgency to sell their properties and the market might be flooded with these 'expensive apartments', said Wing Tai chairman Cheng Wai Keung last week.

Mr Colin Tan, associate director of Chesterton International, added that investors who have cashed out by now are the experienced ones, while 'it is the novice investors who are usually left holding on to their units' and may be more prone to panic selling later.

Already, the profits that were reaped by sub-sellers this year have dwindled according to how recently they bought their units, consultants noted.

Those who made the original purchase in 2004 and 2005 gained more than $600,000 each on average, while those who bought their units last year made only $230,000 on average, according to Savills' data. Investors who bought and sold within this year reaped only about $175,000 on average.

Part of this is due to the general principle that the longer you hold a property investment, the greater the gains will be, said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

However, a large part of the difference in gains also arose from the huge run-up in prices over the last two years. This spectacular growth is unlikely to be repeated, removing a cushion from investors still hoping to resell their units before completion in 2010 and beyond.

But a glimmer of hope for the property market lies in the healthy profits that investors have made so far this year.

Savills estimates that punters took home a total of $350 million in profits alone from sub-sales in the first seven months of this year. While consultants think it is unlikely that all the money has already been ploughed back into property, they expect it to return to the market eventually, which may help to prop up prices.

However, Chesterton's Mr Tan believes this will happen only when current prices soften enough to attract investors again.

'Properties are not like shares - you cannot come in and out even as prices decline,' he said. 'To lessen your risk, you come in only when you think prices have bottomed out or are at sustainable levels.'

[dark-defender]

I'm no finance whiz but I reckon its only 'profit' if you didn't borrow to purchase it - otherwise I think its called a liability right?? And only those fortunate few who bought their second or third unit and can sell whenever they want will be able to hold on as you say... not those that are living in their so called profit now. Thats not even mentioning those expats whose company offers them to go and want to sell up quickly. Anyway - I don't really care - just bored and nothing better to reply to.

[Puzzled]

this is akin like saying -

when i have sold 3 out of 100 available homes with price of 2X intrinsic value, i am sitting pretty much in profit. yeah, market is holding up.

Well, partially correct but leads u nowhere. let's wait for the result of the rest 97!

[a (breathless?) bear]

no one geniunely expect prices to crash back to 2004-05 levels.  I am a bear, but I do congratulate those who bought in 04-05.  Fantastic investment, wish I was so smart.  Most of us bears epxect prices to fall back to anything from early 06 to early 07 level (yep I realise it is a wide range, different people will have a different level of bearishness...)

However, it is interesting that property spruikers now have to resort to reporting the gains of those who bought in 04-05... a sign of desperation in my view.  No one refered to 04-05 last year.

[Puzzled]

Price is all about supply and demand, speculative activities (for properties bought other than own stay) is devilish and have created artificial demands. Governed body should be clear of what should be speculative and what should not.

Not a socialist but do think the below sound logical

1) HDB catering for the common folks and it should not be speculative at all. Price in the resale market should be fixed say, a price cap at 20% of initial cost (10% profits to the developers + index tagged to yearly inflation of SIBOR. + renovation) - should be good enough to house 50% of the population with this.  Beside the current rule of 5-yr occupation period, resale of resale can only be made 2 yr after occupation.

2) HDB subsidized private property - To cater for middle income Citizen or PR household who cant afford private apartment - this should house something like 30% of the population, and the side benefit is to encourage more FT to apply for SPR or citizenship. It should still be cheaper than the private apartment and let us cap it at 20% of the profit + inflation index. In fact option 1 should be reduced and be replaced by option 2 over the long run.

3) Private apartment - ok, let's make this market driven and open plot to house up to 10% of the population + 10% speculation.  High income household (>10k perhaps) can afford them and more detach from the up and down of property cycle.  If they think price is too high, they can choose the option 2 above by taking the necessary steps.

What about developers? Are they squeezed? No, a guranteed 10% profit in option 1 & 2 is god-given.

Don't fall into the trap of property bubble of what we have seen in Japan, the West and now in China.  A house, a shelter above our heads are not meant to be speculative.

[no profit if buy now]

the way i view after reading the article is if anyone buy at today prices, there is limited profits,if any? so why buy at this high price and carry a huge loan around?

[Kubes.SG]

Fiona Chan has done a good job reporting the statements of the real estate agents' analysis.  It did get me thinking, but then I realized that the full story is not being told.  Great for all those people who have sub-sold their prime properties this year.  But I could not find in the article the actual number of sub-sales this year, for properties bought in each of the 04-07 years.  What I do know is that the number sold this year is less than 1000.  (NOT COUNTING THE MASS DEVELOPER SALES).

I did a quick check and found that one database is reporting 25,782 prime properties for sale in Singapore.  Of course there are some are duplicates in that list, lets say 20%.

So I don't think the that investors are "holding" deliberately, but instead I think the sellers (95% of them)  have not found buyers.   We still have a huge gap between sellers' asking price, and what smart buyers are willing to pay.  With so much supply today, and it drastically increasing with 25,000 to 50,000 new properties over the next 2-3 years, the power is very much with the buyers.  This can only mean significant downward pricing if the market moves at all.

TOTAL PROPERTIES FOUND: 25782 

 1   2   3   4   5   6   7   8   9   10   11   12   13   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   30   31   32   33   34   35   36   37   38   39   40   41   42   43   44   45   46   47   48   49   50   51   52   53   54   55   56   57   58   59   60   61   62   63   64   65   66   67   68   69   70   71   72   73   74   75   76   77   78   79   80   81   82   83   84   85   86   87   88   89   90   91   92   93   94   95   96   97   98   99   100   101   102   103   104   105   106   107   108   109   110   111   112   113   114   115   116   117   118   119   120   121   122   123   124   125   126   127   128   129   130   131   132   133   134   135   136   137   138   139   140   141   142   143   144   145   146   147   148   149   150   151   152   153   154   155   156   157   158   159   160   161   162   163   164   165   166   167   168   169   170   171   172   173   174   175   176   177   178   179   180   181   182   183   184   185   186   187   188   189   190   191   192   193   194   195   196   197   198   199   200   201   202   203   204   205   206   207   208   209   210   211   212   213   214   215   216   217   218   219   220   221   222   223   224   225   226   227   228   229   230   231   232   233   234   235   236   237   238   239   240   241   242   243   244   245   246   247   248   249   250   251   252   253   254   255   256   257   258   |  Next

What I have noticed as I browse through the listings is that most now have no asking price.  When I last looked a few weeks ago this was very much the exception.

[To Kubes SG]

Fiona Chan has done a good job reporting the statements of the real estate agents' analysis.  It did get me thinking, but then I realized that the full story is not being told.  Great for all those people who have sub-sold their prime properties this year.  But I could not find in the article the actual number of sub-sales this year, for properties bought in each of the 04-07 years.  What I do know is that the number sold this year is less than 1000.  (NOT COUNTING THE MASS DEVELOPER SALES).

I did a quick check and found that one database is reporting 25,782 prime properties for sale in Singapore.  Of course there are some are duplicates in that list, lets say 20%.

So I don't think the that investors are "holding" deliberately, but instead I think the sellers (95% of them)  have not found buyers.   We still have a huge gap between sellers' asking price, and what smart buyers are willing to pay.  With so much supply today, and it drastically increasing with 25,000 to 50,000 new properties over the next 2-3 years, the power is very much with the buyers.  This can only mean significant downward pricing if the market moves at all.

TOTAL PROPERTIES FOUND: 25782 

 1   2   3   4   5   6   7   8   9   10   11   12   13   14   15   16   17   18   19   20   21   22   23   24   25   26   27   28   29   30   31   32   33   34   35   36   37   38   39   40   41   42   43   44   45   46   47   48   49   50   51   52   53   54   55   56   57   58   59   60   61   62   63   64   65   66   67   68   69   70   71   72   73   74   75   76   77   78   79   80   81   82   83   84   85   86   87   88   89   90   91   92   93   94   95   96   97   98   99   100   101   102   103   104   105   106   107   108   109   110   111   112   113   114   115   116   117   118   119   120   121   122   123   124   125   126   127   128   129   130   131   132   133   134   135   136   137   138   139   140   141   142   143   144   145   146   147   148   149   150   151   152   153   154   155   156   157   158   159   160   161   162   163   164   165   166   167   168   169   170   171   172   173   174   175   176   177   178   179   180   181   182   183   184   185   186   187   188   189   190   191   192   193   194   195   196   197   198   199   200   201   202   203   204   205   206   207   208   209   210   211   212   213   214   215   216   217   218   219   220   221   222   223   224   225   226   227   228   229   230   231   232   233   234   235   236   237   238   239   240   241   242   243   244   245   246   247   248   249   250   251   252   253   254   255   256   257   258   |  Next

What I have noticed as I browse through the listings is that most now have no asking price.  When I last looked a few weeks ago this was very much the exception.

Duplication is 80% and not 20%. You know nothing of how agent operate so best you keep your comments on this matter to yourself instead of wasting time deducting nonsensical conclusions from data you do not have any knowledge of.

[quixot]

So you are agent so you know better about how agent biz works?
Ok, fine, prove to us it is 80% instead of 20%. Otherwise, I will take 20% which makes more sense

[wwwwwwwwww]

So you are agent so you know better about how agent biz works?
Ok, fine, prove to us it is 80% instead of 20%. Otherwise, I will take 20% which makes more sense

You can do your own research. If it was 20$, prices would have crashed by now. But they are holding up very well to the dismay of bears.

[u think it's bottom?]

DJ MARKET TALK: S'pore Property Sector Not At Trough Yet - CIMB

[Myopic]

DJ MARKET TALK: S'pore Property Sector Not At Trough Yet - CIMB

Maybe there is another 5-10% to go = so what is the bih shit about it. In 10 years time it will still be up 50% at least.

[Yes of course]

over time. BUT don't expect peoples to follow you and get caught. Prices will come off. Peoples are less myopic than you. Why buy when prices are falling. Sales transaction volumes are dwindling and we wanna buy cheaper than you 

[Selling]

My landlord has been trying to sell his 4-bedder apartment in the last 4 months but no one has come to take a peak.....

Lots of properties on the market but only a handful are buying and there are more sellers out there.