Published January 9, 2009

Bargain hunting starts in tepid property market

Four recent sub-sales have been transacted at 20% below launch prices

By ARTHUR SIM

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THE hunting season seems have begun in the property market, with at least four buyers making a killing.

A UBS report says that according to URA data, four recent sub-sales have been transacted at 20 per cent below launch prices.

Two units at Ardmore II were sub-sold for $2,000 per sq ft, compared with the last-transacted price of $2,400 psf. One unit at Scotts Square was sold at $3,050 psf, compared with the last-transacted price of $3,850 psf in the second quarter of last year.

And one unit at Sky @ Eleven was sold at $880 psf, compared with the last transacted price of $1,270 psf in Q2 2007.

'Prior to this, we believe there has not been a single sub-sale transaction more than 11 per cent below the new sale price for the same unit,' said UBS analyst Regina Lim.

UBS believes that the sharply lower sub-sale prices signal a major change in buyers' risk appetite and the outlook for Singapore residential property.

It noted that some projects sold in 2006 and expected to be completed by Q4 this year could be the subject of defaults by buyers if sub-sale prices fall 30 per cent below launch prices.

'This is especially as 40 per cent of buyers of new apartments above $1.5 million were foreigners or companies in 2006 and 2007, and it may be difficult not to repudiate the sale-and-purchase agreements for these buyers if they default,' UBS said.

Cushman and Wakefield managing director Donald Han said that he does not expect many sub-sales to be transacted at big losses because developments that will receive their temporary occupation permit (TOP) this year - and hence, requiring loan draw-downs - are likely to have been launched in 2006 before prices peaked.

But he added: 'People that bought in 2007 and 2008 will want to get out of the market.'

Knight Frank director (research and consultancy) Nicholas Mak said that 'not all sub-sales lose money'. Some recent sub-sales showed price increases, he noted.

Still, prime properties are likely see the biggest drop in prices, as these rose the most in the past few years, he said.

In its report, UBS says that prices in the primary market have also been cut.

Among new launches, the 104-unit Newton Edge, priced at $1,201 psf, is some 23 per cent cheaper than Viva, where 15 units were sold in Q3 last year for around $1,550 psf. And at RV Suites in River Valley Road, 19 units have been sold at $1,350 psf, which is 15 per cent below Wharf Residences at $1,600 psf and 38 per cent below Martin 38.