High-End Homes Shine in Sub-Sale Market

The sub-sale market in the high-end residential segment was abuzz in the second quarter, both in terms of price gains and activity, as those who bought units earlier took the opportunity to sell them for a tidy profit.

DTZ Debenham Tie Leung’s latest analysis of caveats shows the median price of private apartments and condos that changed hands in the sub-sale market in Q2 jumped 37% from Q1. The median price rose from $598 per square foot in Q1 to $822 psf in Q2.

This was the highest level since $830 psf a decade ago in Q2 1996 at the peak of the property market, according to the firm’s analysis of caveats captured by the URA Realis database.

Subsales essentially refer to cases in which buyers who bought from developers sell in the secondary market prior to the project receiving Certificate of Statutory Completion. The certificate is typically issued about a year after a project receives Temporary Occupation Permit.

Sub-sales - often seen as a proxy of the level of speculative activity in the property market - were transacted largely for apartments/condos in the higher price brands in the April-June quarter this year, DTZ says.

The two highest price bands DTZ used in its five-tier analysis - units costing $1 million to less than $1.4 million, and units priced at $1.4 million and above - accounted for 44 per cent of total sub-sale transactions in Q2.

These two price bands posted respective quarter-on-quarter increases of 73% and 23% in the number of sub-sale deals. There was also a 60% quarter-on-quarter rise in number of sub-sales of units costing $800,000 to less than $1 million.

DTZ attributes this partly to strong interest in exclusive projects that were either completed recently or are nearing completion - such as The Pier at Robertson along the Singapore River, and The Berth By The Cove at Sentosa Cove.

‘People who want to buy homes for owner occupation or for investment with immediate rental income flow tend to prefer a unit that is nearing or has received Temporary Occupation Permit,’ says DTZ executive director Ong Choon Fah.

She also points to sub-sale interest in popular projects such as Icon in Tanjong Pagar, The Berth by The Cove and The Sail @ Marina Bay (first tower) that were launched by developers a few years ago at prices lower than those of similar projects released recently.

For instance, Ho Bee launched The Berth by The Cove in late 2004 at an average of $785 psf. Condo units there today would be worth more than $1,000 psf, property agents say.

DTZ says: ‘With the price recovery in high-end residential projects, those who bought units earlier in such developments have been able to benchmark the value of their properties against the newer projects.

‘This has created an opportunity for them to sell their units in the sub-sale market to the increasing number of buyers who are keen on such high-profile exclusive projects.’

DTZ’s analysis shows that while there was a pick-up in sub-sale deals in the higher price bands in Q2, activity in the two lowest price tiers declined from the preceding three months. As a result, the total number of apartments and condos sold in the sub-sale market for Q2 - at 115 - was hardly changed from the Q1 figure of 113.

Buyers with HDB addresses continued to account for a lower share of the number of sub-sale deals for private apartments and condos, down to to 23% in Q2 from 38% in Q1.

The firm also notes that the number of sub-sales continued to remain relatively low in Q2 - at 2.8% of the total 4,096 apartment and condo transactions in the quarter.

‘Going forward, while sub-sales will still be significantly lower than the levels between 1996 and 1999, the momentum for the sub-sales market is expected to strengthen on the back of the recovery of the high-end residential market and several high-profile projects that are expected to be launched,’ DTZ says.

‘These will boost median prices of apartments/condos transacted in the sub-sale market. In addition, a strong take-up for these forthcoming high-profile launches may also lead buyers who are unable to secure a choice unit to remain interested in the sub-sale market for several top-quality projects which have been previously released at lower prices.’

Source: The Business Times, 29 August 2006