H1 Subsale study - interesting read!

In a study conducted by Ngee Ann Polytechnic, most subsales of private non-landed homes in 1H 2014 involved relatively long holding periods.

This may suggest that the seller's stamp duty (SSD) is effective in curbing speculative deals. Subsales are secondary-market transactions in uncompleted projects.

In the high-end segment, nearly all subsale caveats were traced to units that were bought in 2009 and 2010, when SSD was not implemented yet. There were no caveat lodged for units in the Core Central Region (CCR) that were previously bought in 2012 and 2013.

In the mass-market segment, 73% of subsale transactions involved properties that were bought in 2009 and 2010.

SSD was introduced in 2010 for residential properties bought on or after 20 Feb 2010 and flipped within a year. Later that year, SSD was extended to properties bought on or after 30 Aug 2010 and sold within 3 years. And since early 2011, the holding period has been extended to 4 years with sharply higher rates. Residential properties bought from 14 Jan 2011 and sold within 4 years incur SSD of 16, 12, 8 or 4% if they are sold in the first, second, third and fourth year of purchase respectively.

Given their long holding periods, most of the H1 subsale transactions were profitable, though the proportion of subsales that were in the black was higher in the mass-market segment, where prices have climbed at a faster clip from the Q2 2009 through.

75% of the 40 subsales in CCR made money. In the Outside Central Region (OCR), where mass-market homes are located, the proportion is 97%, out of 142 subsales.

Profit or loss was calculated by comparing the latest price against the price at which the unit had previously changed hands, factoring in the prevailing SSD rates (if applicable). However, other costs such as interest, legal fees and ABSD were not counted.

The URA data was further dissected to identify the biggest absolute quantum in terms of gain and loss, respectively, for subsale deals done in 1H 2014.

From the data compiled,  two conclusions are quite evident for at least the first half of this year:   

1. Owners of units that are mainly in the suburban areas (OCR) fare much better in the subsale market than their counterparts with units in the prime districts (CCR), both in terms of % profit (much bigger) and % loss (much smaller). This seems to run contrary to our belief that properties in the prime districts are generally considered "good location buys" as they tend to retain their values better.  

2. Buying a unit right in the heart of CBD may not necessarily be the "cash cow" that one originally perceived it to be.

 

However, the wife and I suspect that the above may just be a reflection on those who do not have the necessarily "holding power" to ride out the current property storm. It will be interesting to have the same sets of analysis done a year from now, when the impending deluge of new homes especially in the OCR region hits the market.