Thursday, May 6, 2010

Gains soar for condo subsales at Sentosa Cove

Only one subsale so far this year has resulted in a loss - of $167,000

(SINGAPORE) Increases in property prices on Sentosa Cove, especially since the start of this year, have buoyed gains from subsale deals in the location.

The average gain per unit from subsales of condos in the upscale waterfront housing district from January to April this year has almost doubled to about $1.4 million from about $762,000 in Q1 2009.

Savills Singapore's analysis of URA Realis caveats as at May 3 shows that the most profitable subsale deal among condos on Sentosa Cove since the start of 2009 yielded a profit of slightly over $3 million. That subsale took place in March this year. In fact, six of the 11 subsales since the beginning of 2010 have generated a gross profit (sale price less purchase price) of at least $1 million apiece.

Only one subsale so far this year has resulted in a loss, of $167,000.

Savills' director of investment sales and prestige homes Steven Ming says that generally, those who sold Sentosa Cove condos in the subsale market this year after holding them for at least three years were the ones who reaped profits of about $800,000 or more. 'Opportunistic buyers who purchased in 2009 and sold within the same year made smaller gains ranging from about $100,000 to $754,000,' he adds.

Mr Ming notes that all 11 condo subsales this year have been at The Oceanfront @ Sentosa Cove, which received Temporary Occupation Permit (TOP) in March 2010. Nine of the 11 sellers had bought their units in 2006. 'They have witnessed the volatility of the market and took the opportunity to sell into strength or are already very satisfied with the tidy returns against their purchase prices.

'Moreover the units at Oceanfront are likely to have been bought on Deferred Payment Scheme and the need to fully fund the purchase kicks in when the project gets TOP. This could also have motivated some owners to divest their units rather than assume the burden of any additional mortgages,' he adds.

Savills' study showed that the proportion of subsale deals resulting in gains has also been higher from Q3 last year than in first half 2009, reflecting the surge in overall private home prices. In addition to the sanguine property climate, market watchers also singled out the opening of the integrated resorts (IRs) as boosting foreign interest in high-end properties.

Savills' analysis shows that foreigners including permanent residents have picked up about 41 per cent of the condos transacted in the subsale market since the beginning of last year.

'Most of the housing developments on Sentosa Cove are being completed, so you start to appreciate the whole environment better - the waterfront community and lifestyle, you can see yachts passing by, and the water has a very calming effect,' says DTZ executive director (consulting) Ong Choon Fah. 'The old concerns about Sentosa Cove being a giant construction yard with road congestion have faded away or are being addressed by the Sentosa Cove management.'

Savills found caveats for a total of 113 subsale deals for condos at Sentosa Cove since the start of 2009; it matched caveats for previous transactions for 103 of these properties, and used the price difference between the two to work out gains or losses for these units.

The firm's analysis also showed a total of eight caveats lodged for subsales of landed homes on Sentosa Cove since the start of 2009 and it found previous caveats on five of these. All five subsale deals were profitable. The bungalows were held for at least two years and the subsale gains ranged from $436,960 for a house at Paradise Island transacted in the subsale market in June last year to $5.7 million for a villa on Coral Island that was subsold in December last year.

Mr Ming reports that anecdotally, a good number of buyers, especially from mainland China, have been buying luxury properties in Singapore. 'This is particularly so for landed homes on Sentosa Cove, since this is the only place where foreigners who are not Singapore permanent residents are allowed to buy landed homes. Prices of such bungalows are already pushing $2,000 psf of land area and more. Demand appears sustainable and prices are likely to head northwards over the next 12 months. Many bungalow owners bought their land parcels at $400-800 psf and even with building costs, they stand to make good gains ahead,' he explains.

Among condo subsales, the most profitable deal involved a 13th-floor sky suite at The Oceanfront, which was bought in July 2006 for about $7 million and sold for slightly over $10 million in March this year. BT understands that the 5,038 sq ft unit was picked up by an Indian citizen, Nalinkant Rathod. A person with the same name, who is also a citizen of India, is president director at Indonesia-listed Bakrie & Brothers.

However, the most expensive subsale condo deal during Savills' study period was for a two-level penthouse sky villa in the same development that was subsold at $11.5 million in June last year. Its seller is believed to have reaped a profit of about $700,000 based on a previous caveat in February 2007 at $10.8 million.

The biggest subsale loss of almost $1.18 million was also chalked up for a unit at Oceanfront. It was bought in October 2007 for $5.5 million and sold last November for $4.3 million.

Subsales refer to secondary-market transactions in projects that have yet to receive Certificate of Statutory Completion. This can take place three to 12 months after TOP.

Source: Business Times, 6 May 2010

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