Sunday, February 21, 2010

‘Flipping’ rate at 3-year low

Sub-sales of non-landed homes fell to a three-year low last year, with the proportion at 14 per cent of total non-landed sales, said the latest report from property consultancy DTZ.

This figure is below the 16 per cent in 2008 and 15 per cent in 2007, but much higher than the 2 per cent to 11 per cent registered between 1998 and 2006.

A sub-sale takes place when a buyer buys a new apartment, then resells it before it is built. These deals are usually used as an indicator of speculative activity in the property market.

There were some concerns about the rise in speculative buying in the middle of last year when prices were rising.

In mid-September, the Government announced cooling measures which appeared to have tempered speculative interest, said Colliers International director of research and advisory Tay Huey Ying.

New measures announced on Friday could further dampen interest a little.

The Government said it would levy a stamp duty on sellers of private homes if they were to sell the homes within a year of purchase on or after Feb 20 this year.

It also lowered the loan-to-value limit to 80 per cent for all housing loans provided by financial institutions, from 90 per cent previously.

The Government introduced these measures to ‘temper sentiments and pre-empt a property bubble from forming’.

The moves come despite the comparatively lower speculative activity now.

In 1995, sub-sales accounted for a hefty 29 per cent of total non-landed sales. This figure was at 23 per cent in 1996. Last year, median sub-sale prices rose by 24 per cent.

DTZ noted that the median sub-sale price of non-landed homes rose by 3.8 per cent to $1,090 per sq ft in the fourth quarter of last year.

In the last three months of last year, Casa Merah in Tanah Merah saw the highest number of sub-sale transactions, followed by Ferraria Park in Changi.

Median sub-sale prices at Casa Merah rose to $800 psf in the fourth quarter, up from $770 psf in the third quarter and $671 psf at the end of 2008. Both projects were granted Temporary Occupation Permits in the third quarter of last year, DTZ said.

Newly completed projects or those nearing completion usually attract a higher level of sub-sales as the new buyer can move in or rent it out quickly, consultants said.

Knight Frank managing director for residential services Peter Ow thinks sub-sales as a proportion of total home sales may rise this year as many projects will be completed this year.

Other experts think that with the new measures, sub-sale numbers may hold steady this year.

In any case, consultants generally do not expect sub-sales to rise significantly this year. Said Ms Tay: ‘Last year, many people bought mass market properties. But, as mass market prices may not rise substantially this year, there may not be many gains to be made in the sub-sale market.’

High-end prices are expected to rise more than mass market prices this year, but runaway prices are unlikely, said DTZ, given concerns such as credit tightening in China.

‘Those who want to flip can do so only when the market is rising very fast,’ said its head of South-east Asia research, Ms Chua Chor Hoon.

‘The new measures won’t scare away the speculators. But they will make them think very carefully about flipping as the Government could introduce more measures if needed,’ said Ngee Ann Polytechnic lecturer Nicholas Mak.

Source: Sunday Times, 21 Feb 2010

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