http://www.businesstimes.com.sg/spec...ories-20130110
Published January 10, 2013
Investors make a bundle from trading in strata factories
All but two of the 618 deals last year matched against previous caveats were profitable
By Kalpana Rashiwala
ABOUT 60 per cent of the 618 units of 60-year strata factories sold in the secondary market last year and for which previous sale records could be traced, had been last sold in 2010 or 2011.
An analysis of caveats by Savills Singapore indicates that 5.8 per cent of the 618 units (36 units) changed hands faster: they were bought last year and resold or subsold before the year was out.
By going through the Realis' caveats database of the Urban Redevelopment Authority (URA), Savills found 1,136 caveats involving secondary-market transactions last year that were resales and subsales of 60-year strata factory units.
But the property consultancy could find caveats of previous transactions for only 618 of those 1,136 units, and so set about working out how much profit secondary-market buyers made upon resale or subsale of those 618 units.
Savills' exercise found that nearly all those who bought and then sold the 618 units - 99.7 per cent - made money. Only two transactions (0.3 per cent) incurred a loss.
The two loss cases involved units that had been bought in 2011.
The profit or loss was calculated as the difference between the sale and purchase price, without taking into account transaction costs and other expenses.
Among the 616 profitable deals, the average profit was 47 per cent, or $262,636.
The biggest gains were made by investors who waited the longest before selling their units last year: The owners of the 73 units bought in 2007 gained, on average, 85 per cent or $406,160.
This group was followed by those who bought their units during the 2009 economic downturn and divested their properties last year, reaping an average gain of 64 per cent or $366,208.
The elevated prices paid for the 177 units bought in 2011 and offloaded last year at a gain trimmed profits for their sellers to 27 per cent or $166,795 on average.
Finally, investors who bought the 36 strata factory units last year and flipped them in the same year all managed to make a gain, but their profit margin thinned to 15 per cent or $86,797 on average.
The industry makes a distinction between subsales and resales in secondary-market deals. Subsales are sale transactions for projects which have yet to receive a Certificate of Statutory Completion (CSC) and where property titles for units sold have yet to be transferred to the buyers; resales refer to transactions involving projects for which CSCs and titles have been issued.
Savills' study showed that the most popularly traded project in the secondary market last year - at least among those for which caveats of previous transactions could be traced - was Harvest @ Woodlands in Woodlands Industrial Park E5, with 58 units.
Rounding off the top four developments were Midview City in Sin Ming Lane, Tradehub 21 in Boon Lay Way and Northstar@AMK, with 43 deals each.
The most profitable secondary-market deal among the 618 was for a unit in Woodlands Bizhub. This was bought in July 2009 for $1.01 million and transacted again last February for $2.47 million, yielding a gain of $1.46 million.
Savills Singapore believes that 2012's total volume of primary sales (by developers) and secondary-market sales of factories and warehouses of all tenures will probably be slower than that of the year before.
With fourth-quarter deals still to be fully counted, 4,392 caveats had been lodged for 2012; the final quarter could bring the final tally to around 4,700, still shy of the 5,183 in 2011.
Savills Singapore research head Alan Cheong said prices for 60-year upper storey factory and warehouse units tracked by Savills continued to rise through 2012: They climbed 3.3 per cent quarter on quarter to $451 per square foot in Q4 2012, taking the full-year price increase to 13 per cent, half of the 26 per cent gain chalked up in 2011.
On the leasing front, a record 5,924 rental deals were inked from January to November last year, surpassing the 5,575 deals for the whole of 2011.
Mr Cheong said: "However, demand was driven mainly by renewals as cautious industrialists deferred their purchase plans. Monthly average rents stabilised at $2 psf for upper-storey factory and warehouse units, and at $3 psf for high-tech units in Q4 2012."
Data from the URA indicates that around 27 million sq ft gross floor area of industrial space is expected to be completed this year.
Mr Cheong said: "Based on our observations, the actual supply completed could be significantly lower, although it would still be substantial, compared with an average net take-up of 9.5 million sq ft net lettable area annually over the past decade."
The major projects expected to be completed this year include North Spring Bizhub (1.25 million sq ft) and Woodlands 11 (869,000 sq ft).
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