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Private property speculators in retreat

Practice of 'flipping' units before completion falls to lowest in 5 years

Published on Oct 29, 2011

By Esther Teo, Property Reporter

Speculative activity

SUBSALE activity - a handy indicator of property speculation - has fallen to its lowest in about five years as the cooling measures appear to dampen demand in the private property market.

Subsales occur when an owner buys and sells a unit before the project is completed.

There were only 520 unit subsales in the three months to Sept 30 - just 6.6 per cent of the total number of unit transactions and the lowest level since the fourth quarter of 2006, Urban Redevelopment Authority (URA) data released yesterday said.

In the heady days from 2007 to 2009, it was common for buyers after having paid the deposit, to 'flip' the property for a sizeable profit within months or even weeks. There were reports of some investors who were able to make a couple of hundred thousand dollars in the space of a few months.

The highest activity for subsales ever recorded was in the fourth quarter of 2008 when they comprised 16.3 per cent of all sales. URA began collecting information in 2004.

But these days are over. Subsale transactions are also down from the second quarter when 816 units were transacted, comprising 8.3 per cent of total sales.

Experts said January's tough cooling measures, the fourth round to be imposed, have creamed off demand from speculators and short-term investors.

The measures, which include a hefty seller's stamp duty of up to 16 per cent, have also dampened subsales activity and prompted buyers to rethink their purchases, they add.

CB Richard Ellis Research executive director Li Hiaw Ho noted that subsales in the first nine months of the year totalled 1,958 units - or 7.8 per cent of total sales volume. Last year, they totalled 2,710 units or 9.2 per cent of all sales.

Yesterday, URA data was also unchanged from flash estimates showing the prices in the third quarter for residential properties had risen 1.3 per cent, helped by demand from genuine home buyers, especially in the mass market.

The figure represents the eighth consecutive quarter of price moderation.

The data confirmed that the high-end segment continues to be sluggish. Prices inched up by an anaemic 0.7 per cent in the third quarter, less than the 1.6 per cent rise in the second quarter.

Prices of non-landed city fringe homes rose 1.2 per cent in the third quarter while suburban home prices grew 2.1 per cent.

The landed segment posted price gains of 2.4 per cent while terrace homes added 3.9 per cent.

Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, noted that this is the first time since the fourth quarter of last year that the full quarter's numbers are unchanged from its flash estimates, suggesting a less favourable sentiment.

'Looking forward, given the bearish market sentiment, we can expect the URA price index to maintain this softer growth through to the end of the year. The fourth quarter could see a modest gain of 0.8 to 1 per cent, bringing the full-year growth to over 6.5 per cent.'

Preliminary figures from the Singapore Residential Price Index (SRPI) released yesterday by the National University of Singapore also show a marginal price increase of 0.1 per cent last month, a rally from the 0.2 per cent dip in August. The SRPI tracks a basket of completed non-landed projects.

Resale prices for shoebox apartments typically of less than 500 sq ft dipped 1.9 per cent last month after rising 3 per cent in August.

SLP International research head Nicholas Mak said this could be due to weaker rental demand which has led to some shoebox owners opting to sell their apartments at a lower price instead.

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