http://www.theedgeproperty.com.sg/co...e-unprofitable

One in 10 transactions in 3Q2015 were unprofitable

By Esther Hoon / URA, The Edge Property | October 10, 2015 9:00 AM MYT
More sellers incurred losses in 3Q2015 as home prices trended down further on the back of weak sentiment. The latest study by The Edge Property showed the proportion of unprofitable transactions jumped from 6% in 3Q2014 to 8% in 2Q2015 and 10% in 3Q2015 (see Chart 1). The rise in unprofitable transactions followed the continued downtrend in prices. According to the Urban Redevelopment Authority (URA) flash estimate, prices of private homes fell by another 2% q-o-q in 3Q2015.



Chart 1



Source: URA, The Edge Property



The auction market witnessed a similar trend. A total of 21 houses were put up for mortgagee sale in 3Q2015, according to data provided by DTZ. Of the 21 units, six successfully went under the hammer. Only two, however, were sold at a profit.

“The success rate is about 11% for mortgagee sales, and most properties that are successfully auctioned have a relatively lower quantum,” says Lee Nai Jia, regional head of research for DTZ Southeast Asia. “Most of the mortgagee sales that were successfully auctioned tend to be lower than the opening price and are roughly about 6% to 10% lower than what was recently transacted in the secondary market. While there is much interest, most buyers are looking for mortgagee sales that are offered at a steep discount [of about 40%]. Hence, the success rate is relatively low,” he adds.

The high-end segment saw the highest proportion of unprofitable transactions (20%, or 41 of 209 secondary-market transactions). Unprofitable transactions accounted for 13% (33 of 265 secondary market transactions) in the city fringe and 5% (23 of 501 secondary-market transactions) in the mass market.

In addition, high-end homes chalked up the biggest percentage loss among the unprofitable deals and the lowest profit margin among the profitable deals (see Table 1). Based on URA flash estimate for 3Q2015, prices of non-landed homes are now 9% off their peak in both the high-end and city-fringe segments, and 7% in the mass market.

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