Q3 condo subsales hit 10-year high amid price surge, post-pandemic completions

Some buyers also cashing in as mortgage rates rise

Nov 10, 2023

SUBSALES of suburban condominiums are on the rise as buyers cash in on a strong run-up in prices.

There were 355 subsale transactions in the third quarter of 2023, data from the Urban Redevelopment Authority (URA) indicated. This was the highest quarterly figure since Q1 2013, when there were 395 transactions.

Condominiums in the Outside Central Region (OCR) or suburbs accounted for over 60 per cent of subsale transactions in Q3, while 36 per cent came from the Rest of Central Region. The remainder were from the Core Central Region.

A subsale is the sale of a condominium unit bought directly from the developer to another buyer before the project is completed.

High subsale volumes have typically been seen as indicators of speculative buying or distressed sales, but market watchers attributed the recent quarter’s numbers to a flurry of completions in 2023 after Covid-19 induced delays, as well as to opportunistic sales as market conditions improved.

This year, 19,050 private residential units (excluding executive condominiums) are expected to be completed – the highest annual total since 2016.

The figure includes projects that were supposed to be completed earlier but were delayed due to the pandemic, said Mogul.sg’s chief research officer Nicholas Mak.

Buyers of private residential property can avoid paying Seller’s Stamp Duty (SSD) if they sell their properties more than three years after buying them. SSD of up to 12 per cent is payable for any home sold within three years of purchase.

“Since the period between the residential project launch and… (completion) has lengthened beyond three years due to the construction delay, there is an increase in the number of owners who are selling their new properties after the three-year SSD period,” Mak said.

PropNex Realty head of research and content Wong Siew Ying said many of the sellers in the subsale transactions in Q3 had bought their units between 2018 and 2020, which means they would likely have been able to “enjoy price upside due to the more buoyant property market over the last couple of years”.

URA’s private residential property price index has risen by about 43.5 per cent cumulatively between Q3 2017 and Q3 2023.

Wong noted that the median transacted unit price of new non-landed private homes in the OCR excluding executive condominiums has increased from $1,382 per square foot (psf) in Q1 2018 to $2,080 psf in Q3 2023.

“The property market had picked up substantially in the past couple of years, which could have enticed some owners to sell their uncompleted homes,” she added.

“Owing to the property boom in the last couple of years, it is not uncommon for some owners to want to cash in on gains and decide to sell their home on the secondary market as subsales.”

In the first nine months of 2023, 99 per cent of subsales were profitable, not factoring any transaction costs or taxes, said Wong.

URA Realis data shows that subsales during this period made an average profit of more than S$252,800 per transaction, and an average annualised profit of more than 20 per cent.

This was significantly higher than the average profit of S$217,706 in 2022 and S$189,302 in 2021, Wong said.

Leonard Tay, head of research at Knight Frank Singapore, said there could also be buyers who have chosen to make a profit instead of holding on to their property amid elevated interest rates.

“Interest rates increased very significantly throughout 2022 and remain elevated. There might be a group of buyers who are investors not buying for self-use and are now faced with the start of high mortgage payments,” said Tay. “Some might have baulked at the prospect of the payments and decided to sell.”

The three-month compounded Singapore Overnight Rate Average (Sora) rose to about 3.8 per cent in November 2023, from about 1.5 per cent in January 2019.

Lee Sze Teck, Huttons Asia’s senior director of data analytics, said the rapid rise in rents over the past two years may have also prompted those interested in selling their homes and buying a new one to choose a subsale over a resale or new development.

He said: “Existing homeowners tend to sell and rent if they buy a new unit. Rents which have risen rapidly over the past two years make this option expensive. Thus, there is more demand for subsale units now.”

The 10 best-selling subsale projects this year include Riverfront Residences, Treasure at Tampines and Parc Esta, indicated data provided by Mogul.sg.

With the bumper crop of subsales in Q3, such transactions in the first three quarters of the year have hit 883 – surpassing the 765 chalked up in 2022. They are still far below the record, however. In 2007, subsales hit 4,863 – the highest since data became available in 1996.

Said PropNex’s Wong: “The various rounds of cooling measures, such as the SSD and the Additional Buyer’s Stamp Duty… will curb investment demand, discourage owners from flipping and help to keep property speculative activity in check.”