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Seller incurs $111,000 loss despite buying near bottom of market

Properties sold near the bottom of the market are not necessarily a value buy. A 969 sq ft apartment at Icon, a residential project located a short walk from the Tanjong Pagar MRT station, was recently sold at a loss of $111,000. The seller had purchased the unit in November 2009, shortly after the market picked up from the Lehman Brothers crisis.

He had paid $1.86 million, or $1,921 psf, for the unit, which is located above the 40th floor. Comparable units in the development went for an average price of $1,725 psf in 2009.

On Nov 10 this year, the unit was resold at $1.75 million, or $1,806 psf, 6% below the purchase price. This works out to a 1% loss annually over seven years.

Another 969 sq ft unit located directly above it was also sold at a loss amounting to $179,000, or 9%. The seller had also paid a toppish price of $1.96 million, or $2,022 psf, on the same day as the first seller in November 2009.

He incurred losses, despite selling the unit near the peak of the market in 2013. The unit fetched $1.78 million, or $1,837 psf, in a resale transaction on July 19, 2013.

So far, there have been 60 resale transactions involving units bought in 2009. Of these, 57 were sold at a profit and three at a loss. The 57 units were previously purchased at an average price of $1,386 psf. The three units sold at a loss were previously bought at an average price of $1,958 psf.

The 646-unit Icon was one of the best-selling residential projects when it was launched in 2003, right after the Severe Acute Respiratory Syndrome outbreak. Many units were snapped up at an average price of $650 psf. The 99-year leasehold condominium was completed in 2007.

The development saw a total of 611 sub-sale transactions between 2003 and 2010. Sub-sale, which refers to secondary market transactions before the issuance of the Certificate of Statutory Completion, is often seen as a barometer of speculative activities.

The biggest loss in the week of Nov 8 to 15 amounted to $828,000. It accrued to a 1,227 sq ft unit in Marina Bay Residences. The seller had purchased the unit in August 2010 in a sub-sale at $3.83 million, or $3,120 psf.

A 1,227 sq ft unit at Marina Bay Residences was flipped three times. The third seller took in a loss of $828,000.

On Nov 11, the unit was resold for $3 million, or $2,445 psf — a loss of 22% over a six-year holding period.

Interestingly, the unit has been flipped three times. The first seller, who bought the unit from the developer in December 2006 at $1,701 psf, made a profit of $612,300 when he flipped the unit in June 2009 at $2,200 psf.

The second seller, who flipped the unit in August 2010 at $3,120 psf, reaped a profit of $1.13 million. Unfortunately, the musical chairs stopped and the third seller, who sold the unit this month, sustained a hefty loss. The unit is located above the 30th floor. Marina Bay Residences is a 428-unit, 99-year leasehold development completed in 2010.

This article appeared in The Edge Property Pullout, Issue 756 (Nov 28, 2016) of The Edge Singapore.

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