New Reporter
03-05-23, 10:59
Loss-making residential resale deals hit five-year low
Some 95 per cent of private home secondary-market deals yield gains in Q1 as sellers ride higher prices, but trend may turn with market
Apr 24, 2023
THE proportion of loss-making residential property transactions in the secondary market fell to its lowest level in five years in the first quarter of 2023, despite rising interest rates and mounting economic headwinds.
According to data consolidated for The Business Times by real estate consultancy Cushman & Wakefield, just 4.2 per cent of all resale transactions in Q1 2023 made losses – marginally lower than the previous quarter’s 4.5 per cent and nearly a quarter of Q1 2019’s 18.2 per cent. Cushman & Wakefield based its analysis on matched caveats lodged for landed and non-landed private homes.
Loss-making exits peaked in Q2 2020, at 21.8 per cent of resale deals, the data showed. This was during the early stages of the pandemic, when “circuit-breaker” measures were introduced and market uncertainty was at its highest, said Wong Xian Yang, research head at Cushman & Wakefield.
“After the end of the ‘circuit breaker’ and as Singapore entered Phase 2 of (its) reopening, volumes and sentiment recovered from Q3 2020 onwards, driving the proportion of loss-making deals lower.”
https://i.imgur.com/GrBCUzi.png
The lower incidence of losses in resale deals is mainly due to Singapore’s “resilient” demand for residential properties, even as economic headwinds persist, Wong said.
Based on the Urban Redevelopment Authority’s (URA) latest flash estimates, private home prices accelerated in the first quarter of this year, growing 3.2 per cent quarter on quarter as sale transaction volume fell by 8 per cent.
Year on year, prices rose 11.3 per cent in Q1, while volume dwindled by around 38 per cent.
Private home prices are widely expected to flatten this year. Analysts project an increase of between 3 per cent and 8 per cent for the year, compared with the 8.6 per cent rise recorded in the URA’s overall private property index for 2022, and 10.6 per cent for 2021.
“Rising headwinds brought by the high-interest-rate environment and newly introduced cooling measures could add upward pressure on the proportion of loss-making deals,” said Wong. Fresh cooling measures, including tighter limits on property loans, were rolled out in September last year to ensure prudent borrowing and to moderate demand.
The September intervention followed a round of transaction tax hikes in December 2021. Higher Additional Buyer’s Stamp Duty rates were introduced – up by five to 15 percentage points – for all individuals and entities except Singapore citizens and permanent residents buying their first residential property. Borrowing limits were also tightened.
Data compiled by Cushman & Wakefield showed that in Q1 2023, the biggest losers in both percentage and quantum terms were deals involving properties purchased in 2012-2013. The period reflected a peak just before the market turned following government measures in 2013, such as the introduction of the total debt servicing ratio (TDSR) framework to prevent buyers from over-leveraging.
In the five biggest loss-making exits of Q1 2023, losses ranged from S$250,000 to S$1.31 million in quantum terms, and from 17 per cent to 43 per cent in percentage terms.
While there are parallels for properties bought in 2021-2022, with the new measures being introduced shortly after to cool the red-hot housing market, Wong emphasised that potential sellers of these homes are unlikely to face similar major losses in the future.
The difference is that the introduction of the TDSR framework in 2013 restricted home financing for all, resulting in a decline in property prices in the next four years, he said.
“Now, even with the recent rounds of cooling measures, home prices are still increasing and the replacement cost of properties have also gone up,” he said.
Wong predicts that the proportion of loss-making residential resale deals will stay “relatively low” for the whole of 2023, given the tight employment market.
“Sellers would have stronger holding power, so they will be able to hold out for a price that is more beneficial to them. Prices are (therefore) unlikely to correct; the market is more able to adjust to these new measures.”
https://www.businesstimes.com.sg/property/loss-making-residential-resale-deals-hit-five-year-low
Some 95 per cent of private home secondary-market deals yield gains in Q1 as sellers ride higher prices, but trend may turn with market
Apr 24, 2023
THE proportion of loss-making residential property transactions in the secondary market fell to its lowest level in five years in the first quarter of 2023, despite rising interest rates and mounting economic headwinds.
According to data consolidated for The Business Times by real estate consultancy Cushman & Wakefield, just 4.2 per cent of all resale transactions in Q1 2023 made losses – marginally lower than the previous quarter’s 4.5 per cent and nearly a quarter of Q1 2019’s 18.2 per cent. Cushman & Wakefield based its analysis on matched caveats lodged for landed and non-landed private homes.
Loss-making exits peaked in Q2 2020, at 21.8 per cent of resale deals, the data showed. This was during the early stages of the pandemic, when “circuit-breaker” measures were introduced and market uncertainty was at its highest, said Wong Xian Yang, research head at Cushman & Wakefield.
“After the end of the ‘circuit breaker’ and as Singapore entered Phase 2 of (its) reopening, volumes and sentiment recovered from Q3 2020 onwards, driving the proportion of loss-making deals lower.”
https://i.imgur.com/GrBCUzi.png
The lower incidence of losses in resale deals is mainly due to Singapore’s “resilient” demand for residential properties, even as economic headwinds persist, Wong said.
Based on the Urban Redevelopment Authority’s (URA) latest flash estimates, private home prices accelerated in the first quarter of this year, growing 3.2 per cent quarter on quarter as sale transaction volume fell by 8 per cent.
Year on year, prices rose 11.3 per cent in Q1, while volume dwindled by around 38 per cent.
Private home prices are widely expected to flatten this year. Analysts project an increase of between 3 per cent and 8 per cent for the year, compared with the 8.6 per cent rise recorded in the URA’s overall private property index for 2022, and 10.6 per cent for 2021.
“Rising headwinds brought by the high-interest-rate environment and newly introduced cooling measures could add upward pressure on the proportion of loss-making deals,” said Wong. Fresh cooling measures, including tighter limits on property loans, were rolled out in September last year to ensure prudent borrowing and to moderate demand.
The September intervention followed a round of transaction tax hikes in December 2021. Higher Additional Buyer’s Stamp Duty rates were introduced – up by five to 15 percentage points – for all individuals and entities except Singapore citizens and permanent residents buying their first residential property. Borrowing limits were also tightened.
Data compiled by Cushman & Wakefield showed that in Q1 2023, the biggest losers in both percentage and quantum terms were deals involving properties purchased in 2012-2013. The period reflected a peak just before the market turned following government measures in 2013, such as the introduction of the total debt servicing ratio (TDSR) framework to prevent buyers from over-leveraging.
In the five biggest loss-making exits of Q1 2023, losses ranged from S$250,000 to S$1.31 million in quantum terms, and from 17 per cent to 43 per cent in percentage terms.
While there are parallels for properties bought in 2021-2022, with the new measures being introduced shortly after to cool the red-hot housing market, Wong emphasised that potential sellers of these homes are unlikely to face similar major losses in the future.
The difference is that the introduction of the TDSR framework in 2013 restricted home financing for all, resulting in a decline in property prices in the next four years, he said.
“Now, even with the recent rounds of cooling measures, home prices are still increasing and the replacement cost of properties have also gone up,” he said.
Wong predicts that the proportion of loss-making residential resale deals will stay “relatively low” for the whole of 2023, given the tight employment market.
“Sellers would have stronger holding power, so they will be able to hold out for a price that is more beneficial to them. Prices are (therefore) unlikely to correct; the market is more able to adjust to these new measures.”
https://www.businesstimes.com.sg/property/loss-making-residential-resale-deals-hit-five-year-low