Higher share of loss-making deals in resale homes in June after heightened Covid-19 curbs disrupt market

Aug 11, 2021

THE proportion of loss-making residential transactions in the secondary market declined month-on-month in April and May before rising again in June as a spike in the number of Covid-19 cases prompted the introduction of heightened restrictions.

And with tighter curbs disrupting property viewings, sellers could turn more accommodating on pricing to close the deal quicker, suggested Edmund Tie & Company's head of research & consulting, Lam Chern Woon. While the measures - which included restricting home viewings to two people - kicked in from May 16, there was a lag with the impact only showing up in caveats lodged in the month of June, he noted.

According to data from Edmund Tie Research, which looked at the proportion of loss-making transactions (landed and non-landed) in the resale market this year, the share eased from 12.2 per cent in April to a record low of 10.5 per cent in May before climbing back up to 13.8 per cent in June. In March, the figure stood at 14 per cent.

On a quarterly basis, however, the share of loss-making transactions in the second quarter clocked 12 per cent, improving from 14.6 per cent in the first quarter.

"While we are likely past the worst from a market distress perspective, we expect there could still be bumps in the months ahead given the fluidity of the Covid-19 situation and how large clusters could flare up," warned Mr Lam. "The latest re-imposition of a two-person social gathering and home viewing limit will dampen viewings and transactions before the market comes to terms with it," he added.

"We expect that more owners would be more flexible about their asking prices, voluntarily or otherwise, in order to reduce the marketing process duration," Mr Lam noted.

A similar trend played out in the non-landed resale market, with the proportion of loss-making deals easing from 13.4 per cent in April to 11.6 per cent in May, before jumping to 15.3 per cent in June. At the same time, the share of loss-making deals in the non-landed secondary market fell quarter-on-quarter from 15.5 per cent in Q1 to 13.2 per cent in Q2.

For H1 2021, the proportion of loss-making transactions for landed and non-landed properties worked out to over 13 per cent, which was lower than the 17 per cent and 14 per cent notched in 2020 and 2019 respectively.

However, the performance varies by market segment, with transactions in the Core Central Region (CCR) experiencing greater volatility in 2020 and H1 2021 than the OCR.

Mr Lam said: "Given the prevalence of buy-to-let purchasers in the CCR region, it is not surprising to see that fortunes are more readily made or lost in this market segment."

"On the other hand, the general improvement was more steady in the Outside Central Region (OCR) and it suggests that owner-occupiers in this segment may have been more financially prudent in making their property purchases."