Good timing separates winners from losers in property deals

Data from Edmund Tie Research shows that the biggest loss-making properties were bought in 2007-2008 or in 2013 and sold in Q2 this year

Aug 11, 2021

FORTUNE might favour the bold, but good timing doesn't hurt either.

Judging by data from Edmund Tie Research, entering the property market at an opportune time in the cycle can play a key role in deciding whether fortunes are made or lost - as does location.

The real estate consultancy studied caveats for private homes with a prior purchase history and which were transacted in the second quarter of 2021, and then ranked them as the top five profit- and loss-making deals, both by percentage and by quantum.

Edmund Tie & Company's head of research and consulting, Lam Chern Woon said: "In Q2 2021, the top profit- and loss-making transactions related overwhelmingly to properties located in the Core Central Region (CCR), with profitable sales coming predominantly from District 10."

He added that the average holding period of the loss-making transactions was shorter than that of the profitable ones.

The most profitable transaction by quantum in Q2 was a 5,070 sq foot (sq ft) unit at the 24-unit Lien Towers in Holland Park in District 10, by a seller who sold it for S$8.4 million (S$1,657 per square foot), some 20 years after it was purchased.

The seller had bought the second-floor unit in July 2001 for S$2.05 million (S$404 psf). His profit was nearly S$6.4 million, or over three times the purchase price.

Based on the holding period of two decades, the annualised profit works out to 7.3 per cent per year. With the seller racking up a 310 per cent profit, the deal was also the most profitable by percentage in the second quarter of this year.

The freehold development was completed in 1970. Its allure lies in its spacious units, which are served by a private lift, Mr Lam noted.

The last done deal was back in October 2012, when a ninth floor unit transacted for S$9.5 million or a record S$1,882 psf for the project.

Of the five most profitable deals in Q2 by percentage, the holding period was a minimum 15 years. Four of the five were located in the CCR, and the fifth, Outside the Central Region (OCR). That unit in the OCR was an 11th-floor 1,518 sq ft unit in the 99-year leasehold Lakeside Apartments in District 22.

It transacted in May for S$1.22 million (S$805 psf). The seller bought the unit for just S$300,000 (S$198 psf) about 15 years prior, reaping a windfall of S$922,500 or nearly 308 per cent. The seller had a HDB address at the time of purchase in 2006, suggesting a HDB upgrader.

Similarly, the biggest profit-making deals by quantum in Q2 were all in the Core Central Region (CCR). The sellers also held onto these units for a good length of time - over 15 years - during which the prices of these properties roughly doubled or, in some cases, more than doubled.

All of them are freehold.

But there's clearly more to turning a profit than simply scooping up a prime property and waiting it out.

All top five loss-making deals by percentage "were purchased unfavourably from a timing point of view in 2007, 2012 and 2013, at a near property cycle peak", noted Mr Lam.

They are all in the CCR, with three of the five on Sentosa.

Events such as the sub-prime mortgage crisis in 2007-2008 and the introduction of the total debt servicing ratio (TDSR) in 2013 made notable marks on Singapore's property market.

The biggest loss-maker by percentage was a sixth floor, 3,735 sq ft unit at Turquoise on Sentosa.

The 99-year leasehold unit was sold in May for S$4.7 million (S$1,259 psf) - just over half the S$9.13 million (S$2,445 psf) the seller paid for it in 2007.

This made it the biggest loss in terms of quantum. Held for over 131/2 years, this works out to an annualised loss of 4.8 per cent.

Looking at the leading five loss-making deals by quantum, four of the five transactions in Q2 were located in the CCR; the fifth was in the Rest of Central Region (RCR).