The Nassim unit tops Q2 resale gains, with seller reaping S$6m profit after 4 years

Jul 27, 2022

A TRANSACTION for a 4,069 square foot (sq ft) unit at The Nassim was the most profitable deal by quantum in the resale market in the second quarter, as the seller walked away with a cool S$6 milllion in profit in a little over 4 years.

According to data collated for The Business Times by real estate consultancy Cushman & Wakefield, the unit at the freehold condominium in prime District 10, bought for around S$14 million (S$3,440 per sq ft) in February 2018, was sold in May this year for S$20 million (S$4,915 psf). This translates to an annualised profit of 8.7 per cent. Based on the purchase price, the profit worked out to 43 per cent in terms of percentage.

For its study, Cushman & Wakefield studied caveats for private, non-landed homes with a prior purchase history for the period between January 2012 and June 2022, and which were transacted in Q2 2022. It then ranked the top 5 profit-making and loss-making deals, both by percentage and by quantum. The analysis excluded transaction costs and taxes, such as buyer stamp duty and seller stamp duties.

The data showed that the five biggest money-making transactions by quantum in the resale market in Q2 were all freehold units in the Core Central Region (CCR), by virtue of the relatively higher prices and transacted unit sizes in the CCR. Cushman & Wakefield’s head of research, Wong Xian Yang, said: “The CCR market remains ideal for high-net worth investors looking to invest significant amounts of capital into the market.”

On the other hand. the five most profitable transactions by percentage were either located in the Rest of Central Region or Outside the Central Region (OCR), with sellers chalking up profits ranging from 62 per cent to 70 per cent.

The most profitable deal by percentage was for a 2,626 sq ft unit at 999-year-leasehold D’Banyan in Sembawang, where the seller earned a tidy profit of 70 per cent. The unit was sold for S$2.1 million (S$800 psf) in June; it was purchased for nearly S$1.24 million (S$471 psf) in September 2016. After a holding period of close to 6 years, the seller made an annualised profit of 9.6 per cent.

In this case, the timing of the purchase back in 2016 was fortuitous, as it was just before the market started to gain momentum in the second half of 2017.

Wong noted that RCR and OCR prices have benefited as a result of demand shifting towards more affordable city fringe and mass market properties, following the property-cooling measures and loan curbs. In addition, the appeal of properties in the RCR and OCR has grown, thanks to better accessibility and convenience as infrastructure and amenities are developed.

Wong added: “Rising new-launch prices in the RCR and OCR would also have positive spillover effects for the resale market. RCR and OCR new-launch median prices for non-landed homes of between 800 and 1,100 sq ft have risen 56.3 per cent and 84.3 per cent respectively over the period of 2012 to H1 2022.”

Meanwhile, the largest loss-making resale deal in Q2 by percentage was a 2,185 sq ft unit at 99-year-leasehold Marina Collection in Cove Drive on Sentosa, which transacted for S$3.7 million (S$1,693 psf), 37 per cent less than the S$5.87 million (S$2,690 psf) the seller doled out for the property in October 2012. The S$2.17 million loss translated to an annualised loss of 4.7 per cent, given the holding period of nearly 10 years.

And the deal which spilled the most red ink by quantum was a 4,467 sq ft unit at 99-year-leasehold Silversea in Marine Parade in District 15, which transacted for S$9.5 million (S$2,127 psf) in April this year, S$2.5 million lower than the S$12 million (S$2,686 psf) the seller paid for it in April 2014. Based on the holding period of 8 years, the annualised loss was 2.9 per cent.

The largest loss-making deals by quantum and percentage shared similar characteristics, namely being that the majority of the developments were located in the CCR; most of these units were purchased during the market upturn, before the market cooled off again in late 2013, Wong noted.

The slowdown in the market in 2013 came after the government rolled out the total debt servicing ratio (TDSR) framework in June that year, to prevent buyers from over-leveraging.

Cushman & Wakefield also studied the proportion of loss-making transactions (landed and non-landed) in the secondary market, which continued on a downward path from 7.9 per cent in Q1 to 6.4 per cent in Q2, even as interest rates headed north.

For the rest of the year, Wong reckons that the proportion of loss-making deals may stay subdued, despite the prevailing headwinds. He said: “While market demand would be tempered by rising interest rates and economic uncertainty, the underlying demand for residential properties remains strong, and market leverage looks manageable due to cooling measures and loan curbs.”

“We therefore don’t expect wide-spread distressed sales in 2022, though transaction volumes may cool off slightly.”