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Published January 12, 2007

Condo resale prices a far cry from old highs

Many high-end projects are still below launch prices, potentially offering good deals for prudent buyers


(SINGAPORE) While prices of new high-end developments have veered off the charts, prices of residential properties in the secondary market tell a different story.

Sampling residential developments launched just before the two peaks in Q2 1996 and Q2 2000, an analysis of caveats by Savills Singapore for BT shows prices for most developments have not recovered peak levels - and some are still 40 per cent below launch prices.

Savills Singapore director (marketing & business development) Ku Swee Yong says developments which showed the greatest price increases in 2006 were mainly well located projects in prime districts.

'For these properties in District 9, 10, and 11, prices might have gone up by anywhere from 10 per cent for older properties to 50 per cent for newer properties with good leasing potential,' he says.

Of the 20 projects sampled, only four showed capital appreciation above launch prices, and most of these were in the prime districts. As such, Mr Ku believes there could still be good buys, especially in light of the increasing prices as reflected in the Urban Redevelopment Authority's quarterly property price index which rose 10 per cent in 2006.

'If you do your homework well, there are a lot of gems out there,' he says.

The brief list of developments that maintained or appreciated in value - Ardmore Park, Scotts 28, Cuscaden Residences and St Martin Residence - is predictable, as these were some of the more high-profile launches at the time.

Interestingly, equally famous Nassim Jade is still 23 per cent below launch price, debunking the myth that any property in Districts 9, 10, and 11 should do well.

'The worst-hit properties were generally those that were not able to generate good rental rates,' says Mr Ku, citing poor facilities and location as main drawbacks. 'These developments might have a small pool, not many common facilities, or they could be in a good district but actually located too close to a commercial or retail area, which means traffic in adjoining roads.'

Overall, projects that show good capital appreciation are those where 'the lease rates are good for the long term'.

Projects that did well were also those that probably had a certain cache or 'branding' with foreign buyers. Actual numbers of foreigners who bought into the likes of Ardmore Park and Scotts 28 are not known, but Mr Ku believes it could reflect a similar 30-40 per cent of foreign buyers who bought new high-end developments in general.

Based on returns alone, a development like Aspen Heights should have appreciated in value - but it is still about 30 per cent below its launch price.

Aspen Heights is a telling example of disparity in prices because it is in River Valley Road, where rental returns could be as high as 7 per cent and monthly rents around $4.50 psf. Yet in Q4 2006, its median resale price was $875 psf.

Mr Ku points out that directly opposite Aspen Heights, a new project, The Imperial, is being sold for around $1,400 psf. 'Aspen Heights is a bit old but it does seem to be undervalued,' he says.

Maplewoods, which has ample common facilities, is also 25 per cent below its launch price. In Q4 2006 the median resale price was $665 psf, while next door, a new project, The Nexus, is selling for around $820 psf. The rental yield for Maplewoods is thought to be a respectable 5 per cent.

Mr Ku does not have a definitive explanation for such price disparities, except that buyers may simply prefer brand new homes. 'The perception could be that a new development would be easier to rent out, hence, making it a better investment,' he surmises. 'Sometimes, it is also just a matter of how well older developments are maintained.'

Mr Ku believes another concern about buying an older unit is that an en bloc sale may leave a new owner out in the cold financially.

Still, in the right frame of mind, this could be a worthwhile venture. As he calculates: 'If you can get a 7 per cent rental yield you can recover your capital outlay in about 16 years. If the project goes en bloc after that, everything is pure profit.'

Buyers have to be clear about their buying strategy, he says. 'I think not many people are clear if they are making a long-term or short-term investment.'

At Ardmore Park, for instance, Mr Ku estimates that based on current prices, rental yields are a low 3 per cent. But because it is Ardmore Park, a property will sell much faster.