Jan 28, 2007

Banding together to make a...

Quick kill in the property market

Speculators can get bigger units on higher floors by pooling money, but some warn that it's risky business deck deck

By Joyce Teo

St Thomas Suites development
is among the new high-end projects
attracting group-based speculators.

AS THE property boom picks up speed, led by the luxury market, groups of people are banding together to buy high-end homes in the hope of making a quick profit.

Popular targets for these groups are high-profile or freehold new launches, particularly those that may attract foreign buyers.

Though the prices of these properties are often astronomically high, all they need to pool together is enough to cover an initial payment of 23 per cent, including stamp duty.

One agent said he knows a group of three who bought units at The [email protected] Bay, Oceanfront in Sentosa Cove and Marina Bay Residences.

'For the prime locations, some people are pooling their resources to get the bigger, higher-floor units,' said another agent.

The practice, though, is confined to a small portion of the market, she said.

On Friday, data from the Urban Redevelopment Authority (URA) showed that while sub-sales rose from 290 in the third quarter of last year to 426 in the fourth quarter, they formed just 5.4 per cent of total sales. Sub-sales refer to the sales of uncompleted homes by their buyers.

Most of them were in districts 9, 10, 11, Sentosa and downtown, where prices of uncompleted homes rose 25.4 per cent last year, from 7 per cent in 2005.

The URA said it released sub-sales data to enable the public to have a better sense of the level of speculative activity in the private homes market.

The Sunday Times managed to track down three people who are buying homes in groups. All of them said that there must be trust among the buyers.

One of them is joining hands with five friends to invest in a $4.43 million unit at the newly launched St Thomas Suites. His share is just $50,000.

They will sell the property - hopefully at $5.2 million to $5.47 million - within 10 months, regardless of gains, before more payments kick in or a loan is needed, said the lawyer, who is in his early 40s.

'If we can't agree on when to sell, the one with the biggest share will have the say,' he said.

As the property won't carry all their names, a legal agreement stating the share and objectives has been drawn up, he said.

Retiree Howard Wang, who has bought a few properties with his group of friends since the last bull run in the mid-1990s, said they always draw up a simple trust that states their shares.

'It's a very loose arrangement,' he said. 'We always have a trust in case someone passes away or somebody gets involved in a divorce.'

And the money that he invests is all spare cash, he said. Still, there is clear risk involved. Mr Wang was burnt once in the mid-1990s when the bull run ended and he had to absorb a $60,000 loss.

In the event of a slowdown, the danger is that these buyers could dump their property and this could cause the market to slide even faster, said a finance company executive in her 40s.

Earlier this month, she bought a $4.8 million four-bedroom unit at One Shenton with two strangers.

It was unplanned. Her trusted agent managed to get just one unit at the soft launch for her three clients and therefore asked if they would like to share it.

She said: 'Agents were fighting to hold on to their reserved units, so five minutes was all I had to decide.'

The upturn does not last forever, so 'like everything else, you should know when to stop'.

[email protected]

'If not for a few people banding together, you would miss out on the chance to ride on the crest of the property boom. This consortium is born out of greed, optimism and timing. It is to generate as much wealth in as short a time as possible.'

Number of sub-sales in Singapore: