Profits from executive condos continue to be among the highest in Q3

Some Executive Condominium (EC), or Outer Central Region (OCR), homeowners continued to enjoy solid gains during the third quarterly of 2023. Properties were changing hands at nearly twice their original price.

Most of these deals were loss-making.

As a result, the share of private residences that experienced a decline in value due to the sale of their homes increased from 2.8 to 3.2 percent in the Q3 quarter.

Wong Xian Yang (Cushman & Wakefield head of research) said this figure is likely to continue creeping up as a more conservative mood sets in on the Singapore property market.

Cushman & Wakefield’s data analysis for The Business Times revealed that in Q3, four of top five resale deals with the highest profit percentage were EC transactions.

Wong reported that, on average, the sellers kept their units between nine and 10 years. They made an “attractively” high profit, ranging from 90 to 98 percent.

The Tampines Trilliant’s 2,121 square feet (sq ft), EC-unit sold in July at S$2.4million or S$1,141 psf. Seller made an impressive profit of almost 98 percent over the initial price of S$1.2million ($578 psf), which was paid in December 2012. On the basis of a 10-year holding time, an annualised return was 6.6%.

A 495-square-foot unit in Sol Acres at Choa Chu Kang in Singapore was sold to another EC for S$720,000 ($1,454 psf), in a deal that took place in July. This price is 94 percent more than its original S$371,000 in August 2017 (S$749 PSF). A holding period of 5 years resulted in an annualised profit of 11.9%.

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One of the best deals in Q3 – both for profit and volume – was a 10,710sq ft unit in Bukit Timah’s District 10. The penthouse unit in Bukit Timah, District 10, was sold last September for S$32M or S$2,988psf. This seller’s profit was slightly higher than the S$15.6million (S$1,457/sqft) original purchase price from June 2014. In June 2014, the seller made an average annualized profit of 8 percent over a 9.3-year holding period.

Wong states that penthouses exceeding 10,000 sq.ft. in size are a very scarce commodity. It is also very thin in terms of transactions, as there have only been 10 supersized apartment sales since 2018.

Wong explained that in terms of absolute gains all five of the largest money-making transactions in Q3 occurred in freehold unit located in Core Central Region.

According to the expert, units of CCR are also responsible for many losses in both terms and proportions, during different periods.

One of the sales that spilled more red ink, in percentage terms, was a 474 sf unit in freehold condo #6 Derbyshire at Novena. The property was bought for S$920,000 ($1,943/sqft) and sold it in August. This is 23 percent less than what the seller paid initially in November 2017, when he purchased this unit at S$1.2 million ($2,508/sqft). According to a 5.8-year holding period, the seller’s annualised losses were 4.3 percent.

According to the quantum of loss, it was for 1,389 sqft at Mon Jervois with 99-years’ leasehold. This unit is located in District 10. A 1,389 sq ft unit at 99-year leasehold Mon Jervois in District 10 was purchased for S$2.6M or S$1,872psf. That was a 21% reduction from its November 2017 original S$3.3 mn (S$2,377psf). A holding period for 5.8 year would translate to an annualised rate of loss of 4.0%.

Cushman & Wakefield analyzed the caveats that applied to non-landed, private houses purchased between January 2013 and September 2023. The transactions took place in Q3-2023. After calculating the profit margins, it ranked both deals with high profits and low losses. The transaction costs and taxes were excluded from the analysis, including buyer stamp tax and seller stamp tax.

According to caveats, prime CCR residential properties made up 52 percent (of all losses) of private home deals during the third quarterly quarter. RCR accounted 26% of those deals. OCR was responsible for the remaining 20%.

Wong commented that “after the last round of cooling measure, buyers have adopted a watch and wait attitude.”

“However, even though the CCR had a bigger share of transaction losses, the majority (81%) of CCR matches are profitable.”

Wong states that although the numbers of home deals at loss could be on the rise, Wong’s prediction is that losses will remain relatively low.

His statement said: “Domestic residential demand is stable, but cautious. A healthy labour market supports the owners’ ability to hold onto their properties, and they are supported by an incredibly strong balance sheet. Housing and Development Boards’ resale costs continue to go up, boosting upgraders demand. This is especially true for RCR and OCR.

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