Investors who wish to enter the sub-sale market may have to be prepared to fork out more cash. Although the volume of sub-sale transactions of non-landed homes stayed stable at 13 per cent of total non-landed sales in the first quarter, prices have risen, said property consultancy DTZ’s latest report.
The median sub-sale price of non-landed private homes rose 9 per cent from the fourth quarter of last year to reach $1,190 per sq ft (psf) in the first quarter. A sub-sale takes place when a buyer buys a new apartment, then resells it before it is built. These deals are usually used as an indicator of speculative activity in the property market. To rein in speculators, the Government implemented a seller’s stamp duty and lowered the loan-to-value limit for housing loans from 90 per cent to 80 per cent in February this year. Because of the extra 3 per cent that sellers have to pay for stamp duty if they offload a property within a year of purchase, they will want to push up their prices by a bit more, said Mr Joseph Tan of CBRE Research. But DTZ said that these measures would not have much impact on the market as sub-sales are already at a low level.
During the 1995-1996 boom, sub-sales were a lot higher, contributing as much as 35 per cent of total sales, it said. In the first quarter, One Amber in the Amber Road area saw the highest number of sub-sale deals, followed by The Parc Condominium at West Coast Walk. Median prices of One Amber sub-sale units rose 5.9 per cent to $1,200 psf while The Parc Condominium saw a 3.3 per cent rise to $959 psf. But that is because both projects are expected to be granted temporary occupation permit in the second quarter, DTZ said.
Interest in sub-sales tends to hot up just before a development is ready for occupation. That is when some may want to cash out of their investment. And those who buy are able to move in immediately to a brand new home or rent it out. Ms Chua Chor Hoon of DTZ said sub-sales should remain steady as many people buy for long-term investment, but prices are expected to rise in line with economic growth.
Next month, the sub-sale market may quieten down further because of the school holidays, the World Cup and the eurozone crisis, said Mr Tan. Activity could return after July if sentiment improves, he added.
Source : Sunday Times – 23 May 2010