Top private property losses of 2015

Step back just two years, and property losses were almost a foreign concept. In the heady days of 2013, a loss-making transaction was like a two headed goat; investors needed to gawk and poke at it for days before they believed it was real. But by the end of last year, it became clear investors were rushing to offload their high-end properties at almost any cost. Here are some of the worst cases:

An anatomy of loss

The majority of serious losses happened in the Core Central Region (CCR), followed by the Rest of Central Region (RCR) and Outside of Central Region (OCR.) This means it is high-end properties that saw the sharpest losses, those in areas such as District 9 and 10 (near Orchard Road.)

In 2015, about 29 percent of property sales in the CCR were unprofitable, averaging losses of over $500,000. In the RCR, just 16 percent of transactions were unprofitable, with average losses of over $230,000. In the OCR, where prices are already quite low, just seven percent of transactions brought in losses, which averaged around $80,000.

It’s worth noting that, while prices for high end properties fell sharp and fast, they also found they bottom faster than other segments. In fact, prices in the CCR have managed to rise 0.3 percent in Q1 2016, while non-central properties continue their free fall. You can read more about this in our previous articles here and here.

In addition, the OCR region was not quite as rosy as the numbers suggest. While losses were fewer and smaller, the average gains from profitable sales were around $256,000, a 30 per cent decrease from around $375,000 in 2014. There may have been fewer profitable transactions in the CCR and RCR, but these transactions saw a higher payoff for sellers, declining just 20 per cent from 2014. Condos in the RCR and OCR have continued to fall in price by 1.3 percent as of Q1 2016, whereas prices in the CCR seem to have found their bottom.

Top losers

Three developments fared the worst in 2015: Turquoise, St. Regis Residences Singapore, and Seascape. Between them, St Regis Residences Singapore and Turquoise account for six of the largest losses in 2015.

St. Regis Residences

Three units in St. Regis Residences Singapore, along Tanglin Road, had record losses:

The first unit is a two storey, 6,107 square foot penthouse with a swimming pool, which sold at a loss of $15.8 million in January 2015. According to the Straits Times, the unit had been sold to the 17th richest man in Japan, billionaire Katsumi Tada in 2007. At the time the sale price was a record breaking $28 million.

Mr. Andy Chua, the owner of local company Yun Nam Hair Care, purchased the unit for $12.2 million in cash.

Two other loss-making sales at St. Regis Residences were a 4,941 square foot unit which sold at a $4.78 million loss, and a 3,897 square foot unit that sold for a $3.39 million loss.

Owners of the high-end units at St. Regis may be cutting their losses, to invest in better opportunities. The weak global economy has seen plunges in share prices, for example, and some investors may be eager to sell off their property to seize undervalued assets elsewhere. It is also possible that some may be cutting back, in the face of financial losses or cash-flow difficulties.

Turquoise

Turquoise, located in Sentosa Cove, received a lot of attention during its launch. Its proximity to HarbourFront Mall (a five minute drive), plus its location in this enclave for the super-wealthy, made it the highlight of property sales in 2007. Now it seems the promises were oversold, given three of the top losses in 2015 came from this development.

Three units, ranging in size from 2,777 square feet to 2,185 square feet, were sold at losses ranging from $2.72 to $3.14 million. This is on the back of continued property price declines in Sentosa Cove, since 2014.

About half the buyers in Sentosa Cove are foreigners. Under the government’s temporary cooling measures however, there is an Additional Buyers Stamp Duty (ABSD) of 15 percent imposed on foreign buyers. This may have driven interest away from Singapore, and toward other property markets like Australia and the UK. Sellers in Sentosa Cove will struggle to find buyers in the current environment, unless they are willing to accept steep losses.

Seascape

As such, it comes as no surprise that the next entry on this list is also in Sentosa Cove. Seascape Condominium has the same issues as Turquoise, and a 4,133 square foot unit here sold for a loss of $5.2 million – making it one of the biggest loss-making private properties last year.

Most of the top losers are foreign investors

Foreigners who invested in luxury properties seem to have taken the brunt of it. It is not probable that these sales driven by desperation; of these ultra-rich investors could afford to hold on if they wanted to. Rather, it is more likely that they see slower growth in Singapore’s property prices, and want a faster or larger return on investment.

Currency rates may also play a role. The weakening yuan may put off investors from China, who make up a significant portion of foreign property buyers. Investors from the United States, however, may see their losses mitigated somewhat by exchange rates.