More Private properties sold at a loss

More people here selling private homes suffered losses last year as prices across the island kept tumbling.

In the most extreme cases, sellers of high-end properties gave up hope of a rebound and absorbed losses of over $2 million.

And the attraction of renting out investment homes faded as the rental market softened too.

Data from SRX Property showed that 4.2 per cent of secondary market transactions, or 161 of them, last year suffered losses, up from just 1.96 per cent, or 103, in 2013.

In 2012, 1.5 per cent of secondary market transactions – including sub-sales and mortgagee sales – were loss-making, while the figure was 1.8 per cent in 2011. Sub-sales are sales made before the property is built.

The percentage of sellers in the secondary market who achieved capital gains has also fallen – from 97.8 per cent in 2013 to 95.4 per cent last year.

“Cooling measures really hit the market last year. Prices were dropping by then and owners could feel the rental market getting weaker. Perhaps for some owners, they couldn’t see the light at the end of the tunnel and decided to cut their losses,” said SLP International executive director Nicholas Mak.

Most of the losses are likely to have been in the middle to high- end segment as those prices fell more drastically, said Mr Lee Liat Yeang, a real estate lawyer at Rodyk & Davidson.

The biggest losses were suffered mainly in districts 4, 9 and 10. Many of those properties had been acquired in 2007, or at the peak of the previous property boom.

“Those who bought before the Lehman Brothers crisis were hoping prices would go up or at least stay the same… But the high-end segment never really recovered after the crisis. After waiting for six years, they realised the prospect of recovery is still low, so they decided to move on,” said Mr Lee.

Such fire sales seem to be gathering pace, with at least two large money-losing deals so far this year. This month, a 1,076 sq ft unit at The Clift in McCallum Street went for $1.9 million, at a loss of $965,600, or 34 per cent. A 1,808 sq ft unit at The Orchard Residences in Orchard Boulevard sold for $5.5 million, at a loss of $2.253 million, or 29 per cent.

A total of 19 properties were put up for auction sale by mortgagees this month, up from six in January last year and three in January 2013, noted Colliers International deputy managing director Grace Ng.

The number of loss-making sales is tipped to rise this year, as supply from newly completed condominiums will raise competition for tenants and rising interest rates may add to holding costs, said Mr Mak. In all, 21,359 private condos are pegged for completion this year, and 20,919 next year.

Ms Ng expects mortgagee sales to hit 200 this year, up from 159 last year, in view of continued cooling measures and challenging conditions. “Sellers will continue to face increasing difficulties in disposing of their properties in the resale market.”

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