This year proved to be tough for property speculators thus far. In the first eight months of 2009, around 341 subsales of apartments and condos incurred losses. This figure is approximately 4.5 times the number of incurred losses in 2008.

In terms of percentage, this year’s numbers are equally depressing as last year’s. In 2008, the total loss-incurring subsales are just as low as 5.2 percent. However, between January and August of 2009, the proportion of incurred loss in subsales has increased to 23.3 percent.

This increase is mainly the result of weak home prices in the first quarter of 2009. Since the beginning of 2008, it is the highest subsale proportion losses (32.5 percent). The incurred losses in subsales from January to March of 2009 have also posted the highest average loss of $343,982 or 18 percent per unit.

However, based on the analysis of Savills Singapore about the URA Realis system’s Caveats as of 28 Aug 2009, the first quarter’s profitable subsales showed the lowest average gain per unit.

The luck of those who had sold in the subsale market improved during the July to August period and in the second quarter together with the recovery in home prices and sentiment.

Looking ahead, Phylicia Ang, the residential director of Savills, supposes that the size of the losses and the number of subsale loss cases should go down as recovery in property prices have already started and it is expected to continue.

According to Peter Ow, the residential executive director of Knight Frank, “That phase of the market we saw in Q1 when the property market was really bad is over.”

Based on the caveats matches that Savills has traced, this year’s majority of subsale transactions continue to gain profits.

Approximately 77 percent of those who suffered from the loss in the sale of their property from January to August 2009 in the subsale market have purchased their units in 2007, when the private residential property market is at its peak.

Miss Ang said, “They could have bought at historically high prices in 2007 and then chose to cut loss and sell instead of having to source for funding to complete the purchase. Those who bought for investment, that is, not for their own occupation, may not have wanted to be saddled with finding tenants amid a weak rental market and decided to cut loss.”

“Some property investors may also have cut losses earlier this year to channel their resources to the stock market, which began its recovery before the pick-up in home prices,” she added.

While the average gain for the subsale profitable deals in January to August 2009 is $164,157, the average incurred loss per unit in the subsale market over the same period is $267,616.

The Savills has calculated the loss or profit as the difference between purchase and sale prices, without considering the stamp duty, agent fees and other expenses.
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