Luxury market melting down?

March 2, 2015 2:43 PM SGT

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SINGAPORE: Penthouses and large apartments in the prime districts have taken the biggest hit in recent sales, with some of them sinking below their original purchase price achieved during the peak of the market. Property agents foresee more such deals in 2015.

Located behind the St Regis Singapore hotel are the twin 23-storey towers of St Regis Residences fronting Cuscaden Road.

The world caught a glimpse of the profile of the residents at the luxury condominium project when pictures of their half-submerged exotic cars — including a Ferrari and Lamborghini — in the basement appeared in a UK newspaper in June 2011, the latest victims of a flash flood.

A new picture has emerged with the recent caveats lodged with URA Realis: that of submerged properties, with owners selling at prices below their original purchase prices.

One such sale involved a 4,941 sq ft penthouse on the 22nd floor of one of the towers.

The duplex penthouse with four bedrooms and private swimming pool was recently sold for $9.5 million ($1,923 psf), according to a caveat lodged on Jan 17.

For the seller, the price translates into 33.5% below the original purchase price of $14.28 million ($2,890 psf), which was paid in 2006 when the project was first launched.

The loss translates into a whopping $4.78 million — the equivalent of three new Lamborghini Aventadors; a 2,121 sq ft, four-bedroom unit at the freehold Urban Resort luxury condo in Cairnhill; or a 2,723 sq ft, four-bedroom unit at Silversea, the newly completed 99-year leasehold, high-end condo in Marine Parade.

According to an Integrated Land Information Service (INLIS) search, the seller of the penthouse at St Regis Residences was a Panama- registered company.

Meanwhile, the buyer is believed to be a Singaporean.

The $1,923 psf achieved is also the lowest per sq ft price recorded at St Regis Residences to date.

“This is not a distressed sale as the seller had been holding on to the unit right through the collapse of Lehman Brothers and the global financial crisis in 2008-09,” remarks Ku Swee Yong, CEO of Century 21.

“This is a sign of a disgruntled owner in the luxury market.

He’s probably weary of holding onto his investment, and just wants to cut his losses and walk away from the property.” The $9.5 million “is a good price” not just for the buyer, but for the seller as well, observes Grace Ng, deputy managing director of Colliers International.

“Owing to the property cooling measures and the total debt servicing ratio [TDSR], there are very few people who have the wherewithal or the stomach for a $10 million property today.” The second unit at St Regis Residences that changed hands recently was a 3,897 sq ft, four-bedroom unit on the 20th floor of the same tower.

The unit fetched $7.8 million ($2,002 psf), according to a caveat lodged on Jan 23.

The previous transaction for the unit was $11.19 million ($2,872 psf) back in 2006, according to a caveat record.

The loss for the seller amounts to $3.39 million, or a 30.3% mark down from the original purchase price.

INLIS records show that the seller is a British Virgin Island-registered company.

One of the listings with PropertyGuru was for a 4,063 sq ft, four-bedroom unit on a high-floor of one of the towers at St Regis Residences.

The property is currently tenanted at $20,000 a month, with a selling price listed as $10.78 million, or $2,654 psf.

The owner of the unit is said to be a Singaporean who owns more than 10 properties.

“There are many businessmen who want to exit from their property investments now because they need the cash or they want to reinvest in something else,” says a property agent who is marketing the property.

St Regis Residences is a 173-unit, 999-year leasehold luxury condo development completed in 2008.

The project was jointly developed by Singapore property tycoon Kwek Leng Beng’s Hong Leong Holdings, City Developments Ltd and TID Pte Ltd (a joint venture between Hong Leong and Mitsui Fudosan).

It was the first “luxury hotel-branded residence” of its kind in Singapore and Southeast Asia when it debuted in 2006.

The project saw strong sales, with prices driven up from about $2,000 psf in July 2006 to a high of $3,989 psf by June 2007.

However, the all-time-high at St Regis Residences was set in the secondary market when a penthouse was sold for $28 million, or a whopping $4,653 psf.

The buyer of the penthouse was Japanese billionaire Katsumi Tada and founder of Daisho Group, who is said to have purchased the unit as an investment, according to property agents.

He has not lived in the unit since it was completed.

It is currently on the market for sale.

Sinking Just as the launch prices of St Regis Residences in 2006 had lifted the average price of the luxury condo market, the recent resale deals are expected to contribute to the downslide in the Core Central Region (CCR) residential price segment, notes Century 21’s Ku.

In the four years from January 2010 to January 2015, there were 32 resale transactions at St Regis Residences.

Half of those deals (16 units) were sold at prices below their previous purchase price, according to a study of the caveats lodged with URA Realis.

“The discerning ultra-rich buyers who paid top prices probably didn’t feel that the product quality met their initial expectations,” reckons a property consultant who declined to be named.

In the vicinity of St Regis Residences are other luxury freehold condo projects, namely the 150-unit Cuscaden Residences developed by Hotel Properties Ltd and The Tomlinson by Wing Tai Holdings, which contains just 29 units in a 19-storey tower.

Both are freehold properties and completed in 2002.

The most recent transaction at Cuscaden Residences was in August 2014 when a 1,485 sq ft unit on the 17th floor of one of the two 20-storey blocks was sold for $3 million ($2,020 psf).

Most of the units at Cuscaden Residences have been hovering at the $2,000 to $2,200 psf price range from 2010 to 2014.

Likewise, at The Tomlinson, transaction prices have also been in the $2,000 to $2,400 psf ballpark over the same period.

Elsewhere in the prime districts, the sole penthouse at the 102-unit freehold Paterson Suites was sold recently for $13.9 million ($2,086 psf), according to a caveat lodged on Jan 23.

The 6,663 sq ft penthouse was the last unsold unit at Paterson Suites held by the developer, Bukit Sembawang Estates.

The penthouse is a duplex, and contains a private pool and roof terrace.

The $2,086 psf for the penthouse is “a fair price”, says Samuel Eyo, managing director of Singapore Christie’s Homes.

Meanwhile, St Thomas Suites, the 176-unit, high-end condo tower developed by Frasers Centrepoint, is located at the highest point on St Thomas Walk, just off River Valley Road.

The project was launched in early 2007 at prices ranging from $1,700 to $2,100 psf, and was fully sold by the middle of the year.

The most recent transaction at St Thomas Suites was of a 2,605 sq ft four-bedroom, mid-floor unit of one of the 33-storey towers.

It fetched $5.1 million ($1,958 psf), which is just slightly higher than the $4.92 million ($1,890 psf) paid by the owner in 2007.

However, the sale of a 4,672 sq ft, five-bedroom penthouse at St Thomas Suites presented a bleaker picture.

The duplex penthouse was sold for $7.25 million ($1,552 psf), according to a caveat lodged with URA Realis on Dec 10.

The previous owner paid $10.34 million ($2,213 psf) for the unit purchased in a sub-sale in December 2010, when the project was newly completed.

The latest sale price translates into a loss of $3.09 million, or 29.9% for the seller.

At The Orchard Residences, a three-bedroom unit purchased in late-2007 for $7.75 million ($4,287 psf) changed hands in the resale market last month for $5.5 million ($3,041 psf), according to a caveat lodged with URA Realis.

The 175-unit, 99-year leasehold luxury condo is a landmark on Orchard Road, sitting on top of ION Orchard shopping mall and the MRT station.

Developed jointly by CapitaLand and Sun Hung Kai Properties, the project was completed in 2010.

‘Minimising losses’ “What we’re seeing are investors with a portfolio of properties who are concerned about the impact of rising interest rates and a falling Singapore dollar,” reasons Eyo of Christie’s Homes.

“For big-ticket items such as four- or five-bedroom units and penthouses, there are fewer buyers who can afford such property.

For owners of such units, as long as they get an offer, they will sell.

They would rather take a loss now instead of tying up their money over a prolonged period.” At Sentosa Cove, Singapore’s once vaunted waterfront residential enclave, a 2,777 sq ft, four-bedroom unit at Turquoise recently changed hands at $4.55 million ($1,638 psf), according to a caveat lodged on Jan 19.

The previous owner of the unit on the fifth level of the six-storey residential block paid $7.27 million ($2,616 psf) for it in November 2007 when the project was first launched for sale.

The latest purchase price shows that the property value has since eroded by some $2.7 million, or 37.4%.

Colliers’ Ng gave assurance that the $4.55 million achieved for the unit at Turquoise is not just good for the buyer, but also the seller as the price is higher than what was achieved for two earlier transactions, which were distressed sales.

Both the units were mortgagee sales, or units that have been foreclosed by the bank.

They are both 2,777 sq ft, four-bedroom units located on the second and third levels of Turquoise.

They were put up for auction several times in late-2013 and 2014, but failed to find buyers.

The unit on the third level of Turquoise was eventually sold in a private treaty deal for $3.88 million ($1,397 psf) last July in a deal brokered by Colliers.

The price was some $3.2 million (45.3%) below the owner’s original purchase price of $7.105 million in November 2007.

The unit on the second level was sold for $4.026 million ($1,450 psf) in a closed tender conducted by DTZ a few days later in July.

The sale price for the unit was some $3 million (43%) below the original purchase price of $7.09 million also in November 2007.

The recent buyers of the units were Singaporeans.

Prior to being seized by the bank, the owner of both units is said to be a Vietnamese citizen.

Coincidentally, the recent seller of the unit on the fifth level of Turquoise was also a Vietnamese citizen, based on an INLIS search.

However, unlike the earlier two transactions, the latest one was an owner’s sale, says Ng.

“Vietnamese aren’t the only buyers at Turquoise,” she adds.

“There are other nationalities that bought units at Turquoise, including Singaporeans.” Turquoise is a 91-unit, 99-year leasehold high-end condo developed by Ho Bee Land and completed in 2010.

At Sentosa Cove, “about two-thirds” of the first homebuyers and investors of residences were foreigners, notes Century 21’s Ku.

Elsewhere at Sentosa Cove, a 1,894 sq ft unit at The Berth by the Cove was sold for $2.62 million ($1,383 psf).

The unit had previously been purchased in a sub-sale for just under $1.8 million ($950 psf) in February 2005, which translates into a capital gain of 45.5% in the past decade.

The $1,383 psf achieved is the lowest in the development since last July, when a 3,046 sq ft penthouse was sold for $1,149 psf, or $3.5 million.

The Berth has 200 units, and was the first condo project to be launched in Sentosa Cove by Ho Bee in 2005.

The project was completed in 2007.

The recent transaction prices at Turquoise and The Berth could also have been affected by the recent $181 million lawsuit launched by United Overseas Bank (UOB) against a subsidiary of Lippo Group, the developer of The Marina Collection, and seven individuals including two former real estate agents and related parties, observes Century 21’s Ku.

The lawsuit involved the purchase of 38 units at The Marina Collection where 37 have since defaulted.

The recent sales of units at Turquoise, St Regis Residences and the penthouse at St Thomas Suites demonstrate that the sellers probably did not see the luxury condo market recovering in the short term, reckons Colliers’ Ng.

“The owners probably subscribe to the view that luxury condo prices are unlikely to recover to the peak levels anytime soon.

They were therefore willing to sell at whatever price the market will bear.” The last time Ng saw such gnashing of teeth in the luxury market was “after the collapse of Lehman Brothers and the global financial crisis in 2008,” and during the last economic downturn in 2002/2003 after the Asian Financial Crisis.

“But this time, the huge price falls have been confined mainly to the luxury market, especially for the big units, where the quantum is bigger and fewer owners are able to get a loan to purchase,” she adds.

For those looking to invest when “there’s blood in the streets” and who are sitting on a cash pile, perhaps now is a good time to start sniffing for good deals, says Eyo of Christie’s Homes.

Rising mortgagee sales Even the number of mortgagee sales has risen by an alarming rate.

At DTZ’s auction in January, three out of eight residential properties put up for auction were mortgagee sales.

In its private treaty list, nine out of 10 residential properties were mortgagee sales.

At Colliers’ auction last month, half of the residential properties were mortgagee sales, while at Knight Frank’s auction on Jan 21, four out of 15 residential listings were mortgagee sales.

JLL’s auction on Jan 29 saw 10 out of 16 residential properties being mortgagee sales, while 13 out of the 20 on its private treaty list were mortgagee sales.

“At my next auction on Feb 26, almost all the residential properties are mortgagee sales,” says JLL’s head of auction, Mok Sze Sze.

One of the mortgagee sales that will feature in JLL’s next auction is a four-bed-room unit on the 17th floor of The Grange on Grange Road.

The freehold, 95-unit development was jointly developed by Wing Tai Holdings, MCL Land and AIG, and was completed in 2008.

It comprises twin 23-storey residential towers.

Launched in 2005, the project was sold out within months of its launch.

There were subsequently many units that were offered for sub-sales over 2007-2008.

The 2,303 sq ft, four-bedroom unit that is now a mortgagee sale was one such unit, purchased in a sub-sale for $6.2 million ($2,692 psf) in May 2008, according to a caveat lodged then.

The indicative price for the unit is $2,000 to $2,100 psf, according to JLL, which translates into $4.6 million to $4.84 million.

This means the price is now 22% to 25.7% below what it was 6½ years ago.

There were two transactions at The Grange in December: one was for a 1,744 sq ft unit on the 16th floor of the neighbouring block that changed hands for $3.55 million ($2,036 psf), while the other was a fifth level unit of 2,293 sq ft that fetched $4.2 million ($1,882 psf).

Another unit that is up for mortgagee sale at JLL’s upcoming auction is at Twin Regency, a freehold development by UOL Group.

The 234-unit development on Kim Tian Road in Tiong Bahru comprises two 36-storey towers, which were completed in 2007.

The mortgagee sale is a 1,776 sq ft, four-bedroom unit on the 22nd floor of one of the towers, and has an indicative price of $2.5 million ($1,408 psf).

The previous owner purchased the unit in 2007 in a sub-sale when the project was newly completed.

The price then was $1.9 million ($1,070 psf), according to a caveat lodged with URA Realis.

The most recent transaction at Twin Regency was for a 980 sq ft unit on the third level of the neighbouring tower that changed hands for $1.79 million ($1,827 psf) in June last year.

Last May, a 1,442 sq ft unit on the eighth level was sold for $2.35 million ($1,629 psf).

Century 21’s Ku says this is just the tip of the iceberg.

He expects to see more deals where owners sell their property at prices below their original costs.

“I’m less concerned about the wealthy individual with a net worth of $50 million who loses $5 million in a sale,” he says.

“What I’m concerned about are the people whose entire net worth is their HDB flat, and they have gone in and invested either jointly or on their own in a shoebox apartment.”

This article appeared in the City & Country of Issue 663 (Feb 9) of The Edge Singapore.

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