33 condo units sold at a loss in June 2023, 2 recorded over $2m losses

The condo resale market seems to be experiencing some moderation, with resale prices increasing by a mere 0.1 per cent in June 2023. This comes after an average monthly price increase of 1.25 per cent from February to May.

According to URA data captured as of July 19, June 2023 also saw 33 unprofitable resale condo transactions, with the capital loss averaging around $339,000.

(The capital loss excludes other costs of selling a house, such as stamp duty, legal fees and agent's commissions.)

For instance, the lowest capital loss recorded in the month was $9,300 from the sale of a 1,604 sq ft unit from Reflections at Keppel Bay. Initially bought for $2,859,300 in July 2007, the unit was sold 16 years later for $2.85 million. This translates to 0.3 per cent capital loss, or 0.02 per cent when annualised.

Meanwhile, the most unprofitable resale transaction came from Marina Collection, for the sale of a 2,789 sq ft unit that recorded a capital loss of $2,542,160.

It was sold for $5 million after a holding period of 15 years. The owners had bought it for $7,542,160 in June 2008. This works out to a capital loss of 33.7 per cent or 2.7 per cent when annualised.

What got our attention was that this was not the only unit from the Sentosa Cove development that sold at a huge loss.

Top two condo losers in June 2023 sold at over $2 million loss

When we filtered the data to find the top condo losers in the month, we found that there were two transactions with capital losses of over $2 million.

What's even more striking was that both transactions were from Marina Collection.

One of them is the sale of the 2,789 sq ft unit that recorded the highest capital loss in the month.

The other transaction is for a slightly smaller unit (2,788 sq ft) that was sold for $4,522,886 in June 2023. The owners had held it for 13 years, after buying it in January 2010 for $6.97 million. This meant that the capital loss was $2,447,114 (35.1 per cent), which was the second-highest capital loss in the month. Meanwhile, the annualised loss is 3.27 per cent.

If you have been following our monthly condo loss stories, you would also have noticed that it's not the first time a unit from Marina Collection has topped the list of monthly condo losers.

Back in May, we reported that a 3,272 sq ft unit from the development recorded the biggest condo loss in April at $4.65 million.

A likely factor contributing to the losses is that prices of homes at Marina Collection have been on a downward trend since 2013, recording a huge drop of 41.95 per cent.

After prices at the condo climbed for four years to reach a peak of $2,921 psf in 2013, prices have tumbled over the last 10 years. While there were slight price increases in the past decade, the prices have never reached the same level as in 2009 to 2013. As of year-to-date, the average price psf is $1,696.

The biggest condo losers in June 2023 had an average holding period of 12.5 years

We also wondered what's the correlation between the holding period and capital loss of a condo unit. So we filtered the data to find the transactions with a capital loss higher than the average loss of $339,000.

Figures (except floor area) in the table are rounded off to three significant figures.

These nine transactions with the highest capital losses in the month have an average holding period of 12.5 years.

Here's a breakdown of the holding periods:

Among these loss-making transactions, a majority were held between 10 to 15 years. The bigger sizes of the units also indicate that they're more likely to be bought for owner-occupation.

Most of the condos were also bought during property booms in 2007 (1), 2008 (1), 2010 (3) and 2014 (1), leading to higher purchase prices.

This may also explain why the owners were reluctant to cut their losses, holding on to these units for such a long time until recently.

57.6 per cent of the condo losers in June 2023 were less than 1,000 sq ft

In general, the average floor area of these 33 condo losers was 1,142 sq ft.

What's striking was that more than half (57.6 per cent) of the loss-making units had a floor area below 1,000 sq ft. If we break down the numbers even further, six of the loss-making units measure less than 500 sq ft (most probably studios and one-bedders). So they're more likely to be bought for rental income.

The average holding period of these smaller condos (less than 1,000 sq ft) is also lower at nine years. The owners were probably more ready to sell their properties, even if it meant selling them at a loss.

Meanwhile, 77.8 per cent of the top condo losers have a floor area above 1,000 sq ft. And as mentioned earlier, the average holding period was 12.5 years. The longer holding period could mean that the owners were less ready to sell their homes to cut their losses, adopting a wait-and-see approach for the right time to exit.

ALSO READ: Highest condo loss in May 2023 was $3.08m, 38 units sold at loss

This article was first published in 99.co.