Property Losses that are actually Profit ?

In recent times, there are news reports that highlight huge losses in Property Market. Do they tell the whole story ?

Boomtime buyers now big losers

More than 800 condo units were resold at a loss this year as economy slows

An ultra-luxury apartment with a sea view at Sentosa Cove has made the largest loss in the property market so far this year.
Originally bought for $11 million in 2011, the condominium unit at Seascape was sold for $6.35 million in October at a loss of $4.65 million.

A high-end property at The Ritz Carlton Residences in Cairnhill Road made the second-largest loss-making deal of $3.7 million in March.

Another Sentosa Cove unit at Turquoise came in third, in a transaction that made a loss of more than $3.3 million in June.

Source : http://news.asiaone.com/news/business/boomtime-buyers-now-big-losers

Is it true that buyers of these property suffer from huge losses ? 

An often neglected fact is that foreign investments made up a substantial figures in Singapore property, especially when these high end properties are involved. The above example by Asiaone consist of exclusively of high end property of over SGD$5 million at the time of purchased.

Foreign investments in Singapore property at nine-year high

About $8.85 billion from overseas has been pumped into Singapore property so far this year – the best result since the $15.27 billion outlay in 2007, before the global financial crisis hit.

Analysts say the pace of foreign investment could well carry over into next year, depending on how the economy fares.

The influx of foreign funds is due partly to the view of Singapore as a safer investment destination in a world roiled by uncertainties.

Source : http://www.straitstimes.com/business/foreign-investments-in-spore-property-at-nine-year-high

Taking these into considerations, do you think the results would still be the same ?

COMPARED to regional currencies, the Singapore dollar (SGD) has stayed strong above the rest. With the US interest rate hikes set to be carried out towards the end of the year, we are seeing more fund outflows from developing countries like Malaysia and Indonesia.

Source : http://business.asiaone.com/news/the-weakness-strong-singapore-dollar

What the “Top 10 loss making resale Non-Landed Private property transactions in 2016” had not taken into consideration the possibility that the sellers of these “Top 10 loss making” property might be foreigners. After taken into consideration of the exchange rate over the last decade, might not loss big as perceived.

propertylossesforex2

Sources:
Currency Exchange – http://www.ecb.europa.eu/stats/exchange/eurofxref/html/index.en.html
Property Information : URA, Squarefoot. Note that some of the prices provided by asiaone were round up/down. This chart uses the exact buying/selling prices.

The above example uses Indonesia and India buyers. Buying and Selling prices are converted back to the domestic currency at the rates as of buying/selling date.

When taken into account the exchange rates during the purchased date, and selling rate and converted to the respective currency, some of the huge losses that were in fact profits for some of the foreign investors. A losses of over SGD$3 million for St Regis Residences translated into a profit of SGD$2.45 million for an Indian buyer, or a profit of SGD$1.78 million for a Indonesian buyer.

Here are some other scenario if the sellers are from other nations.

propertylossesforex10

Even for those properties that were sold at a losses after forex is taken into account, we can see that for Malaysia, South Korea, UK sellers, the losses that were perceived are greatly reduced and not as large as originally perceived.

Russia property investors in Singapore are a minority, but due to the exchange rates, it’s quite interesting to note that if they had invested in these loss making properties, they would still make a profit of up to SGD$4.6million .

Here’s the annualised return of the properties above.

propertyannualisedreturn

Considering a moderate rental yield of 2% annually, it can be seen that the losses are reduced for certain nationality.

Without background of the sellers of these high end properties, just looking at the transacted price of the property is not going to give a clear picture of the financial gain/losses of these properties.

It could be interesting to explore further to see what kind of correlation can we get from these data in the future.