Shoebox flippers were not spared from getting their fingers burnt. Four shoebox units sold in 2014 and 2015 were held for two years or less. Three out of the four incurred losses ranging from $5,840 to $49,080 or 1% to 8%. All three transactions would have been profitable with the gains ranging from $27,240 to 67,000, if not for the SSD payable (Table 1). No shoebox unit was flipped within one year of purchase among those sold in 2014 and 2015.
Table 1: Three of four shoebox units flipped within two years of purchase incurred losses
Ninety-five per cent of shoebox transactions in 2014 and 2015 were profitable
The study defines shoebox units as those below 500 sq ft. Profit and loss were computed based on the difference in selling and purchase price, taking into account the prevailing Sellers’ Stamp Duty rate where applicable. It excludes other costs such as stamp duty and interest rates.
It was not too bad for other sellers though. A majority 95% of shoebox transactions in 2014 and 2015, where their previous transactions can be traced, were still profitable. All the shoebox units transacted in 2014 and 2015 were previously bought in 2007 to 2013 (Table 2).
Profits averaged $118,000 or 21%. The profit margin was slightly smaller than non-shoebox units bought in the same period (2007 and 2013) which averaged 28%. Percentage-wise, the biggest gains accrued to units bought in 2008 and 2009 during the sub-prime scare, averaging 33% and 31% respectively.
Table 2: Gain and losses for shoebox units sold in 2014 and 2015
City fringe shoeboxes yielded the highest profit, averaging 24% or $130,000, followed by those in the mass-market segment at 20% or $106,000. In the high-end segment, the average profit was 16% or $116,000. This trend could be reversed given that prices of high-end homes has fallen faster than its mass-market counterparts.
Quantum-wise, the highest profit was traced to a high floor unit at Illuminaire on Devonshire. The seller had previously purchased the unit directly from developer EL Development in 2009 for $1,718 psf. He sold it in 2014 for $2,593 psf (Table 3).
Table 3: Top three gains by market segment
This article appeared in The Edge Property Pullout of Issue 679 (June 1) of The Edge Singapore.