The number of prime condominium units sold at prices below their original purchase price is mounting. The most recent proof of that was the recent resale of a 1,927 sq ft unit at Orange Grove Residences for $3.3 million ($1,713 psf), according to a caveat lodged on November 2. The seller is likely to have incurred a loss of $1.1 million (25%) given that the purchase price for the unit back in August 2007 was $4.4 million ($2,283 psf), according to a caveat lodged then.

The latest transaction price of $1,713 psf at Orange Grove Residences is a historic low for the project. The 60-unit freehold luxury condo by developer Ho Bee Land was completed in 2009. When The Orange Grove Residences was first launched in 2007, units were sold at prices ranging from $1,904 psf to $2,350 psf.

“It does not come as a surprise especially in the current low transaction environment, especially if the unit has been sitting on the market for a while,” says Alan Cheong, head of research for Savills Singapore. “It does pay for savvy buyers to look around and do their due diligence because you never know what will turn up as seen in the case of this unit at Orange Grove Residences.”

There are a number of reasons for the increase in unprofitable transactions, adds Cheong. There are some owners who have decided to cut their losses by selling now instead of waiting indefinitely as the government has reiterated that the cooling measure are set to stay for now. Some may want to liquidate this asset in order to purchase something else, while others may need the cash to expand their business but are unable to secure a loan under the tighter total debt servicing ratio (TDSR) financing requirements. Others could also be forced to sell due to divorce, bankruptcy or even estate sale and other change in their financial circumstances, he says.

The last time a unit changed hands at a price below $1,800 psf was in July 2013, a month after the TDSR was introduced. The unit was a 3,143 sq ft penthouse on the fifth floor that was sold for $5.6 million ($1,782 psf). The previous owner had paid $7.39 million or the all-time-high $2,350 psf for it.

According to some property agents who are marketing units in the project, demand has dwindled owing to competition from new luxury condominiums that have completed in recent years, providing buyers with a wider selection of units to choose from. Some buyers are also on the lookout for high floor units with panoramic views, and Orange Grove Residences is a boutique five-storey development.

Despite the waning interest from potential buyers, most unit owners at Orange Grove Residences are reluctant to lower their asking prices as they had paid top prices when they purchased their units back in 2007, says Patricia Lim, director and owner of Illuma Property International real estate agency. However, the latest transaction is expected to set a new benchmark for lower prices, she reckons.

Lim relates a recent anecdote where one of her clients had offered $4.55 million for a four-bedroom unit at Orange Grove Residences. The seller had turned down the offer and had clung on to the $4.8 million asking price, as he had paid $5 million for the unit eight years ago. The buyer subsequently bought a 2,400 sq ft four-bedroom unit on the first level for $4.5 million ($1,875 psf), according to a caveat filed in December last year. The sale was brokered by another agent, says Lim.

However, even the seller of the four-bedroom unit on the first level incurred a slight loss of 11.5% as the earlier purchase price for the unit in February 2007 was $5.085 million ($2,118 psf).

Rental demand for units at Orange Grove Residences is equally low, says Lim. Asking rents of four-bedroom units are $9,000 a month, and some owners are providing fully furnished units at $12,000 a month. Meanwhile, asking rents for partially furnished three-bedroom units are still hovering at $9,500 a month. “Most owners would rather rent out their units fully furnished than leaving them vacant,” she says.

What is happening at Orange Grove Residences is symptomatic of the rest of the luxury condo market today, adds Savills’ Cheong.

Freehold condominium projects near Orange Grove Road

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This article appeared in the City & Country of Issue 704 (Nov 23, 2015) of The Edge Singapore.