Project Spotlight: This Executive Condo has recorded 155 unprofitable transactions
By Elizabeth Choong
/ EdgeProp Singapore |
Yew Mei Green is an EC in Choa Chu Kang with 155 unprofitable transactions. (Photo: EdgeProp Singapore)
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SINGAPORE (EDGEPROP) – Executive condos (ECs) are built and sold by private developers, but the buyers are subject to HDB’s eligibility rules, which include a minimum occupation period (MOP) of five years for the first buyer, as well as a household income ceiling of $16,000 per month.
First buyers can sell their unit after the expiry of the five-year MOP. However, they can only sell the unit to Singaporeans or Singapore permanent residents. ECs will be privatized 10 years after obtaining their temporary occupation permit (TOP), which allow the units to be sold to any buyer regardless of nationality.
Buyers with a modest budget tend to gravitate towards ECs because of the subsidies offered by the government. Furthermore, ECs are usually launched at prices below comparable condos, which has led many to assume that sellers of an EC unit are guaranteed a profit. However, our earlier article clearly indicates that it is possible for EC sellers to incur a loss despite most sale transactions for ECs being profitable for their sellers. At the time of writing, the five-year MOP has expired for 66 ECs and all of the developments have more profitable than unprofitable transactions. Furthermore, the 43 ECs that obtained TOP after 2012 have fewer than three unprofitable transactions each.
In this article, we discuss the reasons behind the 155 unprofitable transactions that have taken place for Yew Mei Green since its launch in 1998. In contrast, two ECs within walking distance; namely Windermere and The Quintet, have 65 and seven unprofitable transactions, respectively.
Yew Mei Green is a EC in Choa Chu Kang
Yew Mei Green is a 99-year leasehold EC located along Choa Chu Kang North 6 in District 23. The development comprises 712 units, consisting exclusively of three and four-bedroom units.
The EC was launched in 1998 and obtained its TOP in 2000. It was one of the first few ECs to obtain its TOP and was the second completed EC in Choa Chu Kang after Windermere, which obtained its TOP a year earlier. Windermere is located across the road from Yew Mei Green.
Amenities within walking distance include Yew Tee MRT Station, YewTee Point, Yew Tee Square, as well as the Choa Chu Kang Stadium, Sports Centre, and Swimming Complex. Schools within a 1km radius include De La Salle School, Kranji Primary School, Unity Primary School, Yew Tee Primary School, Regent Secondary School, and Unity Secondary School. Additionally, Limbang Wet Market, Limbang Shopping Centre, Kranji Expressway, and Choa Chu Kang Park are within a 1km radius.
Source: EdgeProp LandLens (as at 23 April 2024)
Top three unprofitable units were sold shortly after MOP
Since its launch, 155 unprofitable and 517 profitable transactions have taken place for Yew Mei Green. Losses range from approximately $2,700 to $180,000, while profits range from approximately $2,000 to $843,000.
The top three unprofitable transactions are three-bedroom units that were purchased in 1998 and sold in 2005 or 2006 shortly after the expiry of the five-year MOP.
Four unprofitable transactions are repeat transactions for the same two units. These four transactions represent 2.6% of the total number of unprofitable transactions and a mere 0.3% of the 1,378 sale transactions for Yew Mei Green.
The units in Block 52 #12-16 and Block 56 #09-33 were sold for a loss twice. The unit in Block 52 was sold in 2005 and 2006 for losses of approximately $129,000 and $19,000, respectively. The unit in Block 56 incurred a loss of approximately $124,000 when it was sold in 2006 and a smaller loss of $28,000 when it was sold in 2019. Both units are three-bedroom units, but the unit in Block 52 is larger at 1,410 sq ft compared to the unit in Block 56, which measures 1,335 sq ft.
It is notable that the unit in Block 56 was sold in 2010 for $592 psf, netting a profit of approximately $335,000 for the seller. The same unit was sold again in 2012 for $733 psf, earning the seller a smaller profit of approximately $188,000.
More unprofitable transactions than closest neighbours
There are two ECs within a 500m radius of Yew Mei Green; namely, The Quintet and Windermere. The Quintet is a 459-unit leasehold EC that obtained its TOP in 2006, while Windermere is a 395-unit leasehold EC that obtained its TOP in 1999.
Since its launch, Windermere has had 65 unprofitable and 233 profitable transactions. The top 11 unprofitable transactions for Windermere incurred losses above $200,000. In contrast, the losses for all sellers of Yew Mei Green have been under $200,000.
The smaller losses from Yew Mei Green could be attributed to the smaller sizes of the units. All of the top three unprofitable transactions for Yew Mei Green are less than 1,500 sq ft, while two of the top three unprofitable transactions for Windermere are above 2,000 sq ft.
Since its launch, The Quintet has had seven unprofitable and 312 profitable transactions. The losses range from approximately $15,000 to $212,000. With the exception of the top unprofitable transaction, the remaining six unprofitable transactions feature losses below $100,000.
There are two other ECs located within a 2km radius of Yew Mei Green. Both developments are significantly newer than Yew Mei Green. The Rainforest and Wandervale obtained their TOP in 2016 and 2018, respectively. Both developments are located along Choa Chu Kang Avenue 3 and have had no unprofitable transactions since their respective launches.
Irregular unit layout
The irregular layouts of the units in Yew Mei Green could have contributed to the losses suffered by the sellers. Buyers tend to prefer spacious units with regular rectangular or square-shaped rooms.
For example, the units from the top three unprofitable transactions have irregular layouts. These units feature living rooms with one end comprising a semi-circle of windows which adds an interesting detail to the façade of the building. However, the unusual shape could make it more difficult for owners to find suitable furniture, resulting in unused space. Furthermore, the layout of the top unprofitable transaction includes a narrow wedge-shaped entranceway.
Source: EdgeProp Research
Additionally, the master bedroom and en-suite bathroom have some odd corners, which could make it difficult for owners to arrange their furniture. Owners will probably need to custom-make some of their furniture to minimize the wastage of space.
Source: EdgeProp Research
Likewise, Block 52 #12-16 has an irregular layout, which could have contributed to the unit being sold at a loss twice. Similar to the aforementioned units, the master bedroom, master bathroom, and living area have irregular shapes. Additionally, the kitchen has a somewhat triangular shape, with one end tapering into a corner.
Source: EdgeProp Research
Timing is vital
A total of 90 transactions (58.1%) out of the 155 unprofitable ones were sold in 2005 or 2006. They were likely sold by the first buyers upon the expiry of the five-year MOP restriction. Only 12 (7.7%) of the unprofitable sales were transacted 10 years after the privatisation of Yew Mei Green obtained TOP when the unit could be purchased by buyers of any nationality. It is notable that the latest unprofitable transaction took place in 2021 for a three-bedroom unit. The seller purchased the 1,292-sq ft unit in 2012 and incurred a loss of approximately $25,000.
Sellers who sold their unit in 2005 or 2006 did so at an inopportune time when demand for ECs was waning. In fact, the government stopped launching tenders for EC sites from 2005 to 2009, resulting in a lack of new ECs from 2009 to 2012. Singapore’s economy was on the path to recovery after experiencing SARS in 2003. GDP grew 7.9% in 2005 and 9% in 2006 while unemployment rate was 4.1% in 2005 and 3.6% in 2006. The strong economic conditions also gave a boost to average resident household income which grew from $5,666 per month in 2004 to $5,934 per month in 2005 and $6,181 per month in 2006. The stronger household balance sheet likely encouraged more buyers to purchase condos instead of ECs.
The average price for Yew Mei Green fell from $364 psf in 2003 to $338 psf in 2005. The average price inched up to $340 psf in 2006 before surging to $409 psf in 2007 and $584 psf in 2010. No sales were transacted for Yew Mei Green in 2004.
Source: EdgeProp Market Trends (as at 23 April 2024)
Likewise, the average resale price for Windermere declined from $332 psf in 2004 to $320 psf in 2005 and $313 psf in 2006 before rebounding to $369 psf in 2007. There were no resale transactions for The Quintet in 2005 and 2006.
Source: EdgeProp Market Trends (as at 24 April 2024)
Moreover, owners of units in Yew Mei Green who sold their unit upon the expiry of the five-year MOP would have to contend with competition from other owners in the same development who listed their unit for sale at the same time.
Sellers could have avoided a loss or suffered a smaller loss if they had sold their unit a few years later. Using the highest loss-making transaction as an example, the seller would have incurred a smaller loss of approximately $54,000 if they had sold the unit at the average price of $409 psf in 2007. The seller would have made a profit of approximately $196,000 if they had sold the unit at the average price of $584 psf in 2010.
Furthermore, the average resale price for ECs has been on an upward trajectory, rising from $343 psf in 2005 to $1,232 psf last year, representing a growth of 259.2%. From 2019 to last year, the average resale price for ECs islandwide grew by 45.5%. In contrast, Yew Mei Green displayed weaker growth of 37.7% over the same timeframe.
It is notable that the resale price growth for Yew Mei Green has lagged behind its counterparts across the island. This weaker growth for the 24-year-old development could be attributed to its age and lease decay.
Source: EdgeProp Market Trends (as ay 23 April 2024)
Additionally, the average resale price for ECs islandwide first broke through the $1,000 psf benchmark in 2022, reaching an average price of $1,097 psf, which is an increase from $941 psf in 2021. However, the average resale price for Yew Mei Green remains under $1,000 psf.
Lessons learnt
Many assume that buying an EC is a guaranteed method to reap a profit from the sale of the property. However, we hope that this article on Yew Mei Green has proven that sellers of EC units can suffer losses, especially if it is a large unit.
Time in the market is more important than timing the market. If the initial sellers had the capacity to hold on to their properties during a market downturn, they would not have suffered losses. The EC market experienced a downturn in 2005 but rebounded in 2007. The majority of the loss-making transactions for Yew Mei Green took place during the downturn. Sellers might have avoided a loss or incurred a smaller loss if they had sold their property a few years later when the market was recovering.
Sellers should also be aware that lease decay is likely to have a negative impact on the rate of price growth, which can be expected to weaken as the development ages. Hence, buyers may want to consider buying a newer EC if they are purchasing the unit for future capital gains rather than their own occupation.
Finally, investors should bear in mind that most buyers prefer units with regularly shaped layouts. A layout with regular rectangular or square-shaped rooms is likely to appeal to more buyers than one with irregularly shaped rooms and odd corners.
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