Do you remember a time in Singapore when you could buy a property and "flip" it in a couple of months (in some cases, just a few days) for a profit?

Source: Squarefoot Research

For example, look at these transactions in 2007 at Pandan Valley. The shorter of the two was a holding period of just 96 days, and the seller made a big $420,000 profit in a matter of just three months. Sounds incredible, and a big reason why it led to a property bubble in those days.

Today, the property market in Singapore is a lot more controlled, and while you can still "flip" a home if you want to, the current Sellers Stamp Duty (SSD) of three years prevents such quick sales.

This often means attempting to sell a unit within three to four years of purchase; sometimes even before the unit is built (a sub sale transaction). But how well does this sort of house flipping work in Singapore? We took a closer look:

The general answer to the question

We like to be direct at Stacked, so we'll start with the most general answer. We looked at the results of people who flipped their units within three to four years, starting from March 2017.

Using this time period provided a good number of "flip" transactions, totalling 1,984. Among these transactions, we saw an average gain of 15.8 per cent, and an average quantum of $205,899. 

(This includes all transactions, including new-to-resale, and resale-to-resale)

So the most general and simplified answer is yes. On average, sellers have seen gains by selling within three to four years. However, we should keep in mind that 2017 was a good time to buy, as prices were lower and subsequently climbed; especially after Covid.

But it’s good to examine this in more detail:

The difference between new-to-resale, and resale-to-resale

The significance here is in how new launches are usually sold. Developers sell units for cheaper in the earliest launch phases, as a sort of a loss-leader strategy. You can check out the explanation of developer sales strategies here. 

This might incentivise flipping: if you can buy a $1.5 million unit and sell it in the fourth year (when there’s no more SSD), this is an immediate gain of $150,000. 

For resale-to-resale however, a flip tends to happen only when a buyer has found an unusually good deal (e.g., the seller made an urgent sale, at below valuation). 

Here are the differences we found between the two:

From here, you can see that buying a new launch tends to better reward those who sell from the 4th year. If they sell just after the SSD is not payable, the average gains are worse. 

With regard to new launches, we do need to acknowledge the disparity in volume. The vast majority of our transactions happened from the 4th year. But we have to consider that the results can include more condos that were profitable to begin with, hence raising the average gain.

Besides this, most buyers prefer to buy in the fourth year, when it comes to new launches. This is because, for the first three years, the new condo is still under construction. Between the 3rd to 4th year, there could be teething issues with the development.

By buying at the point of completion, or close to it, a buyer can quickly move in or start renting out the unit. This is another reason why sellers in the fourth year may have secured better gains.

Another reason could also be due to the actual product fulfilling or even being better than what was seen in the show flat. As such, buyers may have been prepared to pay more upon seeing the real deal.

For resale-to-resale transactions, it doesn't make much difference whether the sale happens from the third or fourth year. From the buyer's side, there's less difference compared to a new launch, as resale units are all completed units.

Gains are likely lower as there's no "early bird discount," unlike when you buy from developers. Do note that this doesn't factor in interest cost which is expected to be higher for resale developments.

Most profitable projects

These condos had the best results when flipped within three to four years:

Least profitable condos

These condos had the weakest results when sold within three to four years:

Condos which had the highest volume of three-to-four-year resales:

1. There's no guarantee that developers won't lower prices later

Don’t assume that a big early bird discount ensures future gain. There have been cases where developers don’t raise the price by much in later sales phases, or even grant bigger discounts to later buyers. 

We have observed condos dipping in price in later launch phases, as well as fire sales related to ABSD deadlines. Developer pricing changes or relaunches can affect your gains, and the number of prospective buyers for your sub sale unit. 

2. Be aware of prepayment penalties in the home loan package

You’ll need to discharge the outstanding home loan when you sell the unit. In many loan packages, this can come with a penalty of 1.5 times the undisbursed loan amount. In the case of a property you’ve only held for three to four years, the “undisbursed amount” is bound to be quite significant.

Ideally, your home loan will have terms and conditions that waive the penalty in the event of sale; or at least waive the penalty on part of the amount. You need to check for this before you sign for the loan though; it’s too late afterward.

3. Finding a replacement property will entail added costs

Before you agree to a sub sale, do factor in the costs of finding a replacement home. If you’ve been renting while waiting for your condo to be built, for example, selling might entail another few years of rental costs.

You should also consult with your property agent, to shortlist other viable properties before you sell. There have been instances of sellers being too quick to sell, and then realising there’s nothing in their budget in the same location; not even with their added gains. As we’ve seen in the aftermath of Covid, property prices can rise very quickly, even in a short span of three to four years. 

4. If you buy after TOP, you're probably buying much higher

There are many tempting advantages to buying a recently or nearly completed unit. But bear in mind that, if you buy in the third year, the seller is likely to factor their SSD tax into the sale price; and if you buy after completion, you’ll usually pay a premium.

(You can see the higher returns reflected above!)

For landlords, there’s a lot of number crunching involved here. You need to determine if being able to rent right away will make up for the premium you’re paying. For owner-investors, you may need to accept lower gains in the future, for the privilege of moving in right away. 

The idea of flipping your unit can be deceptive; it looks like easy money. But it’s not always straightforward and it can cause a logistical nightmare. After all, a booming market where it’s easy to flip a property is also a market where home prices are rising fast: you might find you’re back to square one, if your replacement property has also gone up in price.

ALSO READ: Seller rakes in whopping 200% profit from sale of $4.3m leasehold condo in Bukit Timah

This article was first published in Stackedhomes.