Is selling your investment property in 3 to 4 years wise?

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:

Type of sale	Volume	Average of $	Average of per cent
New Sale to Resale
Sold from year 4 onwards	10281	$223,363	23.5per cent
Sold in 3 to 4 Years	294	$146,942	12.2per cent
Resale to Resale
Sold from year 4 onwards	5124	$235,746	16.4per cent
Sold in 3 to 4 Years	1690	$216,155	16.5per cent

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:

Project	Vol.	$ Gains	per cent Gains
SUNNY PALMS	1	$1,250,000	64.1per cent
OLA RESIDENCES	1	$828,000	58.3per cent
THE CALYPSO	1	$470,000	58.0per cent
INTERO	1	$960,000	56.5per cent
SHELFORD REGENCY	1	$1,160,000	56.3per cent
WATER PLACE	1	$800,000	54.1per cent
HAZEL PARK CONDOMINIUM	3	$651,000	52.3per cent
COASTARINA	2	$582,500	46.9per cent
WOODGROVE CONDOMINIUM	2	$531,000	45.8per cent
SPANISH VILLAGE	1	$828,000	45.7per cent
WATERBAY	1	$523,000	45.7per cent
HAIG APARTMENTS	1	$422,000	45.5per cent
CHOON KIM HOUSE	1	$629,199	44.9per cent
RIVERPARC RESIDENCE	9	$474,531	44.9per cent
ARDMORE PARK	1	$3,500,000	43.8per cent
HUME PARK I	1	$520,000	43.3per cent
THE TAMPINES TRILLIANT	1	$483,000	42.6per cent
THE SUNNY SPRING	1	$524,888	42.5per cent
WATERCOLOURS	1	$320,000	42.1per cent
YONG AN PARK	1	$650,000	41.9per cent

Least profitable condos

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

Project	Vol.	$ Loss	per cent Loss
REIGNWOOD HAMILTON SCOTTS	1	-$3,950,000	-36.6per cent
TURQUOISE	1	-$780,000	-21.8per cent
3 ORCHARD BY-THE-PARK	1	-$1,625,480	-19.9per cent
MON JERVOIS	1	-$650,000	-19.1per cent
SUNNYVALE RESIDENCES	1	-$276,000	-15.1per cent
LE REGAL	1	-$65,000	-11.8per cent
CAIRNHILL NINE	1	-$247,000	-9.3per cent
SUITES @ KOVAN	1	-$50,000	-9.1per cent
MARINA COLLECTION	1	-$526,707	-8.2per cent
THE LUMOS	1	-$352,320	-8.0per cent
SUITES AT ORCHARD	1	-$120,000	-7.5per cent
SPOTTISWOODE PARK	1	-$60,000	-7.0per cent
QUBE SUITES	1	-$40,000	-6.3per cent
MARTIN NO 38	1	-$175,000	-6.1per cent
SINGA HILLS	1	-$58,360	-6.1per cent
MARINA ONE RESIDENCES	5	-$139,933	-5.3per cent
SUITES@CHANGI	1	-$28,000	-4.6per cent
ONE SHENTON	3	-$119,300	-4.0per cent
WALLICH RESIDENCE	2	-$82,010	-3.5per cent

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

Project	Vol.	$ Gains	per cent Gains
PARC RIVIERA	32	$154,657	12.6per cent
SIMS URBAN OASIS	20	$151,725	12.7per cent
STIRLING RESIDENCES	18	$296,111	21.6per cent
COMMONWEALTH TOWERS	16	$80,593	6.0per cent
PRIVE	15	$218,874	21.6per cent
THE GARDEN RESIDENCES	15	$115,706	12.6per cent
THE MINTON	13	$210,462	20.1per cent
LE QUEST	13	$179,651	14.5per cent
SKIES MILTONIA	13	$110,138	11.7per cent
SYMPHONY SUITES	13	$93,882	9.0per cent
PARC BOTANNIA	12	$196,427	17.3per cent
THE INFLORA	12	$97,583	17.3per cent
THE TAPESTRY	12	$124,699	11.9per cent
RIVER ISLES	12	$122,333	11.0per cent
REFLECTIONS AT KEPPEL BAY	12	$61,151	4.5per cent
KINGSFORD WATERBAY	12	-$32,256	-2.9per cent
THE BAYSHORE	11	$226,636	21.1per cent
TRE RESIDENCES	11	$121,765	10.1per cent
PARC ROSEWOOD	11	$73,353	10.1per cent
EIGHT RIVERSUITES	11	$100,818	8.6per cent

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.