Another headline about a property just sold at record high. These days we all desperately want to hear some good news. There is enough bad news around on company layoffs and new condo projects that can’t sell.
Luxury projects just sold at record high!
The following are common property headlines in local media:
“xxxxxxx sold for record price of S$xx million”
“xxxxxxx records new high of S$x,xxx psf at S$xx million”
“New psf-price high of S$x,xxx psf set at xxxxxxx”
“S$xx million sale of xxxxxxx sets record transaction price of S$x,xxx psf”
Wow, did we miss something? Let’s quickly go in and buy one as well.
(Fortunately, the media won’t report any record low transaction price in a resale project. Otherwise, I wouldn’t be able to stay low last time after each property purchase.)
If we observe carefully, we can even spot a pattern. Many are not-so-new projects launched some time back. Often, they are high-end luxury homes in the Core Central Region where selling of new projects has been increasingly difficult these few years.
But somehow, out of nowhere a buyer paid for a unit at record high psf price. We wonder why the rich buyer didn’t go for a newer project. Also, we pray that the following month there won’t be any returned unit to the developer in this not-so-new project.
Is the coverage free advertorial for the developer? Nonetheless, as loyal readers, we must be understanding for the good intention behind. Under this challenging media environment, the media and advertisers must support each other.
We just learnt that the Ministry of Communications and Information has budgeted $260 million funding for SPH Media in FY2024 and up to $900 million in five years. We should have known that it is not easy for newspapers and property portals to survive in Singapore’s small market.
The bigger the bubble, the higher the casualty?
As I am writing this post, the price of Bitcoin has gone through the roof from pricing at USD40,000 end of January to above USD68,000 now. When the price of something jumps 70 percent in just over a month, we all know that this is a typical bubble inflated by the greed of speculators, waiting to pop anytime.
Past experiences tell us that, each time the news reports a record high price, something unfortunate is going to happen soon.
The same is true in the real estate industry. Whether the buyer is a developer, a corporate or individual buyer, whoever being reported in the news buying something at a record high price almost always ends up regretting later.
“Some projects seem to have their value frozen over time. There is no price appreciation regardless of any increase in the property price index. Other projects have their highest price already achieved at launch. Then prices depreciate year after year with no end to it. These projects can have their first launch dated back to the year 2007. I am not surprised. Many buyers who bought properties in the mid-1990s took 20 years to breakeven.
The bigger the bubble, the bigger the casualty. This is what happened in the prime districts. I have written a recent post about what happened to high profile projects launched in Newton, Orchard and Sentosa back in 2007 (Read “When a fling becomes a thing”). After fourteen years, their price drop today is not too much if you have deep pockets. The paper loss is 20 to 30 percent on average.”
– “What happened to buyers who overpaid at new launch?”, PropertySoul.com
The fate of a land site sold at record high
A joint venture won a Cuscaden land site in a Government Land Sales back in 2018. Read how the media reported the good news at that time.
“The $410 million bid for the 61,597 sq ft, 99-year leasehold site worked out to $2,377 psf per plot ratio. Not only did the price smash all records for a residential government land sale (GLS), as well as earlier market expectations of $1,800 to $2,300 psf ppr, it is also 37% higher than the previous record of $1,733 psf ppr for the Jiak Kim Street GLS site.”
– “SC Global, Far East Consortium and New World Development sets benchmark for Cuscaden Road site”, EdgeProp, 27 April 2018
Notice the words “sets benchmark”, “price smash all records” and “37% higher than the previous record” in the article? The dangerous descriptions was a curse that set the stage for a disaster.
Last month, a joint venture bought a nearby site at a 32 percent discount of $1,617 psf.
“The awarded bid price is 32% less than the $2,377 psf ppr paid for the nearby Cuscaden Road GLS site six years ago … The site has been developed into the 192-unit luxury project Cuscaden Reserve.”
– “UOL Group and Singapore Land Group awarded Orchard Boulevard GLS site”, EdgeProp, 21 February 2024
Cuscaden Reserve’s breakeven price was around $3,200 psf. In 2019, the launch price was between $3,300 to $3,700 psf. Although it was completed in 2022, as of today, the project only managed to sell 12 out of 192 units. In other words, 94 percent of total units remain unsold.
After the award of the 32 percent cheaper plot, developers of Cuscaden Reserve had to face the reality. It recently started marketing the unsold units at a loss of $2,9xx psf.
The truth of shophouses sold at record high
Knight Frank said sales of shophouses in Singapore hit an all-time high value of $1.9 billion in 2021. A Bloomberg article told us that the average price of Singapore shophouses has surged to a record $5,500 per sq ft which is double of Manhattan’s Upper Fifth Avenue. The Straits Times reposted the same article titled “Singapore shophouses are blazing-hot properties as sales and prices surge”.
In April 2023, EdgeProp published an article titled “Chinese investors drive conservation shophouse prices above $7,000 psf”. Read how the agent described his closed deals:
“Several other shophouses in the CBD and Chinatown have changed hands for prices above $7,000 psf, according to Richard Tan, senior associate group district director at PropNex. However, due to non-disclosure agreements, he cannot disclose transaction details. And no caveats have been lodged for these transactions.”
That was true. In fact, the 2023 2nd quarter sales of shophouses jumped 44 percent to $415 million. Knight Frank expected sales to reach $1.5 billion in 2023.
All of a sudden, the infamous $3 billion money laundering case surfaced in mid-August 2023.
By December, ten shophouses valued over $100 million were put up for sale in the Business Times to help DBS Bank recover the outstanding loan repayments. These shophouses (one in Telok Ayer, four in Amoy Street and five in Geylang Road) were acquired by the accused Chinese nationals.
Then a February Bloomberg article headline read “Singapore’s biggest money laundering case tests city’s weak shophouse market”. ERA echoed that high prices and softer yields moderate the shophouse market down to $1.07 billion in 2023.
Rules in place but how about enforcement?
One money laundering case already involves 152 properties. Among them, there are 94 residential properties, 8 Sentosa Cove landed homes, 60 completed resale units and 34 uncompleted units sold by developers.
Money laundering is to wash as much dirty money as possible in a deal. Thus, money launderers are happy to pay well above valuation. The parties involved in the deal (the seller, the agent and the lawyer) benefit too. Likewise, the bank is most willing to match their valuation with whatever the selling price.
Genuine buyers and investors can no longer tell, behind those inflated prices, what the fair values are for Singapore’s properties, including commercial properties, GCBs, luxury homes and new launch projects.
In June 2022, a Chinese buyer reportedly bought 20 units in new project CanningHill Piers. The total transaction price of over $85 million set a record high for bulk purchase in private home new sales. Unfortunately, in September 2023, the police said apparently two foreign nationals involved in the money laundering case had purchased 19 units at Canninghill Piers.
The Developers Anti-Money Laundering and Terrorism Financing Bill was passed in 2018. It states that “developers will need to carry out due diligence checks on purchasers, keep proper records relating to these checks, and report any suspicious transactions to the Suspicious Transaction Reporting Officers.” Similar duties of property agents were legislated in 2021.
How seriously did the relevant parties and authorities take the bills in the last six years?
The mysterious case of Viva Land
In August 2020, Viva Land acquired 39 Robinson Road, a Singapore freehold office building, with an impressive price tag of $500 million. The purchase price was 34 percent above valuation even in a soft property market.
Next, it set another record high in Singapore’s hotel history by purchasing 5-star hotel SO/ Sofitel (now rebranded Hotel Telegraph) at $240 million in May 2022.
Singapore-listed Viva Land is a subsidiary of Vietnamese property group Van Thinh Phat Holdings. The Singapore subsidiary was founded in 2020 under the management of two former Capitaland executives.
Is Vietnam a country known for a strong currency and cash-rich funds? Yet, the sellers, the brokers, the lawyers and our authorities suspected nothing.
Five months later in October 2022, Truong My Lan, chairwoman of Van Thinh Phat Holdings, was arrested by the Vietnamese police for swindling investors trillions of Vietnamese Dong. She had been embezzling cash from Saigon Commercial Bank for over a decade between 2012 and 2022.
Truong’s husband is from Hong Kong. The Hong Kong media reported that three senior executives at Van Thinh Phat involved in issuing the illegal bonds died a sudden death right before and after Truong’s arrest.
In October 2023, Truong was charged with cheating 42,000 investors of a total of USD12.5 billion. The huge sum is equivalent to three percent of Vietnam’s GDP in 2022.
By March 2023, Viva Land had sold 39 Robinson Road in Singapore at $399 million – more than 20 percent mark-down from the purchase price of $500 million. Hotel Telegraph was also on sale now at 30 percent discount.
Anyway, at least the two Viva Land commercial property deals helped to chalk Singapore’s office and hotel sales price records. Our media were happy to report the good news of a strong commercial property sales rebound and recovery between 2020 and 2022 despite a prolonged pandemic.
Telling the truth from the lies
My elder daughter just received her A-level results. She wondered which subject she should study in universities.
I told her that it doesn’t matter what she studies. But she must learn the skills of how to tell right from wrong, and how to see the truth from the lies in her college years. These skills are useful for life.
I have spent two decades in regional marketing management. For over 20 years, I have property investment as my hobby. I have seen too many senior management, respected professionals and so-called experts either cannot tell the truth from the lies, or choose to say black is white.
“It is easy to repeat what most people are saying. It is also not difficult to tell a lie. But it is never easy to tell the truth. We need the wisdom to understand the truth, the courage to believe in it, and the guts to tell it … As Chinese writer and poet Lu Xun said, “Only real knights dare to face head-on with the sad truth in life.”
Big companies encourage whistle-blowing for unethical or illegal behaviour. But after the investigation, they often remove the whistle-blower for fear that the company secrets will be leaked. That is why it is common to see parents telling their children that, whenever they witness something bad happening, keep quiet and pretend they haven’t seen anything. This is the street-smart way to protect oneself.
Most people prefer to do nothing until fake news, lies, and scams get out of hand, and until the victims are all over the place. By then, hopefully, there are enough facts and proofs for the authorities to take action.”
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
You can watch the recording of the presentations at the 2023 Mid-Year Singapore Property Review and Outlook seminar.
The video 2023 Singapore Private Home Market is available for viewing here.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
My book Behind The Scenes of The Property Market is available for preview and order online.
Well said.
Thank you!
Hello, do you think Cuscaden Reserve revised entry price of 29xx psf has any potential upside? Do you think the neighboring parcel will launch well below that?
It depends when the government will relax the 60 percent ABSD for foreign buyers. For the Orchard Boulevard site, you have to direct the question to the winning developer.