Case study #2: The story of Forest vs Water

If you think that properties bought in the same time period will have similar returns, this case study will change your perception.

In 2014, I was referred to a property owner who unfortunately due to a business failure, had to sell off his property at Foresque Residences which was initially for own stay.

Image 1: Foresque Residences location / Source: Streetdirectory

Image 2: Foresque Residences details / Source: Squarefoot

When I first met Mr Tam (not his real name for privacy purpose), we went through the likely price he could sell, and we eventually worked out his breakeven price taking into account

Purchase price: S$1,207,000 (1,130 sqft)

1. The stamp duty he paid for purchase: 3% – $5400

2. The seller stamp duty (SSD) of 4% which he would have to pay

3. My broker service fee of 2% + GST for selling the unit

4. Legal fees and early cancellation fee for his mortgage (Property was just TOP, and CSC not obtained)

Adding up (1) to (4), the amount was about S$100k OR 8% higher than his initial purchase price. He had to sell the unit for S$100k above purchase price in order to breakeven, and to get back his initial capital paid for the down payment.

This seemed like an impossible task at that point in time, because there were still unsold developer units, and to make matters worst, there was going to be more new launches nearby Foresque Residences coming up and strong cooling measures by government.

As Mr Tam was really in a hurry to sell off the unit, we agreed that we will call it a ‘fire sale’ at that time to attract maximum exposure. Do note that the actual unit could not be seen yet as keys were not collected. Below is one of the old marketing pitch sent to agent cobroke groups.

Image 3: Mass send to cobroke groups

After 2 months, we were still not able to secure a buyer for the unit. At this point, Mr Tam and I had a chat about why he bought the unit at Foresque Residences. He told me that he liked that the development was near nature, and he found that the development being about 16-20mins away from MRT by foot acceptable. He also added that he was also considering Waterfront Keys/Gold at Bedok Reservoir when he was planning to buy the unit in 2011.

At that juncture, I told him “If you had bought the waterfront collection at that time, it will be easier to sell, more demand and the Bedok reservoir MRT was announced”.

Image 4: Profitable transactions Waterfront Gold / Source: Squarefoot

When I told him that a unit at Waterfront Gold would be a easier sell, he went on to say that he did prefer Bedok reservoir area, but the agent he bought the unit from manage to convince him that Foresque Residences was a better buy. Now buying a unit is entirely a property buyer’s call. An agent can only provide you their insights, and I am not suggesting that the agent gave the wrong advise. What this case study tells us based on the information available is, properties bought at the SAME time period can and will perform differently. Hence, property selection is critical.

Eventually, I sold the unit at Foresque Residences and Mr Tam managed to achieve breakeven price. However, if he had bought a property like Waterfront Gold (see Image 5 below for the location) which had better capital appreciation, the additional profits could have helped him in his situation with more profits to reduce his debts, his property also could have been sold quicker, reducing any emotional stress faced.

Image 5: Waterfront Gold location / Source: Streetdirectory

Let us now look at both Foresque Residence and Waterfront Gold performance over the years. Both properties obtained TOP in 2014.

Historical Transacted Prices – Foresque Residences

Source: Squarefoot

Historical Transacted Prices – Waterfront Gold

Source: Squarefoot

Analysing both Foresque Residence historical price trend, it has been rather stagnant overall, while price trend for Waterfront Gold had gradually increased until 2015. Both trended downwards after that to where we are now in 2018. During the period of 2011-2014, both properties performed differently with Foresque Residence being rather stagnant and Waterfront Gold prices were rising.

When we buy a property, it is common to buy what we like, or sometimes get swayed to buying something else. If we buy what we like, we need to consider if the majority of buyers will think the same, else this will be an issue later on when re-selling the unit.

Foresque Residences (surrounded by Forest) and Waterfront Gold (surrounded by Water) can be great Properties to stay, however when one considers potential profits, being near amenities (MRT, eateries, etc) which usually attract more demand is an important consideration. However, it is also critical NOT to overpay for amenities. I will share more about this in a separate article.

You may not know if an unforeseen event that requires you to sell off your property will happen, but if you take care of your property decisions and selections, i believe you should be safe.