Russian Oligarch Suffers 50% Loss On Singapore Real Estate Sale

While the Canadian housing bubble - driven by Chinese hot money - continues to grow (although its latest near-death experience courtesy of Home (Lack of) Capital Group may have finally pierced a stake through its heart), housing markets elsewhere are suffering from some serious wobbles. Take Singapore, for example, where recently a 4,069 sq ft at Seascape in Sentosa Cove was sold at a $6.6 million loss. The loss works out to 52% or 10% annualised over a holding period of 6.6 years.

The unlucky seller: a Russian oligarch. According to The Edge Property, the previous owner, a Russian national bought the unit from the developer at $12.8 million or $3,146 psf in June 2010. The unit was put up for mortgagee sale at an auction conducted by JLL in January 2017 at an opening price of $6.8 million but did not find a buyer. It was subsequently sold at $6.2 million or $1,524 psf by private treaty. According to JLL head of auctions Mok Sze Sze, the buyer is an investor.

It's not the first dramatic repricing of Singapore real estate. So far, four other private non-landed homes have been sold at losses above $5 million, based on the matching of URA caveat data as at Feb 17.

Previously, a 4,133 sq ft unit at Seascape was sold at a $5.2 million loss. The unit was bought at $11 million or $2,661 psf in December 2011 and sold at $5.8 million or $1,403 psf. The loss works out to 47% or 17% annualised over a three-year holding period. The seller was also liable for a 4% or $232,000 Seller’s Stamp Duty.

Before that, a 3,757 sq ft unit at St Regis Residences Singapore in prime District 10 was sold at a $5.02 million loss. The unit was bought at $13 million or $3,461 psf in July 2007 and sold at $7.98 million or $2,124 psf. The loss works out to 39% or 24% annualised over a 1.8 year holding period.

In September 2001, two separate 8,740 sq ft units at Ardmore Park in prime District 10 were sold at losses of $8 million and $5.5 million. The larger loss accrued to the unit bought at $18.5 million or $2,117 psf in Feb 2000 and sold at $10.5 million or $1,201 psf. The smaller loss accrued to the unit bought at $16 million or $1,831 psf in December 1999 and sold at $10.5 million or $1,201 psf.

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While it remains unclear who the "motivated" Russian seller was, or what prompted him to rush with the firesale, it is notable that in at least some occasions, price discovery under liquidity durress results in market clearance as much as 50% below suggested "fair values." It may also explain why in its rescue loan to Canada's biggest alternative lender, HCG, the provider of $2 billion in rescue financing, Canada'the Healthcare Of Ontario Pension Plan, demanded $2 worth of collateral coverage for every $1 it lends, a hint that losses as great as 50 cents on the dollar may be imminent if and when the Canadian housing bubble finally bursts.