There’s always an exception to the rule.
So much of investment, financial advice and self-help relies on what only be termed as old maid’s adages - stories of general truths you might catch your grandmother telling.
I was reminded of this while watching a popular Youtuber discuss (/ bash) the new launch, Hillhaven. In it, he makes wild proclamations like “Price increases by $150 psf with every MRT station (towards the city)”, “No transactions == bad investment” and many more. For the next 20-minutes, he dishes a series of well-worn tropes “supported” with cherry-picked data points.
There is no point in spending time dissecting and disproving each point. Aphorisms work precisely because they are generally true and they’re simple. Because investing (especially in property) is so intimidating, we want a simple set of truths / rules to follow to make a good investment.
For every truth there’s always some exceptions. After all, isn’t the Alpha searching for something market’s exception? — the edge that has yet to be priced in.
Bucking conventional wisdom
Recently, I chanced upon an interesting set of transactions that broke almost all conventional wisdom resulting in a huge windfall. This is 4402sqft 4-bedroom penthouse unit in a low-transaction Hillview project in The Petals.
Penthouses (and loft units) are often considered to be a bad idea in Singapore because many see the open air spaces as poor space use. With tight living spaces and expensive square footage, most people value liveable spaces over the privilege of a roof-top garden. The roof-top space also pushes the quantum value of the homes up significantly making them difficult to afford (difficult to sell). This is why some of the biggest loss-making property transactions in Singapore are for penthouses. For example:
- James Dyson sold his 21,108sqft penthouse in Wallich Residence at whopping $11 million loss. (Read more)
- A 6,663 sq ft, five-bedroom penthouse unit in Paterson Suites sold for a $6 million loss in 2022 while the rest of the units Paterson Suites turned over a profit during the same time period.
A closer look at the anomaly
Between 2011 to 2016, this penthouse unit in The Petals suffered a 3 consecutive loss making transactions. The price of the unit fell by nearly 50%. In fact, by they time it hit $1.89M, the place is basically a steal at $429 psf.
At $426 psf, the 2016 buyer made a tidy profit during the Covid uptrend, selling off the unit in 2020 (after 4 years) for $2.7M at $613 psf.
But what we’re looking at today, is the biggest winner of all who sold off the unit for a whopping $4.18M just after a 3 year holding period. That’s 15.7% in annualized profits. This was also the second largest gain in this project.
There are, of course, things that these transactions don’t tell us. For example, how much renovation had gone into improving the living space, upkeep of the apartment, how the unit was marketed, etc. These intangibles coupled with good timing had a big part to play in making this highly profitable transaction happen.
That is not to say that we should run around catching falling knives or overextending to buy distressed properties. But rather, there is a time and place for us to ignore conventional wisdom.
Buying low and selling high
Nothing in this world is objectively black or white, true or false. Most truths are just facts that have yet to be disproven. After all, for the longest time, we thought the earth was flat.
At the end of the day, the most logical and sound investment strategy is still to "Buy low, Sell high”. Meanwhile, you can look for interesting transactions like these on Property How Much.
