Creative schemes to move unsold units
By Feily Sofian
/ The Edge Property |
One developer gets creative to clear its unsold units. According to market sources, OUE Limited is offering two new payment schemes for OUE Twin Peaks – a 462-unit condominium development on Leonie Hill Road. The schemes are considered as a private arrangement between the buyer and seller as the project has obtained the Certificate of Statutory Completion (CSC).
Under the first scheme, also referred as the delayed payment scheme, buyers can put down a 20% upfront payment and exercise the option by December 30, 2016. Buyers who are liable to pay Additional Buyer’s Stamp Duty today would stand to gain if the government tweaks the ABSD requirement. On the second day of the Budget debate on Tuesday, member of Parliament Christopher de Souza urged the government to review the ABSD for Singaporeans.
The second scheme allows buyers to pay a 20% upfront payment for the issuance of the options to purchase and to pay the balance two or three years later. It is similar to the deferred payment scheme, which the government withdrew in 2007 for properties that have not obtained CSC.
Buyers have to exercise the option within two weeks and pay the normal stamp duty plus ABSD where applicable. They can collect the keys to their units and occupy or rent them out immediately.
Both schemes are considered as a private treaty between the buyer and the seller. Under the second scheme, we understand that the title deed will be held by the developer until the buyer pays the balance 80% due to the developer.
One advantage of the second scheme is a two- to three-year savings in interest payment. At the same time, buyers can continue earning interest on their CPF and receive rental income. Buyers who are currently constrained by the total debt servicing ratio or loan to value requirements can also take advantage of this scheme. This gives them more time to dispose of other properties and secure a higher loan quantum when the 80% payment is due
The second scheme has one drawback. According to market sources, units offered under this scheme will be pricier than in the first scheme.
Under the Qualifying Certificate rules, OUE is liable to pay extension fees for OUE Twin Peaks if the project fails to sell out within two years of receiving its Temporary Occupation Permit (TOP). The fees are computed based on 8%, 12%, 16% and 24% of the land cost, for the first, second, third and subsequent years respectively after the deadline, pro-rated on the percentage of unsold units.
OUE paid $625 million, or $1,810 psf per plot ratio, in 2007 for the site, the location of the former Grange ford Apartment. The project received its TOP in February 2015. Based on this, the developer has until February 2017 to finish selling all the units to avoid paying extension fees.
As at September 2015, there were still 392 unsold units in the development. No record was available after September, presumably because the project had obtained its CSC. Upon obtaining CSC, developers are no longer required to report their sale status by the Controller of Housing.
Based on caveat records published by URA, there have been four transactions since October. Two were lodged this year, both involving 570 sq ft units. One of the units, on the 35th floor, fetched $2,918 psf. The other, on the 14th floor, was sold for $2,629 psf. Anecdotal evidence shows these prices are at a 5% discount to peak prices in 2013. In May that year, a 570 sq ft unit on the 16th floor changed hands for $2,805 psf.
According to marketing agents, some third-floor units in the project are being offered as star buys with a price tag of $2,300 psf net. However, the star buys are not eligible for the second payment scheme.
Units on the fourth floor and above are eligible for the second payment scheme. The cheapest unit available under this scheme is understood to be a one-bedroom, 549 sq ft unit on the fourth floor that is going for $1.5 million, or $2,728 psf, after discount. Going by the latest comparable transaction, the unit for the second payment scheme is priced at a premium. Potential buyers should weigh their potential interest rate savings and net rental yield against this premium to estimate the net gain from the second scheme.
The 462 units in the project are housed in two 35-storey towers. All are fully furnished by designers, including Charles & Ray Eames, Gerrit T Rietveld, Hans Wegner, Matthew Hilton and Tom Dixon. The developer could not be reached for comment.
Note: Check out units available for sale at OUE Twin Peaks
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