Developer OUE is offering potential buyers a form of deferred payments in a bid to sell off remaining units at its Twin Peaks condo as the market grapples with plenty of unsold stock.
Deferred payment schemes (DPS) were very popular in 2002 to 2006 but they were abolished in October 2007 for uncompleted private homes. Developers cannot offer similar flexible payment plans if their projects are still uncompleted.
OUE has obtained its certificate of statutory completion for the project so it is no longer licensed under the Housing Developers Rules. These involve strict progress payment rules where a developer is paid based on stages of work done until the project is fully completed.
The 462-unit development was completed in February last year. Around 80 units have been sold at one tower with OUE planning to bulk-sell units at the other tower.
News of OUE's plan, which has two variations, underscores the notion that "in challenging times, one has to be bold and creative", said Mr Desmond Sim, CBRE head of research for Singapore and South- east Asia.
Under the first variation, buyers must make a 20 per cent downpayment and sign the sale and purchase agreement by the end of this year, when the 80 per cent balance and Additional Buyer's Stamp Duty (ABSD) is also paid.
"There are people out there who believe that ABSD may be tweaked positively next year, or maybe the end of this year," said a lawyer who declined to be named. "The general belief is that the ABSD rate can only get better for the buyer, not worse."
Under the second variation, buyers make a 20 per cent downpayment and sign the sale and purchase agreement now. They can then collect the keys to their unit.
The remaining 80 per cent is paid two or three years later, although OUE withholds the title deed until the full sum is paid.
However, there is a catch - OUE prices in a premium. For example, a fourth-floor unit under the DPS appears to be going at about 9 per cent more than if it were sold without the scheme, based on approximations from recent transactions.
This could still make sense for buyers, said Mr Alan Cheong, Savills Singapore research head. Assuming interest savings of 2 per cent per annum over three years and net rental yield of about 2 per cent per annum as well, the net gain is about 12 per cent.
It was reported that a DPS was used after 2007 by Keppel Corporation and Keppel Land for Reflections at Keppel Bay condo and GuocoLand for Goodwood Residences.
Some developments had approval for the scheme but were not yet sold out when the DPS was axed. But Twin Peaks is believed to be the first instance in recent years where a DPS has been made available.
DPS has proven successful in the past. At the MCL Land-Ho Bee joint venture Rio Vista, more than 150 homes were sold within weeks of its relaunch with the DPS incentive in January 2002, even with its average price unchanged from its 2001 launch without the incentive.
While the scheme introduces more flexible options in OUE's case, buyers will probably still be constrained by loan curbs.
In challenging market conditions though, "developers who do well are those who are innovative and are able to offer sustainable sale options which respond to current market requirements", said Ms Jennifer Chia, executive director and head of corporate real estate at TSMP Law Corporation.