Deferred payments scrapped in bid to cool property fever
Published October 27, 2007
Deferred payments scrapped in bid to cool property fever
Market players expect blip, not crash, to follow the exit of the buy-now-pay-later scheme
By ARTHUR SIM AND UMA SHANKARI
(SINGAPORE) In a surprise move yesterday, the government said that it was withdrawing the deferred payment scheme (DPS) for the sale of uncompleted private properties in a bid to discourage speculative buying and cool the property market.
Market players said that the move could unnerve some buyers in the short term - leading to a drop in demand. A crash, however, was unlikely as the recovery of the mid-tier and mass markets this year shows that there is strong underlying demand from non-speculators.
Developers will not be allowed to offer the DPS with immediate effect, but a developer that has already obtained approval to offer the scheme for a project may continue to do so.
The DPS allows buyers to buy a property by forking out only a 10 per cent or 20 per cent downpayment, with the rest due upon completion - sometimes as long as three years later.
The scheme was introduced at a time when the property market was lacklustre and the economy was in recession.
But with the property market now booming, critics have said that the scheme encourages speculation as some seek to resell their properties at a profit without immediately worrying about payments.
Announcing the scrapping of the DPS yesterday, the Urban Redevelopment Authority (URA) said that the scheme was no longer needed as the property market has recovered.
Powered by FireStats
October 30th, 2007 at 8:50 am
This definitely not good news for speculators, but good news for the over-all economy health of Singapore.
Fortunately, current market is driven by real demands, especially from those enbloc sellers and foreigners buying rather than pay the excessive rental.
It can be seen as putting “resale” units at more level-playing field as the “new launches”. Without deferred payment, speculators may “resale” units with high rental return that fully covers the monthly installment almost the equivalent of ‘deferred payment’. They pay the downpayment, and no worry about monthly installment as it’s fully paid off by tenant.
One such property is Medge (Details here…) which is about 12mins walk from Novena MRT. As of this writing, rental return for it’s 2rm units are able to fetch S$3.8k-S$4.2k, that’s more than 5.1% rental yield. Not only the rental covers the monthly installment of $3400 and maintainance of $180, it leaves owner with net income of about about $500. This effectively works like deferred payment scheme, except from day 1, the buyer owns a real piece of the property, paid off month by month by the tenant. In fact, this can be a safer strategy in today’s uncertainty.