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Thread: Deferred payment scheme set to stay

  1. #1
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    Default Deferred payment scheme set to stay

    Published April 13, 2007

    PROPERTY FOCUS

    Deferred payment scheme set to stay

    Many developers see scheme as good option for buyers

    By ARTHUR SIM


    THE deferred payment scheme is a good option for buyers, and developers that BT spoke to reckon the number who opt for this is manageable. Ho Bee Group general manager (business development and marketing) Chong Hock Chang said: 'The number who opted for the scheme varies from project to project and we are comfortable with the current arrangement.'

    'Some of our buyers opt for deferred payment schemes even though there is a price differential because they prefer the flexibility of managing their own finances,' he added.

    Whether the scheme encourages property speculation is an issue that has recently surfaced though.

    Official property data reveals that the level of speculation remains below the levels recorded during the previous peak in the mid-1990s, even before the scheme was introduced.

    Still, Lippo Realty executive director Thio Gim Hock believes the scheme will 'encourage' speculation. 'If you defer payment, the transaction is actually virtual,' he said, adding: 'It's like gambling.'

    Lippo did not offer a deferred payment scheme on either The Trillium, launched last month, or Newton One, launched in March 2006. Newton One is fully sold and The Trillium is over 85 per cent sold.

    Even for projects where both deferred payment and progress payment schemes are offered, the former does not always appear more popular.

    At Sim Lian Land's 338-unit Carabelle in the West Coast, 80 per cent of the 240 buyers so far opted for the progress payment scheme. Although it came with a 2 per cent discount, Sim Lian executive director Diana Kuik believes 'serious buyers do not have a problem with the progress payment method'.

    Interestingly, for its sell-out 616-unit Premiere @ Tampines, Sim Lian did not offer deferred payment at all, and met with some displeasure from buyers.

    The Premiere was aimed at the HDB market, and there was some initial concern that, as with HDB flats, some newly married couples could back out early, leaving the developer in the lurch.

    Indeed, a developer's over-exposure to debt was a concern the Monetary Authority of Singapore raised recently.

    But even on this point, one developer who spoke to BT on condition of anonymity said there were several 'mechanisms' within the preferred payment scheme that ensured that a developer was rarely more than 55 per cent exposed to debt at the Temporary Occupation Permit (TOP) stage. 'Most developers will ask for at least 20 to 30 per cent upfront,' he explained.

    'If a buyer defaults on payment before TOP, I will have at least 20 per cent in the pocket. So unless the prices fall dramatically, I do not perceive deferred payment as a risk,' he said. 'The crux of the matter is that a developer is not 100 per cent exposed.'

    Even in the case of a sub-sale, he said the developer has the option of transfering the structure of the deferred payment scheme on to the new buyer and in instances like this, an additional cash deposit is often required.

    The deferred payment scheme looks set to stay then, judging from its support from developers. A spokesman for CapitaLand said: 'Where there is an option between progress and deferred payment schemes, the bulk of our homebuyers prefer the latter. We will continue to give payment choices to our homebuyers where appropriate.'

    City Developments Ltd said: 'The percentage of the take-up rate for the deferred payment scheme varies depending on the type of properties as well as the type of schemes offered . . . in general, we have more buyers who opt for the normal payment scheme.'

  2. #2
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    Default Deferred payment plans popular with home buyers

    April 13, 2007

    Deferred payment plans popular with home buyers

    Developers unfazed by higher risks as these schemes have become the norm

    By Fiona Chan


    DEFERRED payment schemes have proved so popular with home buyers that they are now standard fare in most new residential projects.

    They allow home buyers to delay paying the bulk of a new home's price for years, but the flip side is that units bought under such plans are costlier.

    Deferred payments were thrust into the spotlight yesterday after the Monetary Authority of Singapore (MAS) said such schemes pose higher risks to developers and their banks, and that it expects banks to take these risks into account.

    A Straits Times poll of developers showed that most new projects offer deferred payments. And where they are available, the take-up rates are usually significant.

    At one end of the spectrum are developments such as The View @ Meyer, where all the buyers so far have opted for deferred payments, said developer GuocoLand yesterday.

    CapitaLand, the biggest developer in South-east Asia, also said that 'the bulk' of its home buyers choose such schemes whenever they are offered as an option.

    Another major developer, whose projects range from mass market to luxury homes, said 74 per cent of its home buyers across the board have taken up deferred plans when they are available.

    But there are also developers, such as City Developments, which say that more of their buyers opt for normal payment schemes.

    And some developers, such as Indonesia's Lippo Group, do not offer deferred plans at all.

    'We have never used such schemes and we have no intention of using them,' said Mr Thio Gim Hock, executive director of Lippo Realty (Singapore), which developed Newton One in Newton Road and Trillium in Kim Seng Road.

    In general, property developers were unfazed by MAS' comments yesterday.

    GuocoLand said it is 'likely to continue with deferred payment schemes' as its buyers - 'both owner-occupiers and investors' - find them 'attractive and convenient'.

    It added that to date, it 'has not encountered default cases' when such schemes at its other projects are due.

    'If MAS clamps down on these schemes, we will have to change them accordingly,' said Ms Diana Kuik, executive director of boutique developer Sim Lian Land.

    'But if all they do is make comments but not policy changes, we might just leave it. At the end of the day it's the buyer's choice to take up deferred payments,' she added.

    In any case, she said Sim Lian's experience was that 'most of the serious buyers prefer normal payment schemes because they pay a lower price for the unit'.

    Property consultants concurred, saying that deferred payments appealed mostly to speculators or home buyers on the fence. They argued that there is little reason to change such schemes, as both the level of property speculation and the risk of mortgage defaults is relatively low.

    'There's no reason to regulate because the risk is on the developer,' said Mr Peter Ow, executive director of residential marketing at Knight Frank. He added that 'in any market there must be some element of speculation'.

    Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, also said that deferred payments are becoming less relevant in a rising market.

    Initially offered as a carrot to home buyers during the property downturn, they actually require developers to set aside more capital as a guarantee to banks, said Mr Ku.

    He added that as home sales boom, some developers are starting to discourage buyers from taking up deferred plans by widening the price gap between homes under deferred and normal payments.

    'There is definitely a reluctance from developers to give deferred payments now,' Mr Ku observed.

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    Thumbs down Re: Deferred payment scheme set to stay

    Published April 13, 2007

    'Hotspot' auction nets no sale

    By KALPANA RASHIWALA


    NOT a single property sold yesterday at a highly touted auction for owner-sales of apartments in the hot spots of Marina Bay/CBD and Sentosa Cove.

    Twenty-one properties were offered. And in most cases the opening prices sought by the auctioneers were not even met. In a few cases there were some bids, but these were below the owners' reserve prices.

    However, CKS Property Consultants, which conducted the auction, is unfazed by the result and confident of selling the properties post-auction through private treaty deals.

    CKS spokeswoman Valerie Ho attributed the poor response at yesterday's auction to bidder shyness. 'Bidders were predominantly local and they may still not be used to the idea of buying a home at an auction,' she said. 'And this is the first attempt to have an auction featuring solely properties put up for sale by owners.

    'There has been a lot of interest after the auction. We expect a lot of negotiations and transactions over the weekend for this batch of properties. We also have a few potential buyers from Indonesia who are coming to our office next week for discussions.'

    Ms Ho reckons the asking prices set by owners are reasonable.

    A long-time market watcher who attended yesterday's auction generally agreed, pointing for instance to the $1.3 million or $1,050 psf opening price sought for a 40th floor two-bedroom unit with a study/loft at Icon at Tanjong Pagar, and the $2.5 million ($1,408 psf) opening asking price for a three-bedroom, 12th floor unit at The Oceanfront @ Sentosa Cove. 'The thing to remember is that these are all sub-sale properties and usually their asking prices are lower than what is being charged by developers for newer project launches in the location,' the market watcher said.

    'But the problem right now is that there are so many sub-sale units in these so called hot-spot locations that, frankly, you can easily pick one up from the classifieds. No need to come to an auction looking for such units - unless the pricing or facing is very attractive.'

    Also, from a potential buyer's perspective there is a disincentive in buying in the sub-sale market as developers will not extend deferred payment schemes they may have given to initial buyers to sub-sale buyers, the market watcher added.

    Properties on offer yesterday included the entire 57th floor, comprising seven apartments, at The Sail @ Marina Bay Tower 2.

    The auctioneer's opening asking price was $10 million but there were no takers.

    Three units at One Shenton were also offered.

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