http://www.straitstimes.com/archive/...rices-20141212

Sale to parent firm: Sign developers not ready to slash prices

Experts say they have holding power, won't dump units

Published on Dec 12, 2014 1:32 AM

By Rennie Whang


THE move by developer Hiap Hoe earlier this week to sell all the units in one of its new condos to its parent company was the right step, given the impending qualifying certificate (QC) deadline, say experts.

But they also say the transfer of units from the left hand to the right hand is also a clear signal that developers are not quite ready to slash prices yet.

"Balance-sheet wise, developers are pretty strong for the next one to two years, from profits made previously," said Mr Alan Cheong, Savills Singapore research head.

"Anyone who thinks developers are going to dump the units on the market in a fire sale is not likely to have their dreams fulfilled."

The Residential Property Act states that developers with shareholders or directors who are not Singaporean must obtain a QC for a new development. They then have two years after obtaining the temporary occupation permit (TOP) to sell all units.

If they fail to do this, extension charges are levied at 8 per cent of the land price for the first year, 16 per cent for the second and 24 per cent for subsequent years.

These charges can be hefty. An OrangeTee research study showed that if the projects that obtained their TOP between 2010 and 2012 failed to sell any unit by the QC deadline, they would have to pay up to $69.7 million this year.

Hiap Hoe announced on Monday that its controlling shareholder, Hiap Hoe Holdings, had agreed to buy all 48 units of the Treasure on Balmoral for $185 million.

The QC deadline had already started to bite for the project, which received its TOP on Nov 1, 2012. Extension charges of $5.52 million are being paid for a six-month period from Nov 2 under the QC for the project, the company said.

Hiap Hoe also bought the remaining units at Skyline 360° in River Valley and Signature at Lewis in Lewis Road earlier this year.

Some projects are believed to have forked out for QC extensions.

One is Scotts Square in Scotts Road, which obtained its TOP in the third quarter of 2011. It has about 50 of 338 units unsold.

The Lumos in Leonie Hill, which obtained its TOP in the same quarter, has about 35 of 53 units unsold, according to data from the Urban Redevelopment Authority (URA), said Mr Ong Kah Seng, R'ST Research director.

Developers facing sales deadlines could also privatise as a Singapore company, as SC Global did in March last year.

There are a number of projects with sales deadlines from next year.

The Goodwood Residence in Bukit Timah Road, which obtained its TOP in June last year, has about 25 per cent of 210 units unsold. Plans for the unsold units are too premature to share, a GuocoLand spokesman said.

Another is the Urban Resort Condominium in Grange Road. It obtained its TOP in the first quarter of last year and has 20 of 64 units left.

Popular Holdings said in its second-quarter results statement on Wednesday that it had 21 of 26 units unsold at Ei8ht Raja as at the end of last month. Its QC sales deadline is from May next year.

Meanwhile, Madam Rosy Yu, the spouse of a Lafe Corporation director, has bought at least six units at Residences at Emerald Hill over the past year. The condo obtained its TOP in the third quarter of 2011 and is believed to still have unsold units.

Mr Wong Xian Yang, OrangeTee research manager, said a firm buying units in its own development would be a last-ditch measure as that involves paying a 15 per cent additional buyers' stamp duty.

"But for projects where a substantial number of units are unsold, as in Hiap Hoe's case, the QC penalties could work out to much more."

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