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Published February 1, 2007

Not all punters of high-end property make a killing

A few buyers have already allowed options to lapse

(SINGAPORE) Not everyone who picked up an option to buy a unit at recent previews of high-profile residential projects, such as those for Marina Bay Residences and Lumiere in December, is going ahead with a purchase.

Some options - 'fewer than 10' - were not exercised at the 428-unit Marina Bay Residences when the deadline passed about a fortnight ago, said David Martin, general manager of Raffles Quay Asset Management, which manages the Marina Bay Financial Centre project.

'We'll sell the units to existing interested parties within a reasonable time. We've not decided on the price,' he added in response to BT's queries yesterday.

Over at City Developments's 341-unit One Shenton project, the deadline for signing sale & purchase agreements has not yet passed, but market watchers expect that some options issued during the project's preview in early January will also lapse.

A City Developments spokeswoman said yesterday: 'As the deadline for exercising the sale & purchase (S&P) agreements are not due yet, we are unable at this early stage to comment on the number of options being exercised.

'However, in any case, for large-scale projects with hundreds of apartments, there will be cases where some purchasers will not exercise their option for one reason or another. But based on our experience, these are usually quite negligible.'

In the case of Lumiere in the Mistri Road area, three out of the more than 100 options given since the 168-unit project's preview began a week before Christmas lapsed when the deadline passed last week. 'We've already sold two of these three units at higher prices,' said Chin Teck Chuan, CEO of BS Capital, the company behind the 168-unit, 99-year leasehold project.

A seasoned market watcher, giving his take on why buyers let options lapse, said: 'Basically, these people find they cannot make a profit from sub-selling the units. They'll need at least 3.5 per cent just to cover stamp duty and legal costs.

'So they'd rather let the units go and forfeit a quarter of the 5 per cent deposit - this works out to 1.25 per cent of the purchase price or $12,500 for every $1 million purchase price - than be saddled with making the next payment to the developer, of 15 per cent, within eight weeks from the date on which they were issued options.'

Another industry observer summed up the situation this way: 'Some of these buyers are pure gamblers.

'They view it as taking a bet with 1.25 per cent of the purchase price of the property when they book the unit. And they have about four weeks (typical time given for them to exercise the option and sign the Sale & Purchase Agreement) to play with to try and make some money. If not, they lose the 1.25 per cent, and they move on to their next play.'

Offering possible explanations on why some speculators fail to flip their properties in time, yet another market watcher said: 'Some of these speculators may have found they have gotten lousy-facing units which no one's willing to buy from them at a higher price. Or there may be simply too many units in recent high-profile launches being put up for sale in the sub-sale market.'