Property developers with projects completed are becoming more innovative in their deferred payments schemes (DPS). The latest company to introduce the DPS has been SDB Asia, the property development part of Malaysia’s Selangor Dredging, for its project called One Draycott.
Hillock Green enbloc site is part of the new Lentor Hills Estate, is nestled in Ang Mo Kio Planning Area.
The 64-unit freehold boutique condo located at 1 Draycott Park obtained its temporary occupation permit in April, and a certificate of statutory complete (CSC) at the end of July. It is located in some of the Singapore’s sought-after districts 10 residential enclaves: Draycott, Claymore and Ardmore Park, just away from Orchard Road.
“DPS will only begin to kick in once a project is in compliance with its CSC,” says Eugene Lim who is the chief executive officer of ERA Realty Network. “Such plans provide buyers with more flexible payment options, that appeal to a greater market of potential buyers.”
The most common payment method for a finished project is in the following manner An option fee of one% on the price of the unit’s purchase followed by another 4% in a fortnight after an option has been exercised. Additional buyer’s stamp duty (ABSD) will be paid after the option is exercised.
The next 30-% down payment is due between 8 and 12 weeks after. The down payment could be made up of money as well as Central Provident Fund Ordinary Account savings. If a loan is taken, the remaining 65% will be repaid through mortgage payments.
Two alternative schemes
Apart from the usual payment scheme, SDB Asia offers home buyers two options under its DPS: an extension of the time to complete the sale or a longer exercise time.
If the DPS that has an extended period of sale completion buyers will be required to pay a one% option fee, followed by a 9.9% down payment when the option gets exercised two weeks after. Any ABSD due will be paid at that time. However the buyer will have to pay the following 25% down payment 6 months (24 weeks) in advance instead of the typical eight to 12 weeks.
“This longer time frame for sale completion is beneficial for those who require more time to make the cash needed to pay or get loans,” says an SDB Asia spokesperson.
The second DPS gives the purchaser an extension of the period of exercise and also an ABSD payment. The upfront option cost is more expensive five% for those seeking an extension of eight weeks on the exercise period of option and 10% up front for those wanting an extension of 16 weeks on the exercise period of option. The twenty% down payment is due between 8 and 12 weeks after.
These DPS are popular with buyers who want flexibility in their payments, according to Mark Yip, CEO of Huttons Asia. “Buyers will be pleased with the longer sale duration and extension of the period for exercise of options in the event that they’re waiting for the money from investments have been sold,” he observes.
Catering to those with ABSD or citizenship in limbo
“An extension of the period of exercise is also a great option for buyers of homes who require longer space to market their current property,” says the SDB Asia spokesperson. “The buyer can also save money by not paying the more expensive ABSD for the third or subsequent property.”
Since the 27th of April’s property chilling measures of April 27, ABSD to Singaporeans who purchase their second property has been increased to 20% as well as 30% for the third and following property.
Permanent resident (PRs) are required to pay 30% ABSD for their second home property located in Singapore as well as 35% on their third. In addition, foreigners have to be required to pay 60% ABSD when they make a residential property purchase.
“Some buyers may wait for Singapore PR or citizenship application to be accepted or selling their existing property as well as other investment properties” says Huttons Yip. “These buyers might choose to take advantage of a the option to exercise their options for a longer time.”
The SDB spokesperson claims it’s beneficial parents looking to purchase a unit from One Draycott to their kids who will be turning 21 within a couple of months.
“No price variation”
Alongside the increased ABSD and homebuyers are facing greater interest rates when taking mortgages. Limits on borrowing have also been restricted in the September 2022 property cooling measures. These include the ratio of loan to value cut from 75 to% for first-time home buyers, and 45% for those who are second-time buyers as well as 35% for buyers who are purchasing the third time a residential property.
The DPS provided by SDB was announced on August 1st. Since then only the scheme has been embraced by one Singaporean buyer has opted to take advantage of the program. He chose to extend the option exercise period while purchasing the 797 sq ft two-bedder located on the 16th level in Singapore for $2.86 million ($2,591 per square foot) as per the caveat filed on August 4.
In general, developers charge a higher price for those who choose the DPS as opposed to buyers who buy under the standard payment scheme. However In the case of the One Draycott, “there is no price difference” as stated by SDB spokesperson. SDB spokesperson.
Price cuts up to $150,000
As of now thirty units at One Draycott remain being offered for sale. The units are comprised of two-bedroom apartments with sizes of 732 and 797 sq feet in addition to a penthouse with two bedrooms that measures 1,346 sq ft, with the ceiling being double-volume.
SDB offers discounts of $150,000 for 732 sq ft two-bedders priced at $2.48 million ($3,388 per square foot) prior to the discount. The two-bedders of 797 sq ft are priced at $2.62 million ($3,287 per square foot) with a discount of $25,000.
Buyers who choose to purchase the DPS can also avail discounts on the price, according to an SDB spokesperson.
“The DPS, therefore, allows buyers to choose the best incentive to purchase an asset in the prestigious One Draycott, take advantage of the discount of $150,000, which is a challenge to find in such a desirable location and simultaneously have plenty of space to dispose of their existing property,” says Ken Low who is the director of SRI.
Low also saw an increase in the number of visitors and enquiries to One Draycott since the schemes were announced in August.
One Draycott includes 60 two-bedroom units measuring 732 to 797 square. ft. and four penthouses located on the highest level of the 18-story tower. Penthouses also have two bedroom units, with the same design to the other two-bedroom units. They differ in they are able to enjoy a double volume ceiling, which increases the size of their rooms to 1,238 sq ft and 1,346 sq feet.
Since the project’s launch in June of 2018 The project has seen 34 units sold and three penthouses have been sold. The buyers are mainly Singaporeans as well as PRs as per SDB. The highest psf value reached at One Draycott until now is $3,689 for a 732 square feet two-bedroom apartment on the ninth floor, which brought $2.7 million on July.
Investors, rental rates
“DPS buyers are also able to choose to either move into or rent out the unit, and begin making passive income from the rental when they exercise the option,” adds SRI’s Low. “This gives a huge amount of opportunities for buyers who purchase One Draycott.”
The extended time for completion or exercise of options of One Draycott will appeal to investors who want to profit from the growing rental market According to the ERA’s Lim. “The DPS will not affect their cash flow during the first period.”
For rental rates, two similar properties can be found at eight Hullet, a 44-unit freehold boutique condominium with two- and one-bedroom units ranging from 538 to 797 sq feet as well as 3. Cuscaden, which is a freehold, 96-unit condo situated on Cuscaden Walk, just off Orchard Boulevard. Both projects were completed by 2022.
The most recent rental transaction for two beds of 700-800 sq ft at 8 Hullet was the rental of $6,750 or $9 per month from May 2023. In July, a second two-bedder of 700-800 sq ft in 3 Cuscaden was leased for an annual rental of $7300 or $9.73 per sq ft. Both of these are based on URA rental figures as of the close of August.
Are there plans to have more developers of high-end condominiums that are completed that have inventory not sold provide DPS to buyers of homes? “Such programs can be seen as indirect financing to buyers, and they are expensive for developers,” says Huttons Yip. “Not many developers would offer these.”
Certain developers offer such schemes in limited quantities, says SRI’s Low. Some examples include Lumos located at Leonie Hill, The Oliv@Balmoral and Seascape along with Cape Royale “on an individual basis”, he says.