Tag Archives: SC Global

Unsold homes big drag on developers’ coffers

DEVELOPERS have collectively paid up to $55.1 million in extension fees for unsold units in their private condo projects since 2012. They could potentially fork out another $80.7 million to extend the sales period for another year if they do not sell their inventory by year-end, according to a study by OrangeTee Research.

“As the penalty amounts to millions of dollars per project, we believe that it will incentivise some developers to reprice some of these projects to move sales in the near term,” said OrangeTee research head Christine Li.

A total of 24 condo projects, mostly high-end ones, are still not fully sold two years after receiving their temporary occupation permits (TOPs) between 2010 and 2012, the study showed. Under the government’s Qualifying Certificate (QC) rules, developers have to pay extension charges to extend the sales period after two years of the project’s TOP.

All developers with non-Singaporean shareholders or directors need to obtain QCs to buy private land for new projects because they are deemed “foreign developers” under the Residential Property Act (RPA). This means the QC rules apply to all listed developers. Privately owned Far East Organization and Hoi Hup are among the few developers exempted from the rules.

Given that the QCs allow developers up to five years to finish building a project and two more years to sell all the units, the heat is on developers to clear their stock by the deadline.

To extend the sales period, developers pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent from the third year onwards. The charges are pro-rated based on unsold units over the total units in the project.

Such fees drove luxury residential player SC Global to delist from the Singapore Exchange last year after sales slowed significantly due to the government’s property cooling measures.

Analysts warn that more extension charges will kick in. The charges paid up so far are just the tip of the iceberg as projects built from land acquired during the 2006-2007 en bloc fever have just crossed a seven-year mark, they say.

“More developers are caught between a rock and a hard place” as they have to decide whether to pay the extension charges or cut prices to move the units, said SLP International executive director Nicholas Mak.

If they pay for extension charges, there is also the question of whether they can recover these costs later on, he said. This is why some developers of luxury projects are resorting to selling the units in bulk to mega investors.

OrangeTee’s study of the 24 projects excluded three projects whose land costs could not be determined. It tracked sales of projects through caveats lodged, which it conceded could be lower than actual sales.

At the end of the first quarter of this year, there were 10,295 unsold units in the Core Central Region (CCR), 8,089 in the Rest of Central Region (RCR) and 12,433 in the Outside Central Region (OCR).

Based on URA caveats, there are 71 unsold units in Wheelock Properties’ Scotts Square that TOP-ed in 2011 and 16 unsold units in Wing Tai’s Helios Residences, which also TOP-ed in the same year.

“As unsold inventory builds up, there will likely be more bargains in the market if developers want to avoid paying penalties to extend the sales period, especially high-end developers who have already paid premium prices for their lands,” Ms Li said.

The study excluded the fees that developers need to pay to extend the completion of projects beyond five years, as they can typically extend without paying the charges “based on technicalities”.

Even in a more optimistic scenario where developers manage to sell 20 per cent of the remaining units for the rest of this year, further extension charges to be paid by developers by end-2014 will amount to around $68.3 million.

Some market watchers noted that the QC rules should mark a distinction between larger and smaller projects, given that it takes a longer time to move all the units in large projects in a difficult market as the current one.

Century21 chief executive officer Ku Swee Yong said that demand for high-end projects had been hit hardest by higher additional buyers’ stamp duty (ABSD) since January 2013 and a borrowing cap under the total debt servicing ratio (TDSR) since June last year.

Even if a developer decides to set up an investment company to buy the units and rent them out, the company could be hit by a 15 per cent ABSD and is restricted by a loan-to-value limit of 20 per cent.

While there is good reason for having QC rules to regulate foreign participation in the housing market, these rules were in place before the ABSD and TDSR. “It is about time we review these measures,” Mr Ku said.

Source : STProperty

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Luxury homes left empty in quiet market

COMPLETED luxury homes without owners are gathering dust in exclusive pockets of the city centre as developers hold off selling them in a moribund luxury market.

In the Ardmore Park area off Orchard Road, for instance, an entire condominium project has been completed but not launched for sale. Other projects nearby could soon face the same fate.

Developers who can afford to wait may have chosen to hold back launches in the prime Districts 9, 10 and 11 given the very quiet luxury market, analysts say.

While the residential property market in general has slowed down markedly, the top end has been the hardest hit.

Experts point to recent rounds of property market cooling measures that have driven away many buyers in the high-end segment.

“Wealthy property buyers are the most savvy investors… Many are not in a hurry to buy luxury properties,” said R’ST Research director Ong Kah Seng.

He added that developers may find it feasible to turn their upmarket developments into serviced apartments, though that could incur hefty additional costs, such as beefing up security.

“Another option is to massively slash prices and sell the units in bulk to mega investors,” he said.

One recently built condo that has not been launched is the 58-unit Ardmore Residence, according to Urban Redevelopment Authority (URA) data.

The freehold development by Pontiac Land received its temporary occupation permit (TOP) in the second quarter of last year.

It sits on the site of the old Pin Tjoe Court, which Pontiac Land bought through a collective sale for $201 million in 2006, or $1,358 per sq ft (psf) of potential gross floor area. Units in the project are large, at about 3,300 sq feet on average.

A Pontiac Land spokesman said the units are being leased out at around $25,000 a month and that the developer has traditionally preferred to lease out its projects rather than sell them.

Nearby, the 34-unit Sculptura Ardmore project developed by SC Global has also not been put on the market.

However, it still has some time – it is still under construction and is expected to get its TOP this year. Prices for its units had previously been expected to start from $5,000 psf.

Several streets south of the Ardmore Park district, the 30-unit iLiv @ Grange project in Grange Road also has yet to be formally launched, according to URA data. The freehold project got its TOP in the fourth quarter of last year.

Its developer Heeton Holdings first unveiled the project in 2010 with the intention of selling it at above $3,000 psf.

Heeton had bought the site, which formerly housed Grange Court, for $72.8 million, or more than $1,700 psf per plot ratio (ppr) in 2007.

But it was said last year to be looking to bulk-sell the units at $2,200 to $2,300 psf to a single buyer, according to media reports.

Heeton has two years after TOP to finish selling all the units in the project, under Qualifying Certificate (QC) conditions.

Analysts said the QC rules were turning up the heat on some high-end developers to clear their unsold stock.

The rules give developers up to five years to finish building a project and two more years to sell all the units. They are not allowed to rent out unsold units.

Heeton is bound by QC rules because it is a listed company, but Pontiac Land is privately held.

Developers whose shareholders and directors are not all Singaporeans have to get a QC to buy residential property for development. This is imposed to control foreign ownership of land here.

*****************Background Story *****************

YET TO BE LAUNCHED

Ardmore Residence

  • Developer: Pontiac Land
  • Number of units: 58
  • Location: Ardmore Park, at the site of the old Pin Tjoe Court, which Pontiac Land bought through a collective sale for $201 million in 2006.
  • When TOP was received: Second quarter of last year

iLiv @ Grange

  • Developer: Heeton Holdings
  • Number of units: 30
  • Location: Grange Road, at the site which formerly housed Grange Court. Heeton bought the site for $72.8 million in 2007.
  • When TOP was received: Fourth quarter of last year