Kalpana Rashiwala | The Business Times | Thursday, Apr 25, 2013

SINGAPORE – Despite the recent amendments to the Housing Developers (Control and Licensing) Act, units sold by developers in projects which have been delicensed will continue to escape the radar of monthly sales information submissions to the Urban Redevelopment Authority (URA).

Developers who have obtained a Certificate of Statutory Completion for a private residential project and individual titles for all units in the development may apply to the Controller of Housing (COH) to have the project delicensed. This enables the developer to take out the remaining monies in the project account and close it.

Even prior to the changes to the Act which took effect on April 8, developers were spared having to make monthly submissions to URA on the sales status for such delicensed projects.

As for projects which are still covered by a Housing Developers’ Licence, developers have had to submit to COH each month information such as the number of units sold in the project and their prices, based on information in the options granted.

The shortcoming of price data gathered through this exercise is that typically it would not factor in incentives not received by the buyers at the point they were granted the option to purchase a property from a developer. These could include reimbursement of stamp duty and furnishing vouchers. Such incentives are typically given by the developer later, after the point where the buyer would lodge a caveat to protect his interest in the property. (Caveats are usually lodged by buyers after the option to purchase is exercised or a sales and purchase agreement is signed.)

In such cases, price information on private homes bought from developers – whether gathered from URA’s monthly survey of developers or based on information in caveats – may be inflated. When such data is fed into URA’s private home price indices, this could mean that the indices may not be an accurate depiction of property price trends.

Timely information

The amended Act empowers COH to require licensed developers to disclose to it all discounts, rebates and other benefits including reimbursement of any stamp duty or tax given to home buyers. And the frequency of submissions as well as publication of such information will soon be made weekly, instead of monthly. The goal is to provide timely information to the market.

However, as a developer of a delicensed project does not come under the ambit of the Act for that particular project, market watchers point out that developers of delicensed projects continue to be spared from making such disclosures to URA. Hence they continue to have an avenue to dish out incentives to buyers away from public glare. This may be particularly relevant for high-end projects, where sales have been relatively slow.

As a result, the headline pricing for a project can be maintained, or perhaps even show an increase – which keeps earlier buyers happy. But the final price the developer pockets, net of all incentives, could be much lower.

Some analysts suggest that such inflated price data could mean that URA’s price index for non-landed private homes in Core Central Region may be artificially high.

When queried, URA’s spokesperson said: “Typically, new private residential projects have very few unsold units at the point of delicensing by the Controller of Housing, which usually occurs about one to two years after a project is completed, that is, obtains Temporary Occupation Permit (TOP). For instance, developers subject to Qualifying Certificate requirements are compelled to sell their units within two years of obtaining TOP for their projects.”

Undertaking

Looking ahead, URA said that the number of unsold units in delicensed projects is likely to be even less significant since developers, when they buy a residential development site, have to undertake to complete developing the project on the site and selling all its units within five years to qualify for upfront remission of the 15 per cent Additional Buyer’s Stamp Duty (ABSD) for the site’s purchase. If they fail to do so, ABSD with interest becomes payable immediately upon the expiry of the five years.

“Given the low volume of transactions from such delicensed projects, they are not likely to have a significant impact on URA’s overall property price index, which is computed using a large base of all sales of private residential properties (that is, in both the primary and secondary markets),” said URA’s spokeperson.

Even if developers’ sales of delicensed projects in prime locations may not have a big impact on URA’s price index, property market participants should have access to true prices of property transactions, net of all sweeteners.

URA’s spokesman said the authority will “work together with other relevant government agencies towards consistent reporting of prices for all sales of private residential properties”.

Market watchers guess it would be logical for the authorities to tackle the lodging of caveats, which is under the purview of Singapore Land Authority. The purpose of a property buyer lodging a caveat is to protect his legal interest in the property. While the price is also indicated, the finer details such as whether it is before or net of discounts and other incentives, is not the main point of the whole exercise. But things could change.

 


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