Yahoo Finance Condos with the most attractive deferred payment schemes
A spate of such incentives — at projects such as Reflections at Keppel Bay (above), The Crest and Marina Collection — proves to be a lure for homebuyers and investors
On Sept 15, more than 30 units at Reflections at Keppel Bay were snapped up via a placement exercise conducted by property agencies OrangeTee and PropNex Realty.
The units were in two 8-storey blocks (Nos 1 and 3) located nearest to the guardhouse at the main entrance fronting Telok Blangah Road, with views of Mount Faber. These two villa blocks contain more than 90 units in total and are part of the 151 units that developer Keppel Land held back for lease under the Residences at Reflections programme when the project was completed in 2011.
The properties offered for sale were two-bedroom units of 1,055 to 1,238 sq ft and three-bedroom units of 1,528 to 1,905 sq ft. Only a maximum of 30 units in Block 1 were offered for sale with the option of a deferred payment scheme (DPS). Meanwhile, units in Block 3 were offered for sale under the normal payment scheme.
There were two packages offered under the DPS. Under DPS1, buyers need only pay 1% booking fee, with the remainder 19% deposit due a fortnight later. However, the buyer will have to exercise the option and pay stamp duty within eight weeks. The remaining 80% will be payable two years later.
Under DPS 2, the buyer will pay a 20% deposit and be issued an option to purchase. The payment for the remaining 80% will only be due 24 months after the option date. In the meantime, the option can be assigned to another person during the 22 months prior to exercising the option to purchase.
Most of the buyers opted for DPS 2. However, regardless of which DPS they choose, they are not allowed to move in or lease out their units immediately. This is because some of the units are sold with an existing tenancy under Residences at Reflections, according to a marketing agent.
Furniture rebate
All buyers, however, were given a “furniture rebate”, which is essentially a rental return of $5 psf per month for two years, which could amount to at least $125,000. However, the rental return will only be payable at the end of the two-year period for those who opt for the DPS, while those who purchased units under the normal payment scheme will be get it at the end of eight weeks, when the option is exercised.
Under the normal payment scheme, buyers were offered a higher discount of 23%. After taking the discount into consideration, selling prices started from $1.67 million for a two-bedroom unit of 1,055 sq ft, and from $2.45 million for a three-bedroom unit of 1,528 sq ft unit. Unit prices after the discount translated into $1,538 to $1,897 psf. These prices exclude the furniture rebate.
Those who purchased units under the DPS were given a 20% discount. Prices of two-bedroom units therefore started from $1.74 million for a 1,055 sq ft, two-bedroom unit, and from $2.72 million for a 1,690 sq ft, three-bedroom unit. Unit prices after discount were $1,598 to $1,886 psf.
“In the placement exercise, those who opted for the normal payment scheme were given first dibs,” says Dominic Lee, head of PropNex luxury team. “If the unit was uncontested, they would automatically be the successful bidder. However, if there was more than one interested party, balloting was held for the unit.”
At Reflections at Keppel Bay, selected units in Keppel Land’s corporate residences portfolio are now offered for sale under a deferred payment scheme
Units oversubscribed
There was an equal mix of buyers who opted for the normal and deferred payment schemes, notes PropNex’s Lee. “The good response was not surprising,” he says. In the weekend leading up to the placement exercise, 500 people came to view the units.
“There were quite a lot of people vying for the same units,” adds Lee. “Hence, many of the units were oversubscribed.” For instance, all the units on the first level of Block 1 were snapped up ahead of the placement exercise. Meanwhile, the seven 2-bedroom units on the fourth level of Block 1 received 20 expressions of interest and were all taken up at the placement exercise.
Based on the rental returns or furniture rebate of $5 psf per month for the two-year period, buyers can expect yields of about 7.5% after taking into consideration the discount offered, notes PropNex’s Lee.
The strong take-up at the placement exercise was also attributed to Reflections at Keppel Bay’s iconic image. Designed by renowned architect Daniel Libeskind, Reflections at Keppel Bay sits on a land area of 904,000 sq ft and comprises a total of 1,129 units. The project contains six sculptural glass towers of 24 to 41 storeys and 11 villa blocks of six to eight storeys.
Most of the blocks have views of waterways, with some blocks fronting the sea, while others have views of Sentosa Island, the golf course or Mount Faber. The project is one of three 99-year leasehold condominium projects developed by Keppel Land at Keppel Bay, which was the site of the former Keppel Shipyard. Besides Reflections, there is the 969-unit Caribbean that was completed in 2004 and the 366-unit Corals that was completed last year and also designed by Libeskind.
Preferential payment plan
Perhaps one of the most attractive DPSs on the market today is the preferential payment plan (PPP) at The Crest, located on Prince Charles Crescent, off Alexandra Road. Rolled out on the weekend of Sept 9 and 10, the scheme allows buyers to pay a 1% booking fee upon signing the option to purchase, followed by a 4% initial down payment a fortnight later. The buyer will also have to exercise the option and pay stamp duty.
However, the buyer can choose to move in immediately or lease out the unit. A further 5% deposit on the purchase price is due 12 months later, with the remainder 90% due 24 months after the option date.
The PPP attracted a huge crowd on Sept 9 and 10 when it was introduced. However, only 60 units in two of the three high-rise blocks at The Crest have been made available for sale under the PPP. Units at the central tower of The Crest are not available for sale as they have been earmarked for rent by the developer.
The units offered under the PPP are mainly three-bedroom lofts and four-bedroom dual- key units that are priced from about $3 million. “This scheme is ideal for collective-sale beneficiaries who are looking to move into a new home immediately,” says a property agent who declines to be named. “It will also appeal to investors as they can lease out the unit immediately and earn rental income.”
For a three-bedroom loft unit of 1,518 sq ft priced at $3 million, the buyer needs to pay just a 5% down payment under the PPP, which translates into $150,000. Based on the average monthly rent of $6,000, the investor can earn an annual rental income of $72,000. After 12 months, when a further 5% down payment is due, the investor can use the rental income to offset the $150,000 payable. This means, he only needs to fork out $78,000.
The appointed property agents for the project are Edmund Tie & Co, ERA Realty Network and OrangeTee.
At The Crest, three-bedroom lofts and four-bedroom, dual-key units were recently offered for sale under a preferential payment plan
Premium prices
Units sold under the PPP are priced between $1,800 and $1,900 psf. “Wing Tai has a reputation for developing quality, high-end projects,” says a source. “The Crest is one such project.” The 469-unit condo was designed by award-winning Japanese architect Toyo Ito and developed jointly by Wing Tai Holdings, Metro Australia Holdings and Maxdin Pte Ltd, a unit of UE E&C.
According to Wing Tai in its FY2017 results briefing on Aug 25, about 43% of the units at The Crest have been sold so far. The developer also announced that it had made provision for impairment in the value of the project in 4QFY2017 (ended June 30). Although the amount of the impairment was not dis- closed, it takes into consideration the 10% additional buyer’s stamp duty, including interest, which the joint-venture partners have to pay this month.
Some of the luxury projects that offer a DPS are the 174-unit Gramercy Park by City Developments and the 381-unit Leedon Residence by GuocoLand. Under the DPS, buyers have to pay a 20% down payment, with the remaining 80% payable two years later. Many buyers chose the normal payment scheme instead, as they would have to pay a premium of 4% to 5% above the selling price if they opted for the DPS, says PropNex’s Lee, who is marketing units in both projects. “Most of these buyers are well-heeled, and therefore very few opted for the DPS,” he adds.
First luxury project at Sentosa Cove with DPS
Meanwhile, at Sentosa Cove, famous for its waterfront luxury homes, Lippo Group has relaunched Marina Collection with a DPS. The 124-unit, high-end condo was completed in 2011.
A DPS package was offered in February this year, whereby buyers pay a 30% down payment, after which they can choose to move in or rent out the unit. They only need to exercise the option to purchase two years later, when the remainder 70% is due.
Since its launch, 10 units have been purchased — mainly penthouses priced above $6 million. Based on caveats lodged, these penthouses ranged from 3,412 to 3,789 sq ft and were sold at prices between $6.15 million ($1,802 psf) and $6.43 million ($1,883 psf). The highest price achieved for the penthouses was $7.5 million ($1,600 psf), while two units were sold for close to $1,900 psf. However, caveats were not lodged for these units purchased under DPS, as their options have yet to be exercised.
“What is interesting is that all the buyers are foreigners,” says PropNex’s Lee, who handled the marketing of the units at Marina Collection under the DPS. They included US citizens, Russians, Polish, Swiss and mainland Chinese.
The DPS at Marina Collection rides on the success of OUE Twin Peaks by Singapore-listed OUE Ltd, notes Lee. Incidentally, Lippo Group is the parent company of OUE. The 462-unit OUE Twin Peaks first rolled out the DPS for one of the towers in the development in April 2016, and for the second tower six months later. So far, all except one of the units have been sold.
“It was the success of the DPS at OUE Twin Peaks that inspired many other developers to offer similar schemes to offload their unsold inventory,” says Lee, who was also involved in the launch of OUE Twin Peaks under the DPS last year.
At Marina Collection, 10 penthouses priced above $6 million have been sold this year since the launch of its deferred payment scheme
Since OUE Twin Peaks was launched last April with a deferred payment scheme, all except one of the 462 units have been sold
This article appeared in EdgeProp Pullout, Issue 798 (Sept 25, 2017).
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