PropNex calls for easing of cooling measures, saying they prevent homeowners from upgrading

[The_King]

SINGAPORE — The cooling measures that came “swift” and “unexpected” in July last year have made it difficult for homeowners who want to buy a private property, due to the huge jump in cash outlay that is required of them.

In view of this, it is probably time to revise some of these property cooling measures.

This was what Mr Ismail Gafoor, the chief executive officer of real estate agency PropNex, said as he was explaining the recent situation of option to purchase (OTP) agreements being “re-issued” more frequently than usual.

An OTP is a document which grants the buyer the right to purchase a property in return for a fee, and it is valid for only three weeks, but it can be re-issued or extended by up to eight weeks.

What has been happening, Mr Ismail said, is that potential buyers have been asking developers to re-issue their OTPs.

This is the main reason why there was a sharp increase in the number of OTPs being re-issued in December last year — a problem that was flagged in a Credit Suisse report released close to a month ago.

The report noted that the “curious case” of a high number of returned units is probably due to an “ingenious sales tactic developed by some developers”, where OTPs are constantly being re-issued after it expires, without buyers having to forfeit the booking fee.

This means that buyers interested in a property can hold on to it for longer than usual before making a commitment to purchase it, while developers are able to “lock in” buyers early.

PROPOSAL TO REVIEW ABSD

PropNex is the first real estate agency to respond to the Credit Suisse report. In a white paper released on Thursday (March 14), Mr Ismail called for the revision of some of the property cooling measures, which would help reduce the number of OTPs being re-issued.

This is particularly for “genuine upgraders” — homeowners who now live in public housing units and want to get their first private property.

He said that the 12 per cent Additional Buyers’ Stamp Duty (ABSD) should not apply to these buyers who have to pay this upfront before it is refunded upon the sale of their public flat.

“(They) find it too tough to pay the ABSD, for those genuine upgraders... The request is coming from the buyers. (They would say,) ‘I can’t raise (enough money)’ or ‘Give me more time to dispose of my property so that I need not pay the ABSD’,” Mr Ismail said.

For example, a S$1 million private property would require an ABSD of S$120,000 to be paid two weeks after buyers exercised their OTP, assuming that they have not sold their Housing and Development Board (HDB) flat.

This is on top of other payments such as the booking fee and deposit, as well as the buyer’s stamp duty.

Mr Ismail also recommended that the loan-to-value limit be reverted to 80 per cent for those taking their first housing loan. It is now 75 per cent after the cooling measures.

The additional 5 percentage point for this loan-to-value limit has translated to a more than 30 per cent increase in cash outlay for buyers, PropNex research showed.

Mr Ismail said that his team tried to find out what could be the reasons behind the increase in re-issued OTPs after the release of the Credit Suisse report.

“We are very concerned when the authorities started to call our agents, leaders (asking), ‘Why is this happening? Are you all conducting class to go and do churning?’ We are not,” he added. “Churning” refers to agents pushing people who might have difficulties to commit to buy a property.

DAMPENING ‘ASPIRATIONS’

Other property agencies contacted by TODAY said that the reasons put forth by Mr Ismail were similar to their own experience, to some degree.

Mr Ken Low, managing partner of property agency SRI, said that the re-issuing of OTPs is a method to help buyers have more time to sell their HDB flat.

Most upgraders would have exhausted their cash and Central Provident Fund savings on their first HDB home, and they would need the cash proceeds from its sale to upgrade, he added.

Mr Eugene Lim, key executive officer of real estate agency ERA, noted that there are aspirations among homeowners to live in private residence, but the Government has pulled a handbrake on that with the latest cooling measures.

“It’s a blanket approach. In so doing, you do dampen the aspirations of those who want to upgrade,” he said.

WILLING TO WORK DEALS WITH BUYERS

While recognising that there could be genuine cases, industry sources also told TODAY that PropNex’s sales strategy could be a contributing factor to the increase in the higher number of OTPs being re-issued.

Several sources said that PropNex agents have been known to encourage couples looking to upgrade to a private property to each buy one unit, after selling their HDB flat.

The handling of three transactions — the sale of the HDB flat and the purchase of two private apartments — would require more time, an industry source said, thereby fuelling the need for buyers to have their OTPs re-issued.

“With cooling measures, developers are more willing to work with buyers. Before cooling measures, developers don’t care so much. Now, it is, ‘Okay, you’re genuine buyer, you need extension of time, we are prepared to help you’… Willing buyer, willing seller… In a difficult market, these kind of things pick up,” a source said.  

Another source said that PropNex has been generally encouraging buyers to “put more money on the table”, or simply “telling people to buy more, buy more”.

PropNex, being the biggest player in Singapore, seems to be “shouting the loudest” with this, although it would be “proportionate to the size of their agency”, one industry insider said.

NOT A NEW PRACTICE

When asked about these comments made by industry sources, Mr Ismail said that the practice of getting clients to own multiple properties has existed “more than 10 years ago before any of the cooling measures” came into play.

It is not just PropNex agents who are trained in asset progression (or how to grow real estate assets), but also agents from other firms, he added.

Mr Ismail also said that the practice of owning multiple properties has no bearing on the re-issuing of OTPs which is happening now.

He stressed that the firm’s recommendations in its white paper are aimed at helping Singaporeans better achieve their home upgrading aspirations.  

 

 

https://www.todayonline.com/singapore/propnex-calls-easing-cooling-measures-saying-they-prevent-homeowners-upgrading

[aaur4man]

Confirm earn? 

[XianGe]

Might as well jz say cooling measures affect their rice bowl