Singapore Property | Confronted with a sluggish residential market and stiff competition from a wide array of new launches in 2019, certain developers are leveraging an “ingenious sales tactic” to clinch prospective customers who may not be prepared to make a purchase decision, based on a report released by the equity research division of Credit Suisse.
This has led to what the report termed as “the strange case of the increasing number of units returned to the developer” at various new sales launches following the July 6 cooling measures a year ago.
In a standard transaction for a brand-new project availed for sale, the buyer of a unit who gets an option to purchase (OTP) ought to pay 5% of the buying price as a booking charge, of which 25% may be lost should the client fail to pay for the unit in full and returns it to the developer.
The client would then have parted with 1.25 percent of the buying price. However, in many instances, clients haven’t failed to complete their purchases.
Analyst Louis Chua of Credit Suisse attributed the increased number of units returned to the adoption of an ingenious sales strategy by various developers who reissue options to purchase to buyers immediately after the three-week validity duration expires and still maintain the booking fees.
Credit Suisse pointed out that the number of units returned at recently launched projects rose from less than 150 in November last year to 398 a month later. It coincided with the number of units returned according to the monthly sales data for new property launches from the Urban Redevelopment Authority (URA).
Responding to The Straits Times, URA pointed out that developers should offer options to purchase only to buyers who are willing to use them within the confines of the validity duration.
URA added that if the buyer requires an extension of the validity period, he or the developer could request for the same from the Controller of Housing.