Transacting homes off-plan in Singapore is a win-win proposition
Transacting homes off-plan in Singapore is a win-win proposition. 2021 was a prosperous year for real estate developers in Singapore. Developers sold 13,027 private homes in 2021, excluding executive condominiums, according to data from the Urban Redevelopment Authority, while the price of a private home jumped by 10.6% from the previous year (URA).
Early in 2022, the private home market slowed down as property cooling regulations went into effect on December 16, 2021. The second quarter of 2022 had a rise in transaction volume over the first quarter, however private housing prices rose by 3.5% from one quarter to the next. The private residential complex AMO Residence, the year’s first important new launch in the Outside Central Region, sold almost all of its apartments on the day of its opening on July 23.
In Singapore, new homes are often sold off-plan and paid for according to a schedule of incremental payments. Nearly 98% of the new homes offered by developers in 2021 were still under construction. Consider a building site purchased through the Government Land Sales program. A developer may begin selling the products associated with their project 12 to 18 months after receiving the site. Construction on the project may still be in its very early stages at this point.
Developers generate excitement for their newest launches by working with marketing consultants. Buyers get into contracts to purchase their brand-new, unfinished homes after being seduced by alluring marketing materials and luxurious demonstration flats. Within eight weeks of receiving the option to purchase a brand-new, unfinished condominium unit, a buyer will typically have paid 20% of the purchase price plus stamp duties. The remaining 40% of the purchase price is then paid in installments based on several construction milestones, which could take two to three years to complete. Upon approval of the project’s Temporary Occupation Permit, the buyer makes a further 25% down payment and picks up the keys to the unit. When the project receives its Certificate of Statutory Completion, which may be several months from now, the remaining 15% is required.
Off-plan home purchases involve some risks. Home purchasers in China who had made payments for unfinished homes in halted projects are among those who have been impacted by the debt troubles of some Chinese developers. However, local developers often have a solid track record of timely home delivery to buyers. New house sales off-plan can be profitable for both developers and purchasers.
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