10,450 sold & uncompleted private homes under the DPS now

December 20, 2008
Size of the DPS behemoth;
analysts worried about those getting TOP in 2010-11
By UMA SHANKARI

SOME 10,450 sold and uncompleted private homes are now under the
deferred payment scheme (DPS), according to official data released
yesterday.

Of the amount, close to half - 4,560 units - will be completed in
2009, while another 2,540 homes will be completed in 2010, the Urban
Redevelopment Authority (URA) said. Under the DPS, which was
introduced by the government in October 1997 and withdrawn in October
2007, the bulk of the purchase price of a property is due only after
a project obtains its temporary occupation permit (TOP).

The data was welcomed by both analysts and the Real Estate
Developers' Association of Singapore (Redas). Over the past several
months, many market watchers and analysts have been estimating how
big an impact the DPS will have on developers' cashflow and earnings
if buyers default on their homes as TOP approaches.

'I think it provides a clearer picture as to the extent of the
problem,' said Citigroup's head of Singapore equity research, Chua
Hak Bin. 'And it is good that the government acted to stop the system
when it did. If not, things would have got a lot worse.'

Said Redas: 'URA data, together with data compiled by Redas, helps to
allay concerns that speculators may repudiate their DPS purchases at
below-market prices as the completion date nears.' In its statement,
Redas highlighted 10 projects - including City Developments' The Sail
and Keppel Land's Park Infinia - where the DPS was offered but full
payment was still made to the developers once TOP was obtained.

Redas also said that while units may be affected by market
sentiments, sales contracts cannot be repudiated easily.

URA's data proves that the DPS scheme was 'very popular', Citigroup's
Dr Chua said. To arrive at its numbers, URA did a survey among
property developers of uncompleted DPS-approved projects. In total,
developers of 605 projects, comprising 72,384 units, were granted
approval to offer the DPS. Of this amount, there were 18,208 sold but
uncompleted units as at end-November this year. And of this figure,
10,450 (57 per cent) were still under the DPS.

The fact that the bulk of DPS units will be completed in 2009 is
cause for some concern, analysts said. '2009 is going to be a tough
year for the economy, and there are 4,650 units under the DPS that
will be completed,' said Ku Swee Yong, director of marketing and
business development at Savills Singapore.

But assuming a three-year construction period, a large proportion of
the units that will obtain TOP in 2009 were probably launched and
sold in 2006 and early 2007, at prices that are relatively lower than
today's level or the expected level in 2009. So even if the property
market continues to weaken in 2009, the owners of these 4,560 units
could still lease out the homes or sell them, analysts said. However,
if developers had offered the DPS to many sub-purchasers when the
original purchasers sub-sell the units, then defaults could be
expected.

But for now, the real area of concern is thought to be the 2,540
units under the DPS that will obtain TOP in 2010. Of this number,
1,270 of the units are located in the core central region (CCR),
which includes Sentosa and Marina Bay.

'Generally, I'm more concerned over the units which will receive TOP
in 2010-2011, which could have been purchased in 2007 at the peak of
the property market,' said DMG & Partners Securities analyst Brandon
Lee.

And while developers have the legal right to pursue buyers who walk
away from their deals, it could be harder to do this when it comes to
foreigners, said Knight Frank managing director Tan Tiong Cheng.

Normally, about 75-90 per cent of uncompleted private residential
units will be bought by Singaporeans, said DMG's Mr Lee. But in 2007,
the proportion fell to 63-68 per cent, with the remaining purchases
made by PRs, foreigners and companies. 'We see this segment as the
most likely to return their units,' he said. His back-of-the-envelope
figure puts the amount expected to be returned as possibly somewhere
between 20-30 per cent.

URA said that it provided the data to enable the public to make a
better assessment of the private housing market. 'This information
was provided by developers in confidence and with the understanding
that data for individual projects would not be released to the
public. Hence URA is only releasing aggregated data and not data for
individual projects,' the government agency said.

'Conducting a survey of developers of all uncompleted DPS-approved
projects requires a lot of time and resources from the developers as
well as the government. Given that the number of uncompleted units
sold under DPS is likely to decline as projects are completed over
time, we will monitor the situation and consider whether there is a
need to conduct further surveys in future,' URA said in response to a
query from BT.