Mounting fees pressuring developers to cut prices A total of $55.1 million in extension fees were paid by developers due to remaining unsold units in private condo projects since 2012, revealed a study by OrangeTee Research. These companies could potentially shell out another $80.7 million to prolong the sales period by another year if they fail to move their unsold inventory by year-end. “As the penalty amounts to millions of dollars per project, we believe that it will incentivise some developers to reprice some of these projects to move sales in the near term,” according to Christine Li, Head of Research at OrangeTee. “As unsold inventory builds up, there will likely be more bargains in the market if developers want to avoid paying penalties to extend the sales period, especially high-end developers who have already paid premium prices for their lands,” she added. Under the law, all developers with non-Singaporean shareholders or directors are given five years to finish a residential project. After getting the Temporary Occupation Permits (TOPs), they are granted another two years to sell the units. But if they want to extend that by one year, they are required to pay eight percent of the land purchase price. Thereafter, they will have to fork out 16 percent for the second-year extension and 24 percent for three years and above. The fees are adjusted depending on the number of unsold units divided by the overall number. Despite obtaining their TOPs between 2010 and 2012, a total of 24 condominiums, mostly in the luxury segment, are still burdened by unsold inventory. To make matters worse, projects built on land purchased during the en bloc craze during 2006 to 2007 have just passed the seven-year mark. This means more extension charges will take effect, said experts. In Q1 2014, the Outside Central Region posted the highest number of unsold condos at 12,433 units, followed by the Core Central Region at 10,295 units, and the Rest of Central Region with 8,089 units.
Posted on: Mon, 09 Jun 2014 11:26:29 +0000
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