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SDB Asia, the esteemed property development arm of Selangor Dredging in Malaysia, has recently introduced a deferred payment schems (DPS) for its prestigious project, One Draycott.
The boutique condominium situated at 1 Draycott Park, boasting a total of 64 units, has successfully acquired its temporary occupation permit in the month of April, followed by the certificate of statutory completion (CSC) in the month of July. This property is strategically located in one of the highly sought-after residential areas in District 10 of Singapore, encompassing the prestigious neighborhoods of Draycott, Claymore, and Ardmore Park. Its proximity to Orchard Road further enhances its appeal and desirability.
According to Eugene Lim at ERA Realty Network, it is important to note that the Deferred Payment Scheme (DPS) can only come into effect once a project has successfully attained the Certificate of Statutory Completion (CSC). These real estate initiatives present buyers with enhanced payment options, thereby catering to a broader spectrum of potential buyers.
The deferred payment schemma for a TOP project entails an initial option fee amounting to 1% of the unit’s purchase price, succeeded by an additional 4% payment after a fortnight upon the exercise of the option. The payment of the Additional Buyer’s Stamp Duty (ABSD) will also be required upon the exercise of the option.
The subsequent payment of the down payment, amounting to 30% of the property’s value, will be required within a timeframe ranging from eight to 12 weeks. The down payment has the potential to consist of a combination of liquid cash reserves and funds accumulated within the Central Provident Fund Ordinary Account. In the event that a loan has been procured, it is anticipated that the remaining balance of 65% shall be settled via regular mortgage installments.
Alternative schemes under its DPS
In addition to the deferred payment scheme, SDB Asia presents prospective home buyers with two alternatives within its Deferred Payment Scheme (DPS): an extension on the period for completing the sale or a lengthened option exercise period.
Extension on Sales Completion
In the case of a Deferred Payment Scheme (DPS) featuring an extended sale completion period, the prospective buyer will be required to remit a 1% option fee initially. Subsequently, upon exercising the option after a two-week period, the buyer will be obligated to provide an additional 9% down payment. The payment of any Additional Buyer’s Stamp Duty (ABSD) will also be incurred at that time. In this particular scenario, it is noteworthy that the purchaser will be required to make the subsequent 25% down payment after a period of six months (equivalent to 24 weeks), which deviates from the customary timeframe of eight to 12 weeks.
According to a spokesperson from SDB Asia, the extended duration for completing the sale offers advantageous prospects for individuals requiring additional time to arrange their cash payment or obtain a loan.
Longer Option Exercise Period
The second Down Payment Scheme (DPS) presents the buyer with the opportunity to extend the period for exercising the option and also provides flexibility in the Additional Buyer’s Stamp Duty (ABSD) payment. The upfront option fee exhibits a higher value in this scenario. Specifically, individuals seeking an extension of the option exercise period for eight weeks are required to pay 5% upfront, while those desiring a 16-week extension must pay 10% upfront. The subsequent payment of 20% as a down payment is expected to be settled within a timeframe ranging from eight to 12 weeks.
According to Mark Yip, the CEO of Huttons Asia, properties offering Deferred Payment Schemes (DPS) are expected to attract a significant level of interest from buyers seeking greater flexibility in their payment arrangements. According to the real estate analyst, prospective buyers are likely to find value in the extended sale completion period and the option exercise period extension. This is particularly beneficial for individuals who are awaiting funds from other investments that they have recently divested from.
Catering to the needs of individuals affected by Additional Buyer’s Stamp Duty (ABSD) regulations and those experiencing uncertainty regarding their citizenship status.
Flexible scheme offers flexibility home homebuyers
According to a spokesperson from SDB Asia, an extension in the option exercise period can be particularly advantageous for prospective home buyers who require additional time to sell their current property. The potential purchaser may have the opportunity to circumvent the imposition of the elevated Additional Buyer’s Stamp Duty (ABSD) that is typically applicable to the acquisition of subsequent properties.
Following the implementation of property cooling measures on April 27, the Additional Buyer’s Stamp Duty (ABSD) applicable to Singaporean individuals purchasing their second residential property has been elevated to 20%. Furthermore, for Singaporeans acquiring their third and any subsequent residential property, the ABSD has been escalated to 30%.
Permanent residents (PRs) are subject to a 30% Additional Buyer’s Stamp Duty (ABSD) when acquiring their second residential property in Singapore. This percentage increases to 35% for PRs who are purchasing their third residential property. In the current real estate landscape, it is important to note that non-residents are subject to a 60% Additional Buyer’s Stamp Duty (ABSD) when acquiring residential properties.
According to Yip from Huttons, it is possible that certain buyers are adopting a cautious approach by awaiting the approval of their Singapore PR or citizenship application, or alternatively, they may be in the process of divesting their existing property or other investment assets. The potential purchasers in question may potentially choose to extend the duration of their option exercise period.
According to the SDB spokesperson, One Draycott presents a favorable opportunity for parents seeking to acquire a residential unit for their children who are approaching the age of 21 in the near future.
No Price Variance
In addition to the elevated Additional Buyer’s Stamp Duty (ABSD), prospective home buyers are confronted with the challenge of increased interest rates when securing a mortgage. In the September 2022 property cooling measures, borrowing limits have been adjusted to align with market conditions. Specifically, the loan-to-value ratio has been revised downwards to 75% for first-time home buyers, 45% for second-time home buyers, and 35% for individuals purchasing their third residential property. These adjustments reflect a more cautious approach towards lending and aim to promote responsible borrowing practices within the real estate market.
The deferred payment scheme (DPS) provided by SDB was officially introduced on August 1st, marking a significant milestone in the real estate market. To date, the scheme has garnered interest from a single Singaporean buyer. The buyer made the decision to choose an extended option exercise period while acquiring a 797 square feet two-bedroom property situated on the 16th floor. The purchase price of this property was $2.86 million, which translates to $2,591 per square foot. This information is based on a caveat that was lodged on August 4th.
In the real estate market, it is common for developers to apply a premium to properties that are acquired through the Deferred Payment Scheme (DPS) as opposed to the conventional payment scheme. In the context of One Draycott, it is worth noting that there is no significant variation in pricing, as indicated by the spokesperson from SDB.
Additional Discount up to $150,000
As of the current market conditions, there remains a total of 30 available units for sale at the prestigious One Draycott development. The property in question comprises a diverse selection of residential units, specifically two-bedroom configurations. These units exhibit varying sizes, with dimensions ranging from 732 to 797 square feet. Additionally, there is a noteworthy two-bedroom penthouse encompassing a generous area of 1,346 square feet, boasting an impressive double-volume ceiling.
SDB is currently providing a noteworthy incentive of a $150,000 reduction in price for their two-bedroom units spanning 732 square feet. These units are originally priced from $2.48 million, which equates to $3,388 per square foot, prior to the application of the discount. The two-bedroom units, spanning 797 square feet, are currently listed at a starting price of $2.62 million, which translates to approximately $3,287 per square foot. It is worth noting that a discount of $25,000 is applicable to this price.
According to a spokesperson from SDB, buyers who choose the DPS (Down Payment Scheme) are also entitled to avail the price discount.
According to Ken Low, the managing partner of SRI, the Deferred Payment Scheme (DPS) offers potential buyers the advantageous position of acquiring a valuable asset in the esteemed location of One Draycott. This unique opportunity presents itself with a noteworthy discount of $150,000, a rarity in such a highly sought-after area. Moreover, the DPS grants buyers the flexibility to manage their current property sale while simultaneously securing ownership of this prestigious asset.
One Draycott has experienced a notable surge in both viewings and enquiries, coinciding with the introduction of the aforementioned schemes in August.
One Draycott boasts a total of 60 exquisite two-bedroom units, ranging from 732 to 797 square feet in size. Additionally, this prestigious development features four luxurious penthouses, exclusively situated on the topmost floor of the magnificent 18-storey tower. The penthouses in question are characterized by their two-bedroom configuration, boasting a layout that closely resembles that of the other two-bedroom units. These properties offer the added advantage of a double-volume ceiling, enhancing their overall dimensions to 1,238 and 1,346 square feet, respectively.
Since its inception in June 2018, the development has successfully transacted a total of 34 residential units, which notably includes the sale of three luxurious penthouses. According to SDB, the majority of buyers in this market segment are Singaporeans and Permanent Residents (PRs). One Draycott has recorded an impressive achievement in terms of price per square foot (psf). The highest psf price achieved at this development stands at an impressive $3,689 psf. This remarkable figure was attained by a two-bedroom unit spanning 732 square feet, specifically located on the ninth floor. The transaction for this unit took place in July 2018, with the property fetching a substantial sum of $2.7 million.
The current market conditions are highly favorable for investors, particularly in the real estate sector. Rental rates have been exhibiting a positive trend, indicating a potential for lucrative returns on investment.
Attractive for Investors looking at Rental Yield
According to SRI’s Low, prospective buyers of DPS have the option to either occupy the unit themselves or opt for renting it out, thereby generating passive income through rental collection upon exercising the aforementioned choice. The exceptional offering of One Draycott presents buyers with substantial flexibility and a promising potential for growth.
According to ERA’s Lim, the extended completion or option exercise period at One Draycott presents an enticing opportunity for investors seeking to leverage the robust rental market. The impact of the DPS on their cash flow during the initial period is expected to be minimal.
When analyzing the rental rates of two comparable real estate projects, we can consider 8 Hullet and 3 Cuscaden. 8 Hullet is a boutique condominium with a freehold tenure, consisting of 44 units. The unit types available in this development include one-bedroom and two-bedroom units, ranging from 538 to 797 square feet in size. On the other hand, 3 Cuscaden is a freehold condominium located on Cuscaden Walk, conveniently situated just off Orchard Boulevard. This development comprises 96 units. Both projects were successfully finalized in the year 2022.
In May 2023, a recent rental transaction was observed at 8 Hullet, involving a two-bedroom unit spanning an area of 700 to 800 square feet. The unit was successfully leased for a monthly rate of $6,750, which translates to $9 per square foot.
In the month of July, we observed the leasing of another two-bedroom unit spanning an area of 700 to 800 square feet at the prestigious 3 Cuscaden property. This particular unit was successfully leased at a monthly rental rate of $7,300, which translates to an impressive $9.73 per square foot. Both datasets are derived from the Urban Redevelopment Authority’s rental data, specifically as of the conclusion of August.
Are we likely to witness an increase in the utilization of Developer Purchase Schemes (DPS) by developers of high-end condominiums with unsold inventory in the near future? According to Yip from Huttons, these schemes can be perceived as a form of indirect financing for buyers, which can impose significant costs on developers. The availability of such offerings from developers is quite limited.
Selective schemes are being offered by certain developers, as highlighted by SRI’s Low. Notable examples in the real estate market encompass Lumos at Leonie Hill, The Oliv@Balmoral, and Seascape and Cape Royale, with the latter two being evaluated on an individual basis.