PropNex calls for revisions in cooling measures

Property brokerage PropNex said the increased spate of reissued Options to Purchase (OTPs) are the result of requests by “genuine HDB upgraders” for more time, given additional buyer’s stamp duty (ABSD) burdens.

Chief executive Ismail Gafoor said in a briefing for the media on Thursday that this is why it has submitted recommendations to the authorities for a remission of the ABSD for HDB upgraders, among other proposals aimed at calibrating the existing measures to cool the property market.

The Ministry of National Development, responding, said in a statement: “The government monitors the property market closely, and intervenes where necessary to maintain a stable and sustainable property market. We received PropNex’s proposals on 13 March, and are studying the recommendations.”

PropNex said it began looking into the reasons behind the spate of reissued OTPs at new launches by talking to its leaders and agents, after a Credit Suisse report put the issue in the spotlight.

He said HDB upgraders are finding the ABSD a “huge hefty obstacle”, so “by and large”, they are contributing to the reissuance in OTPs, among other reasons such as wanting a change of name or waiting for banks’ approval. He did not, however, give a breakdown of the reasons.

PropNex is suggesting that HDB upgraders get a remission on ABSD if they undertake to dispose of their existing HDB flat within six months of exercising the OTP for resale properties, or upon the completion date for newly-launched properties, subject to penalties.

Upgraders at new launches have two options, Mr Ismail said.

One is to fork out the 12 per cent ABSD (payable by Singaporeans buying their second property) within two weeks of exercising the OTP, and then get a refund, subject to their selling their flat six months from the completion of the new property.

(For resale and completed properties, they have to sell the HDB within six months of exercising the OTP.)

But buyers will then need time to raise funds to get the money for the ABSD, in addition to the 15 per cent downpayment to be paid shortly after. These two components can amount to S$270,000 for a million-dollar property.

The other option is to dispose of their HDB first before exercising the OTP for the private property, but taking this route means buyers may still need time to see that sale through, and also have to go through the hassle of looking for interim accommodation.

Executive condominiums (ECs) see a full ABSD remission if purchased by Singaporean citizens or if at least one joint purchaser is Singaporean, but the number of ECs available has been declining.

PropNex also called for the loosening of loan-to-value (LTV) ratios and ABSD for Singaporeans buying their second property.

He said LTV ratios should revert to the previous 80 per cent rather than the current 75 per cent for first-time applicants for housing loans so they can enter the market to buy their first property. (see amendment note)

He also believes that the 12 per cent ABSD on the second property purchase should go back to the previous 7 per cent level or even be dialled down further, because the brokerage believes it encourages overseas real estate investments.

In a recent statement, PropNex said it “managed to close the highest number of units” in 21 out of 26 new launches against other joint marketing agencies it was appointed for in 2018, based on issued OTPs.

These include transactions for Whistler Grand and Parc Esta, two projects Credit Suisse identified as having a particularly high incidence of lapsed OTPs in December.

The brokerage does not know or track the number of its sales booked that translate to exercised OTPs.

Eugene Lim, key executive officer of ERA Realty, said PropNex’s recommendation will “definitely be helpful to genuine homebuyers… who want to upgrade to private but are caught in transitional issues”.

Still, he noted that more ECs will soon be available for sale from recent land tenders.

Since Credit Suisse’s report and a report by The Business Times last month, Mr Ismail said the authorities have been calling Propnex’s agents and leaders to ask “why is this happening”. He did not specify which government body and said the authorities were in contact with agents from rival agencies as well.

In a phone call later, he said the company does not support “churning”, the practice by agents pushing people to commit to a purchase though they do not qualify or are not ready to do so.

He said: “Our message and training to our people is that we have to qualify genuine buyers who have the means… They have no restrictions to sell and buy the property and have the ability to take a loan to proceed.”

He also said at his media briefing: “As an agent, I have only one role – to connect with the buyer and explain the process.” The request goes up to the developer, who then considers whether to reissue the OTP if the buyer expresses the interest.

A Council for Estate Agencies (CEA) spokesman said it regularly reminds property agents to perform their work in accordance with applicable laws, and that they must be conversant with and must comply with the relevant laws and regulations that apply to property transactions.

Recently, industry association Real Estate Developers’ Association of Singapore (Redas) said it may be timely to re-evaluate the LTV ratio for first-time property purchasers and review the timing of the upfront payment of the ABSD for upgraders.

It also called for some flexibility in terms of the time frame needed to sell out projects in the matter of remissible ABSD for developers.

Amendment note: A previous version of the story said that the current LTV ratio is 80 per cent, not 75 per cent. This has been amended accordingly.

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