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The appeal of buying completed homes

First-time buyers, upgraders benefit as they can move in quickly upon purchase, cutting out waiting time and possibly saving on rents.

THE Business Times on May 20, 2015 cited a report that at the end of Q1 2015, developers had paid about S$119 million in extension charges for unsold units of non-landed private residential developments completed from 2010 onwards. Condominiums completed prior to 2010 were mostly fully sold. It was further estimated that developers would incur up to a staggering total of S$328 million in extension charges for unsold units in their condominium projects for this year and the next, if Singapore's real estate market does not improve and they fail to sell any units by end 2016.

There are two reasons for these significant numbers. Firstly, the extension charges under the Qualifying Certificate (QC) requirements are calculated at per annum rates of 8 per cent of the land purchase price for the first year, 16 per cent for the second, and 24 per cent for the third and subsequent years of extension. The amount is pro-rated according to the number of unsold units. Secondly, more projects were completed in 2014 as compared to 2013. Since the developers are required to sell their units within two years of completion, more would be incurring these charges in 2016 as compared to 2015.

There is thus the urgency for these developers to sell within the stipulated timeframe. This presents a golden opportunity for buyers to pick up their choice properties.

Where are these unsold completed units located? Why do they remain unsold? What are the benefits of buying completed unsold units? This article attempts to answer these questions.

The total unsold inventory of completed and uncompleted units in the non-landed private residential market has been declining steadily over the past nine quarters as the market gradually absorbed the outstanding supply while the government tapered its land sales programme. By Q2 2014, the available stock then were 28,436 units, down 16.2 per cent year-on-year (y-o-y) and by Q2 2015, this further reduced to 26,905 units, down 5.4 per cent y-o-y (see Exhibit 1).

However, as the rate of absorption for new launches also slowed over the past two years, there has been a corresponding build-up of completed units left unsold. Hence, the number of units which are completed but remain unsold has been increasing. In Q2 2014, there were 1,412 such units, up 113.9 per cent y-o-y and by Q2 2015, 2,470 units up 74.9 per cent y-o-y.

A significant proportion of the unsold stock lies in the Core Central Region (CCR). In fact, in Q2 2014, 63.3 per cent of the completed but unsold 1,412 units were in the CCR. By Q2 2015, 77.6 per cent of the 2,470 completed but unsold units are in the CCR.

The unsold stock situation in the CCR is in line with the overall weakness of the market in view of the hefty Additional Buyer's Stamp Duty (ABSD) imposed on foreign buyers, who typically formed a higher proportion of buyers in this market segment. As market pundits had been predicting that the government is likely to review ABSD after the 2015 general elections, foreign buyers have taken this as a signal to wait.

Meanwhile, local demand continues to be saddled by the Total Debt Servicing Ratio (TDSR). Although prices in CCR have fallen, the median price for new non-landed homes in the CCR is still significantly higher than those located elsewhere. Based on the Urban Redevelopment Authority's (URA) data from January to August 2015, the median transacted price in absolute quantum for new non-landed homes in the CCR was S$1.8 million as compared to S$1.1 million in the Rest of Central Region (RCR) and S$904,000 in the Outside Central Region (OCR).

Unit sizes in the CCR also tend to be bigger than those in RCR and OCR, which further impacted their affordability. Based on URA data from January to August 2015, the median unit size for new non-landed homes in the CCR was 81 square metres, as compared to 65 sq m for RCR and 68 sq m in the OCR.

Meanwhile, there has been an increasing buyer interest in completed units as seen in the rise of sales transactions though this remains a small proportion relative to the total new sales market. In Q2 2014, there were 33 completed new unit sales and in Q2 2015, there were 117 such units sold. Noteworthy of mention is the sales volume in the CCR market in Q2 2014 when 22 completed units were transacted and this tripled to 67 units in Q2 2015. There appears to have been a rebound of sales in completed units in the CCR.

The Rest of Central Region (RCR) also witnessed a spike in sales of completed units from 10 in Q2 2014 to 37 units in Q2 2015.


In the CCR, the new sale prices of uncompleted and completed units are on a downward trend (see Exhibit 2). This presents investors with more options. In fact, completed units are attractive because they could be immediately available for owner occupation, or can be leased to obtain immediate rental income.

In the RCR market, the gap between the average new sale prices of uncompleted and completed units is narrowing (see Exhibit 3). However, the resale market in RCR could also be interesting to look at, as the average resale prices of completed units have fallen below that of new sale prices, partly due to the rising competition from developers as more new projects are launched in RCR.

What about the Outside Central Region (OCR)?

It is observed that new sale prices of units completed fewer than three years ago have fallen significantly in H1 2015 from both H1 2014 and H2 2014 (see Exhibit 4). This could be due to some projects approaching the end of the maximum completion time allowed by the authorities, and a higher proportion of bigger units changing hands at lower per square foot prices. However, the market continues to see low transaction volumes of newly completed units in the OCR because recent launches have been extremely attractive. Some of these projects in good locations are being launched at very reasonable prices with developers keen to achieve better market absorption to move units.

In addition, these developers who had obtained their sites one to two years ago would be aware of the market softening. Besides the usual ramping up of marketing activities to bring in more human traffic to their showflats, many had gone further to ensure the attractiveness of the project, creating more efficient space allocation within a unit, and a generous suite of attractive facilities.


The tangible benefit of buying a completed unit is that one can see the finished product. Usually, developments obtaining Temporary Occupation Permit (TOP) would witness another surge of sales as prospective buyers can finally appreciate the building design, quality finishes and other thoughtful details in the development itself and within the units.

Immediate rental returns are cited earlier as a good reason for buying completed units in CCR. This also holds true for buyers who are not owner-occupiers of completed units in other locations.

Investing in Singapore's real estate could also provide foreigners from some countries a hedge against currency devaluation. This is especially so for Malaysian and Indonesian buyers, who together account for the majority of foreign buyers (including Singapore Permanent Residents) of private homes in Singapore, The Sing dollar is tipped to stay resilient against their currencies because weaknesses in commodity exports are expected to persist following the devaluation of the Chinese yuan.

Finally, prices for these completed units are competitive or even lower than uncompleted units, presenting a value proposition to different buyer groups in a tepid market. For example, institutional buyers such as funds may structure an attractive bulk purchase deal with a developer for its unsold, completed units through the assistance of a real estate agency active in the CCR. Individual buyers can also assemble themselves to make offers to developers to purchase multiple unsold completed units through syndicated buying at a bulk discount rate. They can reap their immediate rental yields by leasing these units to suitable tenants through the networks of real estate agencies. First-time buyers and upgraders benefit too when buying for owner-occupation as they can move in quickly upon purchase, cutting out waiting time and possibly save on rents which would have been incurred in leasing while waiting for the completion of newly launched units.

  • The writer is managing director of KF Property Network