Supply, More Supply, Surprised?

The Government just released the statistics on the property market today. The numbers confirmed what analysts have been saying since June 2013 when a tighter TDSR was imposed.

1. Private property prices continued to appreciate albeit at a slower rate because developers adjusted their price expectations after the tighter TDSR rules kicked in.
2. HDB resale flat prices have started to ease as a result of HDB easing more rules to allow people to buy direct from HDB.

I am not going to harp on that issue. Let the newspapers tomorrow report on that.

Minister Khaw posted an interesting statistic (see picture below). He did not elaborate since the numbers are self explanatory.

Laymen who read the picture below will think that 2016 will see the most number of homes completed. Unfortunately that might not be the true picture.

Let me shed some light.

For every development, we know there is a estimated completion date ie. when the developer must complete the project and apply for temporary occupation permit (TOP). There is also a date for statutory completion. Do you ever wonder how the developer set those dates?

If the developer buys the land parcels from the Government to build executive condominiums (ECs) or private housing, there is a stipulated project completion period. This is the latest date the developer must complete the project and gets the TOP otherwise the Government will take back the land.

• For private housing, the project completion period is 60 months or five years from the date of acceptance of the tender bid by the Government
• For ECs, it is 48 months or four years

Then the developer has to obtain the certificate of statutory completion (CSC) within three years. This three years period is set by the Government too.

How about HDB flats you may ask?

HDB operates differently from the private sector. HDB will give you an estimated completion date and an estimated delivery possession date which is something like one year after the estimated completion date. The delivery possession date is the latest HDB must hand over the unit to the buyer. 

If the HDB flats are under the Design, Build and Sell Scheme (DBSS), the flats will be completed much earlier than the estimated completion date as it is being built by private developers. Just look at Trivelis and the BTO project beside it. The time difference between the launch of these two projects is a few months. Yet Trivelis is already 50-60% completed while the BTO has just started foundation works.

So the numbers below are based on TOP dates for ECs and private housing and estimated completion date for HDB flats. How accurate are these dates? Not very.

As this is the latest latest date the developer must complete the project, you can bet your last penny that the project will be completed much earlier than that. Whereas for HDB flats, there can be delay up to one year. If it is DBSS, it will be completed earlier.

A rough estimation is that around 20-30% of projects will be earlier than expected. So the peak in completion is likely to be in 2015 instead.

So those who have committed to a property must be prepared to take possession early. For HDB upgraders, be prepared to sell your HDB flat if you need to. As it is now, resale HDB flat prices are moderating. Coupled with mortgage interest rates that is estimated to creep up in late 2014 (if the US Federal Reserve starts to taper its Quantitative Easing), HDB upgraders must brace themselves for higher mortgage repayments by then.

Source: MND