Ki Residences is designed by Link: Hoi Hup Realty and Sunway Group. The two developers have been doing partnership projects for 11 years in Singapore and is well known in the industry. Their records include Ki Residences Singapore, Royal Square At Novena, Sophia Hills, Arc At Tampines and much more.
Do you know the positives to buying a property Off the plan? Off the plan properties are marketed heavily to Singaporean expats and interstate buyers. The main reason why many expats will purchase Off the plan is that it takes many of the stress away from getting a property back in Singapore to invest in. Because the apartment is brand new there is no must physically inspect the website and usually the place is a good location close to all amenities.
What exactly is ‘off the Plan’? Off the plan occurs when a builder/developer is constructing a set of units/apartments and will look to pre-sell some or all of the apartments before construction has even began. This kind of purchase is call purchasing off plan as the buyer is basing the decision to purchase based on the plans and drawings.
The typical transaction is actually a deposit of 5-10% will be paid at the time of signing the agreement. Not one other payments are required whatsoever until construction is done upon that the balance from the funds are required to complete the purchase. How long from signing of the contract to completion can be any amount of time really but generally will no longer than 2 years. Other benefits of purchasing Off the plan include:
1) Leaseback: Some developers will offer a rental guarantee to get a year or two post completion to supply the buyer with comfort around prices,
2) In a rising property market it is really not uncommon for the value of the apartment to increase causing a great return. In the event the deposit the purchaser put down was 10% and the apartment increased by 10% on the 2 year construction period – the buyer has seen a 100% return on their own money because there are not one other costs involved like interest payments etc within the 2 year construction phase. It is not uncommon for a buyer to on-sell the apartment just before completion turning a fast profit,
3) Taxation benefits that go with purchasing a new property. These are generally some good benefits and in a rising market purchasing Off the plan can be a smart investment.
What are the negatives to buying Ki Residences Floor Plan Singapore Off the plan? The main risk in purchasing Off the plan is obtaining finance for this purchase. No lender will issue an unconditional finance approval to have an indefinite time period. Yes, some lenders will approve finance for Off the plan purchases however they are always subjected to final valuation and verification from the applicants finances.
The maximum period of time a lender will hold open finance approval is half a year. Because of this it is really not possible to arrange finance before signing a legal contract upon an Off the plan purchase just like any approval might have long expired once settlement arrives. The danger here would be that the bank may decline the finance when settlement arrives for one of the following reasons:
1) Valuations have fallen so the property will be worth under the initial purchase price,
2) Credit policy has evolved resulting in the home or purchaser will no longer meeting bank lending criteria,
3) Interest rates or even the Singaporean dollar has risen leading to the borrower no longer having the ability to pay the repayments.
Not being able to finance the balance from the purchase price on settlement can result in the borrower forfeiting their deposit AND potentially being sued for damages in case the developer sell the home cheaper than the agreed purchase price.
Examples of the above risks materialising in 2010 through the GFC: Through the global financial crisis banks around Australia tightened their credit lending policy. There were many examples where applicants had purchased Off the plan with settlement imminent but no lender ready to finance the balance in the purchase price. Listed below are two examples:
1) Singaporean citizen living in Indonesia purchased an Off the plan Ki Residences Sunset Way in 2008. Completion was due in September 2009. The apartment was actually a studio apartment with the internal space of 30sqm. Lending policy in 2008 before the GFC permitted lending on this type of unit to 80% LVR so just a 20% deposit plus costs was required. However, right after the GFC financial institutions began to tighten up their lending policy on these small units with many lenders refusing to lend in any way while others wanted a 50% deposit. This purchaser was without enough savings to cover a 50% deposit so needed to forfeit his deposit.
2) Foreign citizen residing in Australia had purchase a property in Redcliffe Off the plan in 2009. Settlement due April 2011. Purchase price was $408,000. Bank conducted a valuation as well as the valuation started in at $355,000, some $53,000 underneath the purchase price. Lender would only lend 80% of the valuation being 80% of $355,000 requiring the purchaser to set in a bigger deposit than he had otherwise budgeted for.
Should I buy an Off the Plan Property? The article author recommends that Singaporean citizens living overseas considering purchasing an Off the plan apartment should only do this if they are in a strong financial position. Ideally lisldj would have no less than a 20% deposit plus costs. Before agreeing to purchase an Off the plan unit you ought to speak to a specialised mortgage broker to ensure which they currently meet home mortgage lending policy and should also consult their solicitor/conveyancer before fully committing.
Off the plan purchasers can be great investments with many many investors doing very well out from the purchase of these properties. You can find however downsides and risks to purchasing Off the plan which need to be considered before committing to the acquisition.