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COMPANIES

Fewer 'goodies' for would-be home buyers

Developers say buyers prefer straight discounts instead of indirect ones

Published on Jan 9, 2015 1:13 AM

By Mok Fei Fei


DEVELOPERS are cutting back on offering indirect discounts and furniture vouchers as they are failing to entice would-be home buyers back into the market.

Property consultants say the inducements have not been as effective in attracting new business since cooling measures were introduced. The process usually involves developers or agents throwing in goodies like renovation or furniture vouchers for the purchase of a unit, thereby lowering the overall cost.

"It used to be quite common to give these discounts and we called it all sorts of things, like interior design vouchers," said Chris International director Chris Koh.

"That has more or less stopped since the tightening of the loans requirements, and we have to be very transparent in giving such discounts now."

Consultants told The Straits Times that all rebates and discounts have to be declared to banks when home owners seek loans. These discounts are then deducted from the price so the mortgage granted is based on the lower price but this can work against the buyer as the loan quantum would be lowered.

While the declaration rule has been in place since 2002, consultants said the banks have been more rigorous in the past few years in the wake of tighter loan requirements. ERA Realty key executive officer Eugene Lim said: "Before that, banks could interpret the rules themselves, but now that they have to net off all discounts and benefits, it does not work for the buyer."

PropNex Realty chief executive Mohamed Ismail added that buyers have become more savvy and want direct discounts instead of indirect ones.

"Real buyers are more discerning and they don't fall for these gimmicks anymore. They know if you can offer vouchers, you must have marked up the price elsewhere so they would rather go for a discount on the home than incentive packages," he said.

The issue of indirect discounts came to the fore after United Overseas Bank initiated a lawsuit against Lippo Marina Collection and others, claiming they conspired to get inflated loans.

The bank alleges that the defendants failed to inform it of substantial discounts of between 22 per cent and 34 per cent given to buyers of 38 units at the Marina Collection in Sentosa.

Property consultants said even if furniture vouchers or rebates are given, they would normally price them between $20,000 and $50,000 for units costing between $1 million and $2 million.

This works out to a discount of between 1 per cent and 5 per cent.

Orange Tee managing director Steven Tan said unit refurbishing is a new trend among developers of completed projects with apartments to clear. The renovated units are then sold at a price typically lower than what buyers would have to pay if they bought the furnishings themselves.

"The developers usually spend quite a sum on enhancing the property during renovation and providing the furniture, which make them more attractive and cost-effective to buyers," he said.

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