Straits Times highlight a trend seen this year of the increasing number of people returning purchased units.Do grab a copy if you are interested. Honestly, it is just a statistics because it is just saying 30% of 277 units were EC. That is still a small amount compared to 3337 units EC issued last year. That is about 2.5% of it.
What is interesting for me is that for the first time the blame was landed squarely on the MSR. The MSR limits the monthly housing payments to less than 30% of the buyers gross monthly income. In many reports in the past, the limelight was taken by the TDSR, which governs that the combine of all debts the household owns must be less than 60% of combine gross income.
Other reasons likely can be due to cancellation of marriages or income becoming more than a combined $12,000.
Whichever way, the developers for the umpteenth time, have asked the government to lower the measures, else they are going to ‘suffer’.
I felt that all the measures put in were suppose to be put in place before the property craze starts to run wild.Having these measures such as MSR and TDSR so late in this game, smacks to me bad planning, or deliberate planning to push forth a property asset growth policy, to stimulate the economy when the production engine is not doing too well.
These measures should not be removed so soon, and articles like these might highlight that there are small port lets of the population overreaching.
The penalty for returning is heavy, once the sales option is executed, the penalty is 20% of the unit price. If an EC is 800k, that is 160k!
Property asset growth have been ingrain in people’s minds as the way to build wealth, and like paper assets (stocks and bonds), greed sets in and people pushes the limits:
- They get married even when they may not be ready for it just to get in fast
- They overreach for a lucrative condo even though they currently couldn’t, optimistically believing that their financial situation would become better once the time comes
- They haven’t factor in government regulations coming in to disrupt their plans
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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