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Citylife $2m Presidential Suite – What Will Happen Next?
Despite the policies that the government has implemented to cool the Singapore property market, it certainly feels like property prices are going to hit record highs with every launch. While investors pouring their money into shoebox apartments are ridiculed to have bought them at inflated psf prices, the same cannot be said about the record transaction at Citylife. It’s an Executive Condominium and not tailored to investors. With a total area of 4349sf and translated to about $467psf, it can hardly be judged as expensive.
The EC scheme was always said to have conceptualized to help meet the aspirations of the “sandwich class” who cannot afford to buy private properties but are ineligible to buy HDBs due to income levels. There is an old saying that it take a thousand tests to verify a theory but it takes only 1 inaccuracy to discard it. This $2.05m EC is as close that it gets to that inaccuracy. Here are why the general public is a little concerned with such transactions taking place.
There are a lot of discussions going on about why this apartment unit was approved to be built in the first place, how the buyers could afford it when the income ceiling is $12,000, how it does not serve the very objectives of the EC, etc. You can read more reports and discussions here: Yahoo! News, Straits Times Forum, Todayonline, XINMSN, Hardwarezone, TREmeritus
What this transaction show?
This will undoubtedly be viewed as a green light by developers build more of these units. On TV, it was also mentioned that the presidential suite was created to test the market. So this means developers will view this as a green light to build more since there was such a receptive response to it. The question you might ask is: Why not test the market by offering $200psf and see the response?
With the direction of the government clearly shown by the many cooling measures implemented, allowing the building luxurious units have an impact that goes against the grain. Even the buyer of the EC presidential suite has said that it will house a few household and consolidate into one. This will appear like a good move. But we have to ask the question again of whether this was the intention of the EC scheme?
If this was private property, the government in some way cannot get involved. As the scheme for Executive Condominiums are within the full observation of HDB, we can expect action to be taken in the form of new policies to circumvent the likelihood of such transactions occurring again. They have after all implemented more rounds of property cooling measures that the average property observer can count.
Some of the things that can be implemented include:
- Setting floor area parameters that developers have to follow
- Setting a maximum price limit for ECs
- Implementing a source of funds requirement
- Setting a maximum loan tenor for purchases above a specified price
- Lowering the loan to value for purchases above a specified price
- Require a minimum income level for purchases above a specified price
- Request a higher portion of cash down payments
- Additional stamp duties if purchase is made with considerable third party funds
Yes some of these suggestions might seem extreme. But there are already many extreme measures that have been implemented and enforced. Extreme measures could be the only way to control the extraordinary property bull that we are experiencing in Singapore in recent years.