Friday, 10 February 2017

GuocoLand - Updates on Risks factors

GuocoLand was mentioned in this week's edition of The Edge Magazine under the Property Pullout titled: Pickup in sales of new luxury condos. There are some points which were brought out and perhaps to have a clearer understanding of some of the risks involved, I quote some passages from it.

Quoted from the article:
At GuocoLand's mixed-use Tanjong Pagar Centre, a 646 sq ft, one-bedder on the 42nd floor of the soon-to-be-completed Wallich Residence was sold for close to $1.92m ($2,970 psf), according to a caveat lodged on Jan 25. This brings the total number of units sold in the 181-unit development to 17. The project has yet to be launched. Prior to this January transaction, a 1,625 sq ft unit on the 51st floor was sold for $5.26 million ($3,238 psf) in March 2015. 
At Leedon Heights, the freehold 381-unit Leedon Residence was completed in 3Q2015. Developed by GuocoLand, the project saw strong sales after it received its Temporary Occupation Permit. The two most recent caveats lodged in January were for two-bedroom units of 1,044 sq ft: THe one on the seventh floor fetched $2.43 million ($2,327 psf), while that on the 10th floor was sold for $2.48 million ($2,375 psf).
More units at Leedon Residence were snapped up recently, but have yet to be reflected in the caveats, says SRI's Koh. A week ago, he brokered the sale of two large units in the project. One was a 2,648 sq fe, four-bedder that sold for $5.56 million, while the other was a 4,074 sq ft, five-bedder that fetched $8.8 million. The largest unit at Leedon Residence is the 8,051 sq ft, five-bedroom garden suite. It was recently sold for $12.5 million in a deal brokered by Bruce Lye, SRI's other managing partner.
The three units at Leedon Residence recently brokered by SRI were bought by Singaporeans. These high-net-worth individuals live in the Good Class Bungalow estate of the neighbouring Leedon Park and are buying units at Leedon Residence for their children, says Koh. "They are attracted by the exclusivity of the project and its lush sprawling 5ha site, which is one of the largest freehold sites in prime District 10."
To date, about 290 units have been sold. According to sources, the developer is in negotiations with several private funds that are interested in buying the remaining 91 units in Leedon Residence. It has to sell all the remaining units by end-June to avoid QC penalty charges. 
Key points to ponder about:
  •  Qualifying Certificate (QC) 
    • Essentially, all foreign developers are required to apply for QC when buying residential land for development
    • Developer gets 5 years to build the project and 2 more years to sell it. 
    • Developers can pay an extension fee to extend the deadline by up to 3 years
      • 8% of the purchase price of the land for the first year
      • 16% of the purchase price of the land for the second year
      • 24% of the purchase price of the land for the third year.
    • To avoid paying for QC penalty charges for Leedon Residences, GuocoLand chose to go the route of finding private funds. If found, it is a win win situation as GuocoLand can avoid the charges and the private funds will be able to purchase units at a discount and lease / sell them when the market conditions get better.
  • Wallich Residence, though yet to be released, had already sold 17 out of 181 units. 
    • I'm guessing that these are probably sold to directors or business associates indicating high demand for the project. The location and prestige of the project will likely entice buyers in itself. 
  •  High-net-worth individuals are really amazing to be able to afford a GCB and still have excess money to purchase condos in Prime district for their children. 
    • They will incur ABSD (since they already have a GCB) if they were to purchase it under their own name. Hence, it makes perfect sense to buy it for their children since they will save a sizeable chunk of money that way. 
    • I do hope to be able to do the same for my future children when the time comes because housing prices are unlikely to go back to how it was 10 years ago and similarly, 10 years later, housing prices are impossible to be the same level as it is now. 
    • Have you bought your ticket to become a high-net-worth individual? If you have, good luck for the $12m toto draw tonight at 9.30pm! 


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