Possible Reason For the Property "Increase"

[Redcape]

Have been pondering on the possible reason(s) for the "pick up" in the property sector since it doesn't seem things are really picking up on the ground.

That was when I realized that the Deferred Payment Scheme (DPS) was allowed and made a big comeback recently.

On paper, the DPS appears rather attractive for would-be speculators and developers alike. On average, the DPS stretched over 2 years and the more extreme punters will see it as a chance to buy properties without any capital outlay then flip it by the end of the 2 years while still earning a profit in the end (hopefully).

The above was the hypothesis. However, I do not have the data to prove or verify it at the moment. 

We can maybe check the data (at URA website?) to see if there are any clues as to how many units are transacted via the DPS? My gut feel is, there may be no such data.

Another way to indirectly check it out is via the listed developers themselves? How are revenues generated from DPS recorded on the P & L and Balance Sheets? Are monies from the DPS listed as accounts receivables on the balance sheet?

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The above example is maybe much ado about nothing at the end of the day but the case of DPS contributing to some extent, the recent "increase" of sentiments in the property sector can be rather true.

Hope to hear some views from the floor and gather some wisdom from the crowd.

[r0n]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

[Redcape]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is  $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

Hi there, thanks for pointing out the calculation of the deposit.

Yes, was wondering if there is a sale of the property via DPS, how will it reflect on the P&L and Balance Sheet? Will take the time to look into it and maybe discuss it here.

[corydorus]

In the first place, the property were pressed down "artificially"with TDSR and ABSD. Is not due to over invest or economic conditions resulting weaker property prices. Overtime as saving increases, the total loan amount to beat TDSR and initial deposits are able to be covered after 3 years.

So if my logic is correct, is the beginning of property price upswing unless gov introduce more damping measures which will be a surprise.


Cory

[CY09]

Hi Cory,

While it indeed is true that ABSD and TDSR are artificially pressing down prices; I am of the opinion that the QE being done by USA, EU and Japan is artificially pushing up our home prices. This is because money is flooding our Singapore monetary system. Should this artificial intervention done by these 3 central banks are stopped, Singapore's property market may faced a sudden twist in the arm and thus fall. Hence to negate the external artifical factors, we have to implement "internal artificial price suppressors".

[Millionfaith]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is  $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

Hi there, thanks for pointing out the calculation of the deposit.

Yes, was wondering if there is a sale of the property via DPS, how will it reflect on the P&L and Balance Sheet? Will take the time to look into it and maybe discuss it here.

[Millionfaith]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is  $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

Hi there, thanks for pointing out the calculation of the deposit.

Yes, was wondering if there is a sale of the property via DPS, how will it reflect on the P&L and Balance Sheet? Will take the time to look into it and maybe discuss it here.

Maybe you can write to the IR to seek clarification?

[Millionfaith]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is  $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

Hi there, thanks for pointing out the calculation of the deposit.

Yes, was wondering if there is a sale of the property via DPS, how will it reflect on the P&L and Balance Sheet? Will take the time to look into it and maybe discuss it here.

Maybe you like to write to the IR to seek clarification.
(Not vested)

[BlueKelah]

Hi Cory,

While it indeed is true that ABSD and TDSR are artificially pressing down prices; I am of the opinion that the QE being done by USA, EU and Japan is artificially pushing up our home prices. This is because money is flooding our Singapore monetary system. Should this artificial intervention done by these 3 central banks are stopped, Singapore's property market may faced a sudden twist in the arm and thus fall. Hence to negate the external artifical factors, we have to implement "internal artificial price suppressors".

You missed one other big contributor which is China
China has done its fair share of QE. Their gov debt levels still rising like no tomorrow, though the rate of rising has slowed down, but not reversed. 

The ah tiongs have definitely been a big contributor in the past years rise in property. I know of a "pei du mama" (Study mama's) that own 3-4 private properties outright and my agent friend says they often encounter ah tiong that bring like a suitcase of cash to buy.

Main thing is this year our NODX sectors have been boosting the economy quite a bit from strong demand as China gov pumped up their economy before their leadership conference benefitting everyone globally. So the strong economy and wages have likely given a boost to property sector. Been a good year for stock market as well so everyone feeling richer this year I reckon.

USA is on the path to tightening now with both rate rising and reducing their balance sheet. 
China is evidently slowing down again.

EU and Japan still continuing their QE quite a bit.

Next year will be more interesting, I think there will be a turning point over the new year similar to Jan 2016. Trump has done a good job avoiding gov shutdown and passing tax bill though so maybe things wont be as bad.

[Redcape]

I took the chance to check on a particular developer's recent Q3 2017 report. The trade and other receivables under the current assets for 3Q2017 stood at about $290 million as compared to $81 million in 3Q2016. Granted that it was mentioned under the footnotes that the increase was due to the deposit paid for the land at Woodleigh Lane. The next question to ask is definitely, "how much is the deposit exactly?". The developer in the example has recently introduced DPS to one of its property in the Tanjong Rhu area. 

The bid for the land at Woodleigh Lane is  $700.7m. Upon award of tender, the successful tenderer must pay 25% of the sale price (included in which
is the tender deposit) within 28 days from the date of award, and the balance 75% of the sale price must be paid within 90 days from the date of award.

So roughly $175m is relating to the deposit paid, and it will probably be reversed out of trade and other receivables by the end of the year when they pay 100% of the sale price.

Not sure about your point on how developers account for DPS though.

Hi there, thanks for pointing out the calculation of the deposit.

Yes, was wondering if there is a sale of the property via DPS, how will it reflect on the P&L and Balance Sheet? Will take the time to look into it and maybe discuss it here.

Maybe you can write to the IR to seek clarification?

Thanks for the reply.That is one of the option. 

However, I will try to do some individual research first before turning to other sources of information.

Between, I just google on DPS and came up with the below information from Keppel Land (Report to Shareholders 2013):

• For Singapore trading properties under deferred payment scheme and overseas trading properties, revenue and profit are recognised upon the transfer of significant risks and rewards of ownership of the properties to the purchasers using the completion of construction method.