If you’re about to buy an apartment, bad luck. URA has just announced that the government has withdrawn the Deferred Payment Scheme with immediate effect.
The Deferred Payment Scheme is a form of progress payment that allows the property buyer to defer the bulk of the purchase payment to a later date. Although property developers have to obtain approval from the Controller of Housing, it’s apparent that approval is often granted since DPS is almost always offered at new property launches.
The property buyer used to be able to defer more than 80% of the purchase price till the issuance of the Notice of Vacant Possession (served after the developer has obtained TOP). He has a lot of time to shop around for a bank loan, or sell some assets to fund his purchase.
The only other form of progress payment is the Standard Payment Scheme. This is less attractive than DPS. The first progress payment has to start much earlier, at the time of the completion of foundation work. This means the buyer has to source for funding much earlier.
Is the DPS withdrawal a good thing? Maybe. Rather than letting the property bubble burst, I believe this measure is introduced to cool the bubble, to deflate it a little.
A possible downside is an over-reaction by potential buyers. They may become overly cautious, overly risk averse, and shun property investment altogether. Worse, with lots of new launches in the pipeline (remember all the en blocs?), a property downturn may become a reality sooner than later.