A RECENT rule change that stops people using their Central Provident Fund (CPF) savings to buy commercial properties has claimed an unexpected victim.
The fledgling market for small office, home office (Soho) apartments has been hit, with 80 per cent of prospective buyers at one development walking out the minute they realised their CPF savings cannot be used for the purchase.
Soho units, which allow buyers to live and work within the same space, are approved for office use and usually come furnished with kitchens and bathrooms.
They were designed to encourage city living and the few projects with Soho units are mostly downtown, such as Far East Organization's Central above Clarke Quay MRT station.
But a Soho development being built in Joo Chiat Road by Shining Holdings has seen an initially strong demand almost completely vanish, after the change in CPF rulings took effect on July 1.
When it first sold The Modules in May, 25 of its 48 units were snapped up within a few weeks. But in the more than two months since July 1, only three have been sold, said marketing agent OrangeTee.
It added that this is mainly due to the CPF Board phasing out the Non-Residential Property Scheme in July.
The board said the scheme - introduced in 1986 to allow members to enhance their CPF returns by investing in property other than homes - is no longer relevant as members can now invest their savings in property funds rather than directly in shops and offices.
But this means potential buyers who could have used CPF savings for the down payment and monthly instalments on a Soho unit must now fork out funds for both in cash.
'On average, about 80 per cent of people who walk in to ask about the project turn around and walk out after they find they can't use CPF to buy the units,' an OrangeTee agent told The Straits Times.
Soho apartments in prime districts are still selling well, as they attract buyers who do not have to rely on CPF funds.
Southbank near Lavender MRT station sold all 60 of its Soho units after July 1, said marketing agent Knight Frank.
As for Far East's Central, few units have been sold this year as marketing has been temporarily halted. Thus it could not gauge the impact of the CPF changes.
But property experts said that, looking ahead, the new rule may dampen the Soho market, which is relatively new.
'The ruling would probably affect singles and young couples with no kids who plan to use Soho units as their primary home,' said a consultant.
The impact on the Soho market is likely to be greatest in developments away from the city but not many developers plan to build Soho units away from the city.
Mr Nicholas Mak, director of research and consultancy at Knight Frank, said the ruling 'appears to go against the grain of trying to encourage entrepreneurship', as Soho units allow buyers to use their office space as homes.
'To the extent that it curbs demand for Soho apartments, it will also give developers less incentive to build such units, which may lead to less supply in the already small Soho market,' he said.
The market is not likely to grow soon. Two developers that had been planning projects with a Soho component now say they will not sell such units.
CapitaLand's Selegie Complex will have Soho units, but they will be leased rather than sold, the firm said yesterday.
United Engineers also said last year that it would include 160 Soho units at its upcoming Vista Xchange at one-north.
But it has clarified that the units - now reduced to 60 - will be 'Soho-style' homes and not actually zoned for commercial use.
fiochan@sph.com.sg
| Fledgling market |
| SOHO units, which allow buyers to live and work within the same space, are approved for office use and usually come furnished with kitchens and bathrooms. They were designed to encourage city living and the few projects with Soho units are mostly downtown, such as Far East's Central above Clarke Quay MRT station. The impact on the Soho market is likely to be greatest in developments away from the city but not many developers plan to build Soho units away from the city. |
