According to Urban Redevelopment Authority (URA) data, sales of new private home sales hit 10,024 in 2020, higher than the 9,912 units sold in 2019.
For the whole of 2020, there were 10,729 resale transactions compared with the 8,949 resale transactions in 2019. And there were 198 sub-sale in 2020, compared with 289 sub-sale transactions in 2019.
So what is the difference between a resale and a sub-sale?
In today’s article, we will at the a look at the difference.
URA defines a sub-sale as “the sale of a unit by one who has signed an agreement to purchase the unit from a developer or a subsequent purchaser before the issuance of the Certificate of Statutory Completion and the Subsidiary Strata Certificates of Title or the Certificates of Title for all the units in the development”.
In layman terms, it means the sale of a unit in an uncompleted project by the original buyer to another buyer.
A resale property transaction is simply an owner selling a unit in a project that is already completed to another buyer.
For sub-sale transactions, it is slightly more complicated as there are 3 parties involved. You have the original buyer, the secondary buyer and the developer of the project.
Due to the current stamp duties, the original buyer will need to pay Seller's Stamp Duty (SSD) because he/she has not owned the property for at least 4 years, and will probably mark up the price just to break-even.
For properties transacted on or after 11 March 2017, the SSD payable for the holding periods are as follows:
How Does Sub-Sale Work?
When the original buyer first purchase the property, he/she would have signed the Sale and Purchase Agreement (S&P), and paid the relevant stamp duties, i.e. Buyer’s Stamp Duty.
Buyer’s Stamp Duty (BSD) is taxed based on the purchase price or market value, whichever is higher, on all home purchases in Singapore.
The amount taxable is in the chart below:
As the property is still considered as a BUC, building under constructon, the legal title or the Certificate of Statutory Completion (CSC) will not be issued by the developer.
Once the original buyer decides to sell it before the property is completed, he/she will have to inform the developer of the decision.
The original buyer and secondary buyer will then sign an Option to Purchase Agreement (OTP).
Subsequently, the developer of the project will enter into a new S&P Agreement with the secondary buyer under the same terms and conditions as the original buyer.
Once that is done, when the project is completed and the CSC granted, the secondary buyer will become the owner of the unit and receive the keys to his/her new home from the developer.
Due to SSD, sub-sales are declining as evident in the drop in transactions in 2020 as compared to 2019.
Sub-sales usually happens when the original buyer is caught in a difficult financial situation, for whatever reason, after committing to the purchase. Some could be facing a job loss or a hefty pay cut, due the on-going pandemic and find that he is unable to service the monthly instalment or the upfront payments.
Unlike before the additonal cooling measures were implemented, there were a large number of sub-sales as many speculators would buy a unit at the launch and flip it for a tidy profit.
What About Resale?
When you buy a completed unit from another owner, it is considered a resale.
As long as the owner have surpass the holding period, there is no need to pay SSD. Because the unit is completed, you can view the property, negotiate on the price and once transacted, you can move into the property.
Should You Buy A Sub-Sale OR Resale Property?
Buying a sub-sale would mean having to wait for the project to be completed, but you are getting a brand new unit.
In other words you are buying first hand!
If you do not have the luxury of waiting for the project to be completed, the buying resale would be your best bet.
Once the price is agreed with the seller, you can move in almost immediately but it is not brand new and some renovations might be required.
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