Nowhere to hide: How UOB’s lawsuit against Lippo will change the property market landscape

Incentive schemes won’t work anymore.

Luring reluctant property buyers with juicy incentives may have worked in the past, but UOB’s landmark lawsuit against Lippo Group is bound to irrevocably alter the property market landscape.

According to Nomura, it will not be a surprise if banks decide to move against other developers especially if more home owners were to default on their mortgages as a result of higher interest rates.

Like Lippo, many developers have adopted incentive schemes such as furniture rebates, rental guarantees and stamp duty absorption over the past few years. Such incentives make no difference to profit margins but it help maintain a façade that headline prices are still holding up.

“However, with the Marina Collection case now brought to court and the URA’s latest move to publish net prices from this year, it seems to us it is increasingly difficult (and meaningless) for developers to hide behind such incentive schemes. We reiterate our call for developers to be more proactive in lowering headline prices in 2015F, which should in turn 1) stimulate higher sales volumes, especially for projects with an average price point of SGD2mn/unit and lower, and 2) prepare the ground for the government to ease policy towards the end of 2015F,” stated Nomura.