Singapore property developers will face ‘immense’ pressure from higher ABSD: Redas

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The Business Times – 

THE Real Estate Developers’ Association of Singapore (Redas) said the latest set of cooling measures was “rather unexpected”, considering the property market is just beginning to emerge from the challenging Covid-19 situation.

The quantum of increase in the additional buyer’s stamp duty (ABSD) rates, especially the revised land ABSD of 35 per cent for entities, will also “impose immense additional pressure” on housing developers’ land acquisition, a Redas spokesperson told The Business Times (BT).

Developers need to compress their development, sales and project completion periods as well as land replenishment cycles in order to meet the stringent requirements for ABSD remission, the spokesperson added.

Late Wednesday (Dec 15) night, Singapore authorities introduced a slew of property curbs, which took effect on Thursday (Dec 16). Among the changes was an increase in the ABSD rate to 35 per cent for developers purchasing any residential property, from 25 per cent previously.

In addition to the 35 per cent ABSD rate, which may be remitted, the non-remittable component of 5 per cent remains unchanged.

In response to BT’s queries, Redas noted that significant uncertainties still persist due to the pandemic, and the operating environment remains challenging for many businesses.

The association reiterated its call to the government to differentiate the remission criteria for projects of different sizes, especially given the current challenges in the construction sector to meet project completion timelines.

“The property market should be allowed a bit more time to recover and reach a sustained equilibrium,” the spokesperson said.

Redas also hopes the government will consider giving some leeway in “certain deserving cases”. For instance, some developers that were recently granted the option to purchase (OTP) for development land had been given a longer time to exercise the OTPs, on fulfilment of certain conditions precedent.

“We would like to appeal to the government to consider, on a case-by-case basis, allowing such developers to exercise on the date stipulated in the existing OTP, without amendment,” the spokesperson said. If the period is considered too long, Redas suggested another 3-month extension from Dec 16, 2021, for the fulfilment of the conditions precedent before the revised ABSD rate applies.

Meanwhile, Huttons Asia senior director (research) Lee Sze Teck noted that while the fresh cooling measures are expected to slow down price appreciation in the residential market, there is little pressure on most developers to reduce prices. This is because they usually have little to no difficulty to meet the 5-year ABSD timeline for current projects.

However, moving forward, developers will be more cautious when bidding for land, which will have a trickle-down effect on land acquisition prices and tame the en bloc market, Lee said. With the 35 per cent ABSD rate, developers now face greater risks should they fail to complete and sell all units within the 5-year deadline, he added.

PropNex Realty’s head of research and content Wong Siew Ying said the latest property curbs are expected to slow the real estate market’s growth momentum in 2022.

In particular, high-end home sales will likely slow as investment demand moderates. Wong expects some developers of projects in the core central region to trim average prices by 5 to 8 per cent in 2022 in response to the measures as well as slowing demand from foreign buyers and the ample unsold supply in the region.

Redas noted that it fully supports the government’s efforts to help Singapore citizens and permanent residents purchase their first private residential property.

The association also suggested that the government could consider allowing owner-occupiers who are upgrading from HDB flats to private property for the first time to defer the payment of upfront ABSD until 6 months after the completion of the new home, as in the case of executive condominiums.

Its spokesperson told BT: “Redas is of the view that the existing ABSD and total debt servicing ratio in place since 2013 remain a restraining factor for foreign buyers and Singaporeans.”

The new cooling measures also kicked in days ahead of the original launch dates of at least 2 new projects. Boldtek Holdings previously said that bookings for its 34-unit freehold boutique residence Zyanya, located in Geylang, would commence this Saturday (Dec 18) with indicative prices starting from S$1,590 per square foot (psf). However, BT understands that Zyanya’s launch was rescheduled to Thursday (Dec 16), the day the latest policy changes took effect.

And on Sunday (Dec 19), CK Asset’s 230-unit freehold luxury condominium Perfect Ten in Bukit Timah is slated to go to the market. In view of the cooling measures, the developer is now offering a one-time 5 per cent discount for the launch weekend. It also released the per square foot (psf) prices of 10 units, ranging from S$3,200 to S$3,618 before discount, or about S$3,040 to S$3,437 after the discount is applied.

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