Tag Archives: ABSD

Property watchers unhappy about lack of goodies in budget

The government has repeatedly emphasized that it’s too early to review the property curbs. 

Some prospective property buyers are unhappy over the lack of any measures in the recently announced budget to help Singapore’s sluggish housing market, reported The Straits Times.

Singaporean businesswoman Leena Ganesan, 41, and her husband who is a permanent resident, were upset that the authorities did not repeal or ease the Additional Buyer’s Stamp Duty (ABSD), as they were considering the purchase of a two-bedroom condo.

“We have put our investment plan on hold now for two years. If we don’t see anything moving in the next one year, we may invest in India instead,” said Ms Ganesan, who lives in a landed cluster home in Bukit Timah, which she purchased for $3.05 million four years ago.

According to experts, if the government had relaxed some of the curbs, people like Ms Ganesan would have been encouraged to invest. This could have boosted transaction levels slightly, which would have some positive spillover effect on other sectors.

“It will have some spin-offs in other areas: contractors, banks, property agents, furniture retailers. If foreigners come to view properties here, then the tourism sector may also benefit,” said Mohamed Ismail, CEO of PropNex.

In addition, a rise in transaction levels would spur developers to divert capital back to Singapore, shared EL Development’s Managing Director Lim Yew Soon.

“The market is slow, so you see investors and developers investing overseas. There is an outflow of funds from Singapore.”

Developers have repeatedly urged the government to ease its property cooling measures, as these have led to a sharp decline in home sales. Annual transaction levels have plunged to about 7,000 units in the past two years compared to 14,948 units in 2013.

Home builders are also struggling to find buyers for many units, which puts pressure on rental prices and negatively affects the earnings of these companies, noted Tan Zhiyong, Managing Director of MCC Land.

In Q4 2015, there were 5,736 private housing units launched but not sold, according to data from the Urban Redevelopment Authority (URA). Overall, there were 23,271 uncompleted units still unsold last year.

During the same quarter, the vacancy rate for such homes also reached 8.1 percent, the highest in 10 years. Furthermore, prices dropped by 3.7 percent in 2015, following a fall of four percent in 2014.

No respite from mounting extension charges for developers

Property developers forked out $24.9 million in extension fees last year for failing to dispose of all the residential units in their developments within the mandated period, reported The Straits Times.

While this is lower than the $29.98 million recorded in 2014, a recent report from Swiss bank Credit Suisse forecasts that extension charges could rise significantly this year.

Based on Qualifying Certificate (QC) rules, overseas developers are required to offload all the units in their private residential projects within two years of receiving the Temporary Occupation Permit (TOP). Otherwise, they must pay extension charges pro-rated to the percentage of remaining units.

The Additional Buyer’s Stamp Duty (ABSD) rules, implemented in December 2011, also stipulate that developers need to build, complete and sell all units within five years of buying the land. If there are any unsold units, they would be penalised with a 10 percent levy, which was subsequently increased to 15 percent for land plots purchased from 12 January 2013.

According to estimates from Credit Suisse, the total QC and ABSD charges could soar to $226 million in 2016 and $1.3 billion next year.

In particular, the jointly developed Nouvel 18 by CDL and Wing Tai could take the biggest hit this year, with charges amounting to $38.2 million if all of its 156 units remain unsold. This is followed by $15.2 million for China Sonangol’s TwentyOne Angullia Park near Orchard Road, and $14.6 million for Wing Tai’s Le Nouvel Ardmore at Ardmore Park.

However, experts feel that the figures reported by Credit Suisse could drop as they only cover unsold units as of 31 December 2015.

“The QC fees estimate is based on the assumption that developers do not sell any more units. That’s unlikely. As they continue to move units, the fees payable will drop.” Likewise for the ABSD charges, said Ku Swee Yong, CEO of Century 21 Singapore.

Wong Xian Yang, OrangeTee’s Senior Manager for Research and Consultancy, reckons that developers with more unsold units may pursue other means of selling their projects instead of just reducing prices. They may consider bulk sales, which is being done for iLiv@Grange.

Property firm Heeton Holdings has been seeking a buyer to purchase the 30-unit condominium. If it fails to secure a deal by October 2016, it will have to pay its second QC extension.