Tag Archives: Developers

Developers call for cooling measures review amid hefty $100m charges

Real Estate Developers’ Association of Singapore (Redas) President Augustine Tan has urged the government to review the property cooling measures as developers face potential charges of $100 million for unsold private residential units, reported TODAYonline.

“The real estate market is reeling from the compounding effects of an oversupply situation, rising vacancy rates, weak demand and increasing interest rates,” said Tan at the association’s Spring Festival Lunch.

“There is therefore an urgent need for action to bring stability and ensure a soft landing to prevent further damage to the fragile economy,” he added, citing turmoil in financial markets, Singapore’s own restructuring journey and weak global growth as risks to the economy.

As at end-2015, there is a supply of more than 60,000 units in the pipeline and a record 25,000 vacant units, noted Tan, who also serves as Far East Organization’s Executive Director for Property Sales.

Aside from the mounting supply, developers also face pressures from measures like the Qualifying Certificate (QC) and Additional Buyer’s Stamp Duty (ABSD).

First introduced in 2011 and revised in 2013, the ABSD is a tax imposed on both developers and individual property buyers.

The amount paid by individuals depends on the number of properties they own and residency status, while developers have to pay 10 to 15 percent of the land cost unless they complete and sell all the units within five years from the date of land acquisition.

Developers with foreign holdings will also have to meet the QC rules, in which they are required to complete the project in five years of acquiring the land and sell all units within the next two years. Those who need more time to meet the requirements can pay extension charges that are pro-rated according to the proportion of unsold units. Land sold on Sentosa Cove and through the Government Land Sales (GLS) Programme do not need QC.

In 2016, Tan estimates that around 700 unsold residential units across 13 developments will be affected by the QC, with charges amounting to almost $100 million.

Moreover, the ABSD remission clawback for projects with unsold units will kick in by end-2016, putting further pressure on prices. He revealed that around 6,000 unsold units in 33 developments will be affected by the ABSD remission clawback in 2017 and 2018.

As a result, several developers have been lobbying for the removal of the ABSD, arguing that the Total Debt Servicing Ratio (TDSR) framework will help ensure that buyers stay prudent with their acquisitions even without the ABSD.

“Since 2009, the successive introduction of the government’s property measures has cooled the market, bringing down transactions and prices. With safeguards in place such as the continuation of the prudent TDSR measures together with the current economic situation, property prices will be kept in check,” said Tan.

“It is therefore timely to consider a calibration of the cooling measures.”

Developers offering fewer indirect discounts

Once popular with private homebuyers, indirect discounts like furniture vouchers and cash rebates have become less prevalent, reported The Business Times.

In fact, only three percent of some 3,850 non-landed private homes sold by developers since 25 May had indirect discounts, with an average discount of 1.7 percent of the transacted price. The units were from 18 of the 132 projects that saw sales since 25 May, according to an analysis of developers’ new sales data.

Notably, legislative amendments requiring developers to submit detailed transaction data to the Controller of Housing every week took effect on 25 May this year. The said data is then published by the Urban Redevelopment Authority (URA).

Aside from the transacted prices of units, developers are also required to declare the value of benefits given to buyers, such as rental guarantees, cash rebates, furniture vouchers, and the absorption of legal fees or stamp duties, which would otherwise conceal the actual value of the units sold.

“There was a season when discounts, rebates and other perks were dangled as carrots to attract buyers. However, these may be relatively passé today,” said Tan Tee Khoon, managing director of KF Property Network, a Knight Frank subsidiary.

This is because developers may find it pointless to give out cash rebates now that such data has become public information, said Savills research head Alan Cheong., As such, developers who need to urgently clear their stock in order to meet the Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate (QC) requirements are more likely to lower prices directly.

The QC rule requires developers to pay extension fees for condominium units sold within two years of the project’s completion. Since December 2011, housing developers were also required to develop residential sites acquired and sell all the units within five years to qualify for an ABSD remission on land cost.

Projects offering indirect discounts since May to qualify for the remission of ABSD include The Venue Residences, Jewel @ Buangkok, Pollen & Bleu and The Glades. Those unaffected by ABSD or QC include Keppel Land’s Corals at Keppel Bay, City Developments Ltd’s D’Nest and Coco Palms, and Far East Organization’s The Seawind.