Tag Archives: TDSR

Govt may ease property measures this year, says CDL’s Kwek

The government may ease some of its property cooling measures this year in light of the sizeable upcoming supply, according to comments made by Kwek Leng Beng, Executive Chairman of City Developments Limited (CDL), and reported by Bloomberg and TODAYonline.

“Developers hope that the government presses the button sooner than later,” he said after announcing the company’s latest financial results on Thursday (25 Feb).

“I would think that they would do something this year. That’s my speculation, especially this year, when you have a lot of mid-end and low-end homes coming up. I suspect it will be the abolishing the Additional Buyer’s Stamp Duty (ABSD).” Another existing measure is the Total Debt Servicing Ratio (TDSR) framework.

The TDSR limits mortgage repayments to 60 percent of a borrower’s monthly income, while ABSD are stamp duties that individuals have to pay based on their residency status and the number of properties owned. The ABSD rules also impose a fine of 10 to 15 percent of the land cost if developers fail to build, complete and dispose all units within five years of acquiring the land.

With the aforementioned curbs and heftier real estate taxes, the government has been able bring down the high cost of housing.

In Q4 2015, prices of private homes fell by 8.4 percent from their peak in Q3 2013, while the number of transactions plummeted by around 50 percent from three years ago.

However, the overall drop in home prices following nine straight quarters of declines is still short of the over 60 percent surge seen in the aftermath of the 2008 Global Financial Crisis.

On Wednesday, National Development Minister Lawrence Wong also said it isn’t the time yet to relax the cooling measures.

Looking ahead, Kwek believes that prices of mid- and low-end homes could fall further this year, while weakness in the high-end segment will likely persist.

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.”