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From late 2011, property developers have to develop all residential site that they buy and then ensure that the units are 100% sold within 5 years. Failing that, developers have to pay ABSD of 10% on the purchase price of the site. For sites bought from 12 Jan 2013, they will have to incur higher ABSD of 15%.
Singapore- DESPITE much industry lobbying for an extension of deadlines for developers to meet the conditions for additional buyer's stamp duty (ABSD) remission on residential sites, it appears that many developers are sanguine about the looming deadlines.
While tight-lipped about their marketing strategies, developers whom BT spoke to are confident that their projects will sell out before the respective ABSD deadlines - without having to resort to massive price cuts.
Apartment prices are starting to be cut as the spectre of the Additional Buyer's Stamp Duty (ABSD) looms over developers.
The possibility of buyers picking up some bargains now all comes down to the date the ABSD was introduced - Dec 8, 2011.
It stipulated that developers had five years to complete a residential project and sell all the units. If not, they must pay ABSD. The rate was initially set at 10 per cent of the purchase price of the site, and was raised to 15 per cent on Jan 12, 2013.
The first five-year deadline comes up at the end of this year.
Sales of Singapore’s high-end properties have been sluggish for a while, and developers faced with a ticking clock on high charges for unsold units may take drastic measures to change that, but probably not price cuts. “Price is not the issue. The issue is there’s no demand,” Derrick Heng, a property analyst at Maybank-Kim Eng, said Tuesday.
It’s not just a matter of sitting on the unsold units while waiting for buyers to return. Developers in Singapore are running out of time: any units still unsold two years after a project’s completion face an “extension charge,” of 8 percent of the proportional land cost for the first year, rising to 16 percent in the second year and 24 percent in the third. It’s a measure aimed at preventing property hoarding by “foreign” developers in the land-starved city-state.
The only way to avoid the charges is if the developer is Singaporean or the company has only Singaporean shareholders and board members. “Penalties for unsold units under the qualification certificate (QC) ruling may persuade some developers to go down the de-listing path,” Heng said in a note late last month.
Developers are pressured by Qualifying Certificate deadline.
According to Colliers International, rents are expected to come under further downward pressure. The increasingly competitive market could prompt landlords to lower their rent expectations in order to secure tenants. As such, rents for luxury apartments are projected to decline by up to 10% for the whole of 2014.
Here's more:
Developers of high-end properties may feel the heat to meet the Qualifying Certificate deadline, which requires developers whose shareholders and directors are not all Singaporeans, to complete construction of the development within five years and to sell all units within two years of obtaining the temporary occupation permit.
Furthermore, owners of high-end homes face higher holding costs with the kicking in of the progressive fiscal system on 1 January 2014.
Particularly for investors who are servicing mortgages, the abolishment of tax concessions for vacant properties, as well as higher taxes for high-end properties on the back of a weak leasing market, could be a push factor, prompting them to put their properties on the market for sale, adding to the pool of new unsold units.
The heightened competition could weigh on prices of high-end/luxury residential properties for which an average decline of between 10% and 15% could be seen in 2014.
Source: Singapore Business Review 23rd April 2014
