New Reporter
19-02-24, 10:27
Budget 2024: ABSD concessions an ‘olive branch’ but won’t offer much relief to developers
Feb 16, 2024
Additional Buyer’s Stamp Duty (ABSD) clawback rate lowered for developers who sell at least 90 per cent of units within the prescribed timeline
Single Singaporeans aged 55 and above now able to claim ABSD refund when they purchase a lower-value replacement private property
REVISIONS to the Additional Buyer’s Stamp Duty (ABSD) regime for land are a signal that the government acknowledges the challenges property developers face in today’s market, but will not go far in lowering costs or offering relief, market watchers said.
On Friday (Feb 16), Finance Minister Lawrence Wong announced changes that would reduce the amount of ABSD that developers have to cough up if they are not able to sell out their residential projects within the prescribed timeline. “Despite their best efforts, the developers sometimes face difficulties in meeting this timelime requirement,” he said.
The ABSD clawback rate for residential projects will be lowered for developers who sell at least 90 per cent of each development within the prescribed timeline.
While the move will provide some relief for housing developers, ABSD penalties remain “very punitive”, the Real Estate Developers’ Association of Singapore (Redas) said on Friday.
Currently, developers acquiring land for residential projects are subject to an ABSD rate of 40 per cent, of which 5 per cent is paid upfront and 35 per cent is remittable if they sell all of the project’s units within the timeline.
With the revision in place, they will pay ABSD ranging from 25 per cent if they are left with 1 per cent of units unsold, to an unchanged 35 per cent if they still have more than 10 per cent of units unsold.
https://i.imgur.com/3p4cWN9.png
Sites acquired between Jul 6, 2018, and Dec 15, 2021, have a 25 per cent remittable component, which reduces to 15 per cent for projects that are 99 per cent sold at the end of the prescribed timeline.
Even if developers sell 99 per cent of their units at the end of the timeline, they now still have to pay up to 25 per cent ABSD, on top of the 5 per cent upfront component, said Desmond Sim, chief executive officer of Edmund Tie.
The revised ABSD remission scheme will apply to all projects on residential land acquired on or after Jul 6, 2018. Developers will need to commence housing development within two years from the date they acquire the site, and complete the project within five years.
A spokesperson from City Developments Ltd (CDL), one of Singapore’s biggest developers, said the new measure signalled the government’s efforts towards addressing some of the challenges developers face in meeting ABSD timeline requirements.
CDL’s statement added: “Although the policy adjustment may not be significant in scope as the ABSD clawback is still calculated based on the land acquisition cost and not on the unsold units, it provides some relief to the property sector, and we appreciate the gesture.”
Redas said: “We hope the government can consider further reducing the proposed clawback rate to alleviate the severe hardship and pressure some projects and developers are facing. The government may also consider other ways to recalibrate the land ABSD formula. (For example), applying the clawback rate to the remaining value of the unsold units, or extending the timeline to sell out the remaining units once the 90 per cent sale threshold is achieved.”
Developers face a “multitude of challenges”, said Chia Siew Chuin, JLL’s head of residential research, including escalating development costs, reduced saleable floor area, a sluggish economic climate, and softer home sales demand due to market cooling measures, increased interest rates and inflation.
They will “remain guarded, selective and strategic in their land acquisition activities”, she added.
Nevertheless, the tiered clawback is a “symbolic olive branch handed out to developers” which will soothe their anxiety, said Alan Cheong, executive director of research at Savills Singapore.
Edmund Tie’s Sim said: “The units that are hardest to move are usually those priced at larger quantums and located in the Core Central Region, which foreign buyers prefer. But the 60 per cent ABSD these buyers pay still presents a barrier. The new measure reduces the cost developers face, but it will not improve buying sentiment.”
Tricia Song, CBRE’s head of research for Singapore and South-east Asia, noted that to clear the last few units, developers often have to “offer excessive discounts or dangle abnormally high commissions”.
“As a result, larger sites with attractive locations may not automatically translate to high bids, as developers have to build in higher contingency costs. The lower ABSD clawback rate may encourage more competitive bids for attractive land sites in the future,” she said.
ABSD refund for Singapore seniors “right-sizing” to lower-value property
On Friday, Minister Wong also announced that single Singaporeans aged 55 and above will be able to claim a refund of ABSD when they purchase a lower-value replacement private property.
The move comes to better support seniors who wish to right-size, he said. These seniors must sell their first residential property within six months after the date of purchase of the replacement property.
The ABSD concession will help single seniors unlock monies from their existing property to support their retirement, said Marcus Chu, CEO of ERA Singapore.
He added: “However, those who are unable to foot the 20 per cent ABSD first will still have to sell their existing property before buying. For a S$1.2 million property, the ABSD is S$240,000.”
Christine Sun, OrangeTee Group’s chief researcher and strategist, expects this measure to have a “limited impact” on the private residential market. However, smaller, older resale properties which were less attractive in the past because of their shorter lease and lower potential for capital appreciation may benefit, she said.
https://www.businesstimes.com.sg/property/budget-2024-absd-concessions-olive-branch-wont-offer-much-relief-developers
Feb 16, 2024
Additional Buyer’s Stamp Duty (ABSD) clawback rate lowered for developers who sell at least 90 per cent of units within the prescribed timeline
Single Singaporeans aged 55 and above now able to claim ABSD refund when they purchase a lower-value replacement private property
REVISIONS to the Additional Buyer’s Stamp Duty (ABSD) regime for land are a signal that the government acknowledges the challenges property developers face in today’s market, but will not go far in lowering costs or offering relief, market watchers said.
On Friday (Feb 16), Finance Minister Lawrence Wong announced changes that would reduce the amount of ABSD that developers have to cough up if they are not able to sell out their residential projects within the prescribed timeline. “Despite their best efforts, the developers sometimes face difficulties in meeting this timelime requirement,” he said.
The ABSD clawback rate for residential projects will be lowered for developers who sell at least 90 per cent of each development within the prescribed timeline.
While the move will provide some relief for housing developers, ABSD penalties remain “very punitive”, the Real Estate Developers’ Association of Singapore (Redas) said on Friday.
Currently, developers acquiring land for residential projects are subject to an ABSD rate of 40 per cent, of which 5 per cent is paid upfront and 35 per cent is remittable if they sell all of the project’s units within the timeline.
With the revision in place, they will pay ABSD ranging from 25 per cent if they are left with 1 per cent of units unsold, to an unchanged 35 per cent if they still have more than 10 per cent of units unsold.
https://i.imgur.com/3p4cWN9.png
Sites acquired between Jul 6, 2018, and Dec 15, 2021, have a 25 per cent remittable component, which reduces to 15 per cent for projects that are 99 per cent sold at the end of the prescribed timeline.
Even if developers sell 99 per cent of their units at the end of the timeline, they now still have to pay up to 25 per cent ABSD, on top of the 5 per cent upfront component, said Desmond Sim, chief executive officer of Edmund Tie.
The revised ABSD remission scheme will apply to all projects on residential land acquired on or after Jul 6, 2018. Developers will need to commence housing development within two years from the date they acquire the site, and complete the project within five years.
A spokesperson from City Developments Ltd (CDL), one of Singapore’s biggest developers, said the new measure signalled the government’s efforts towards addressing some of the challenges developers face in meeting ABSD timeline requirements.
CDL’s statement added: “Although the policy adjustment may not be significant in scope as the ABSD clawback is still calculated based on the land acquisition cost and not on the unsold units, it provides some relief to the property sector, and we appreciate the gesture.”
Redas said: “We hope the government can consider further reducing the proposed clawback rate to alleviate the severe hardship and pressure some projects and developers are facing. The government may also consider other ways to recalibrate the land ABSD formula. (For example), applying the clawback rate to the remaining value of the unsold units, or extending the timeline to sell out the remaining units once the 90 per cent sale threshold is achieved.”
Developers face a “multitude of challenges”, said Chia Siew Chuin, JLL’s head of residential research, including escalating development costs, reduced saleable floor area, a sluggish economic climate, and softer home sales demand due to market cooling measures, increased interest rates and inflation.
They will “remain guarded, selective and strategic in their land acquisition activities”, she added.
Nevertheless, the tiered clawback is a “symbolic olive branch handed out to developers” which will soothe their anxiety, said Alan Cheong, executive director of research at Savills Singapore.
Edmund Tie’s Sim said: “The units that are hardest to move are usually those priced at larger quantums and located in the Core Central Region, which foreign buyers prefer. But the 60 per cent ABSD these buyers pay still presents a barrier. The new measure reduces the cost developers face, but it will not improve buying sentiment.”
Tricia Song, CBRE’s head of research for Singapore and South-east Asia, noted that to clear the last few units, developers often have to “offer excessive discounts or dangle abnormally high commissions”.
“As a result, larger sites with attractive locations may not automatically translate to high bids, as developers have to build in higher contingency costs. The lower ABSD clawback rate may encourage more competitive bids for attractive land sites in the future,” she said.
ABSD refund for Singapore seniors “right-sizing” to lower-value property
On Friday, Minister Wong also announced that single Singaporeans aged 55 and above will be able to claim a refund of ABSD when they purchase a lower-value replacement private property.
The move comes to better support seniors who wish to right-size, he said. These seniors must sell their first residential property within six months after the date of purchase of the replacement property.
The ABSD concession will help single seniors unlock monies from their existing property to support their retirement, said Marcus Chu, CEO of ERA Singapore.
He added: “However, those who are unable to foot the 20 per cent ABSD first will still have to sell their existing property before buying. For a S$1.2 million property, the ABSD is S$240,000.”
Christine Sun, OrangeTee Group’s chief researcher and strategist, expects this measure to have a “limited impact” on the private residential market. However, smaller, older resale properties which were less attractive in the past because of their shorter lease and lower potential for capital appreciation may benefit, she said.
https://www.businesstimes.com.sg/property/budget-2024-absd-concessions-olive-branch-wont-offer-much-relief-developers