Let genuine HDB upgraders off the hook for ABSD, PropNex CEO suggests

He says this will tackle the issue of the repeated re-issue of OTPs

Tue, Sep 22, 2020

Siow Li Sen


TO HELP HDB upgraders buy private property, the government could hold off levying the additional buyer's stamp duty within the six-month disposal period, which would address the problem of the repeated re-issue of options to purchase (OTP), Ismail Gafoor, the chief executive of PropNex, has suggested.

He is taking a leaf from a similar dispensation given to HDB upgraders who buy units in executive condominiums (ECs): This group is given six months to dispose of their flats after having collected the key to their new EC home, he said. (ECs are a public-private housing hybrid.)

This flexibility is also extended to HDB home owners who buy Build To Order (BTO) or resale flats.

Buyers of private property, however, have to stump up the 12 per cent additional buyer's stamp duty (ABSD) if they have not sold their existing home. This ABSD applies to Singaporeans buying their second home; they are eligible for a refund if they sell their first home within six months of the completion of the second property (assuming it was uncompleted at the time of purchase). Those buying a completed second property have to sell their first property within six months of the date of purchase of the second property.

Buyers who need more time to sell their existing homes have been asking for OTPs to be reissued. The Urban Redevelopment Authority (URA), aware of this, has tightened its monitoring of private developers, The Business Times reported last month.

The problem with OTPs being re-issued upon their expiry - some buyers have stretched out this OTP period to 18 months - is that the practice distorts the primary private sales market if the buyer aborts the deal, especially when prices fall. (The option validity period is up to five weeks.)

Mr Ismail said the exemption should be offered to "genuine HDB upgraders" looking to buy private property. He further suggested making these buyers give an undertaking to the HDB that their HDB home will be disposed of within six months.

HDB upgraders are a goldmine for private developers who build mass-market homes. HDB homeowners who recently completed their five-year minimum occupation period (MOP) in Built-to-Order Flats are now eligible to sell their units and use the gains to upgrade to condominium homes, said Leonard Tay, Knight Frank Singapore's head of research in a recent report in this newspaper.

The HDB notes that 25,138 flats were sold in 2014, and 23,445 in the year after. Those flats sold in 2014 would have completed their five-year MOP by now; those who got their HDB flat keys in 2015 will complete their MOP some time this year.

In March 2016, it was disclosed in Parliament that existing HDB flat owners who collected the keys to a BTO or resale flat would be given up to six months, from the time they collect their keys, to sell their existing flat. The HDB would also assess requests for more time to do so, based on the merits of each case.

In 2015, HDB received 249 requests for an extension of the six-month period. That year, some 41,400 households bought BTO or resale flats, but the number of homebuyers who still owned a flat when they collected the keys to their new home was 13,700.

So the 249 appeal cases, viewed against a base of 13,700, work out to under 2 per cent, noted the National Development ministry.

"If there are requests for an extension of time, the HDB will be prepared to exercise flexibility on a case-by-case basis," it said.