PropNex calls for ABSD rule tweaks for upgraders, more OCR land in Budget 2023

Jan 12, 2023

MAINBOARD-LISTED real estate agency PropNex : OYY 0% has urged for the additional buyer’s stamp duty (ABSD) remission treatment for married couples upgrading from HDB flats to private homes to be aligned with that of those upgrading to new executive condominiums (ECs) from developers.

As part of its wish list for the Singapore Budget 2023 released on Thursday (Jan 12), PropNex suggested “some form of contractual undertaking” to ensure that the private home buyers sell their HDB flats within six months from collecting keys to their new home. 

Currently, married couples who upgrade from an HDB flat to a private home will have to pay ABSD upfront, within 14 days of signing the sales and purchase agreement. They can apply for an ABSD remission if they sell the HDB flat within six months after the date of purchase or temporary occupation permit (TOP) or certificate of statutory completion, whichever is applicable.

This upfront ABSD payment is “the biggest hurdle” for families who wish to upgrade from their HDB flat to a private home, PropNex said. 

The agency noted that some families choose to sell their HDB flat first before purchasing a private home to avoid paying the ABSD, which is at 17 per cent for Singaporeans who are eyeing a second residential property. 

Subsequently, many of these families rent in the interim, which PropNex said not only causes inconvenience but could result in them incurring unnecessary expenses to relocate to the temporary accommodation.

Alternatively, some HDB upgraders have purchased new ECs from developers. ECs are appealing to HDB households as the upgraders buying them are currently not required to fork out the large ABSD payment upfront and are required to sell their flat six months after their new EC receives TOP. 

However, many couples may not be eligible to buy ECs as they have exceeded the monthly household income ceiling of S$16,000, PropNex said. In addition, the stock of new ECs in the market is also limited and 70 per cent of EC units are set aside for first-timer buyers during the initial project launch, with fewer options left for upgraders.

At the same time, PropNex also hopes that the government will consider injecting more Government Land Sales sites to the Outside Central Region (OCR) in the second half of 2023, especially since the OCR serves a wider pool of demand – from first-time home buyers and HDB upgraders.

Although the slate in the first half of the year offers a stepped up supply of 4,090 private residential units, including EC, on the Confirmed List, the number of units in the OCR has fallen to 2,120 units. 

Ismail Gafoor, executive chairman and chief executive of PropNex, observed an imbalance in the demand for and supply of new private homes in the OCR. The number of unsold uncompleted private homes in this region as at the third quarter of last year was at a record low of 3,417 units excluding ECs. 

Meanwhile, the average annual new home sales in the OCR from 2017 to 2021 was about 4,900 units excluding ECs. 

“By that measure, the remaining stock would be sold out in less than a year. Given the low unsold stock, there’s pent-up demand for new homes in the OCR which will likely keep prices firm,” Gafoor said. 

“We believe the injection of more OCR residential supply will play a part in keeping mass market home prices stable in the future,” he added.

PropNex is also hoping that the government will offer more clarity on when the 15-month wait-out period from the sale of private property will be reviewed, as well as offer an update in the second half of 2023 on the initial impact of the wait-out period on moderating resale flat demand and prices. The wait-out period was introduced last September as part of a package of cooling measures and restricts private home owners from purchasing an unsubsidised HDB resale flat.

There is also a recommendation to shorten the waiting time for Build-to-Order (BTO) flats to three years to help young couples in planning their marriage and in starting a family. While HDB has brought forward the construction and building of selected BTO projects ahead of their sales launch since 2017, the waiting times for many standard BTO projects are still lengthy, estimated at more than four years.

Gafoor said that the recent cooling measures have acted like “speed bumps” to slow the pace of price growth in both the private residential and HDB resale markets in the fourth quarter of 2022, as indicated by the flash estimates released earlier this month.

“In addition, the government has also ramped up housing supply to meet healthy demand for homes. These moves will help to ensure that the housing market remains sustainable, even as we look to navigate continued uncertainties – weaker global growth, geopolitical tensions, and inflation – this year,” he added.