Faced with S$100m bill, developers renew calls for roll-back of property curbs

SINGAPORE — With developers facing potential charges for unsold private residential units that could amount to S$100 million, the Real Estate Developers’ Association of Singapore (REDAS) renewed its call on Thursday (Feb 18) for the Government to review the property cooling measures.

“The real estate market is reeling from the compounding effects of an oversupply situation, rising vacancy rates, weak demand and increasing interest rates,” REDAS president Augustine Tan said 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 weak global growth, turmoil in financial markets and Singapore’s own restructuring journey as risks to the economy.

Mr Tan, who is also the executive director for property sales at Far East Organization, noted that as at the end of last year, there is a supply of more than 60,000 units in the pipeline and a record 26,500 vacant units.

In addition to the building supply, developers also face pressures from measures such as the Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate (QC).

The ABSD, first introduced in 2011 and revised upwards in 2013, is a tax levied on both individual property purchasers and developers.

The amount of ABSD individuals have to pay depends on their residency status and number of properties they already owned, while developers are required to pay 10 to 15 per cent of land cost unless they build, complete and sell all units five years from the date of the land acquisition.

On top of ABSD, developers with foreign holding also have to meet QC rules which stipulate that they must complete construction within five years of buying the land and sell all dwelling units in the next two years. Those who need more time to meet these requirements are required to pay extension charges pro-rated to the proportion of leftover, unsold units. Land sold through the Government Land Sales programme and on Sentosa Cove do not need QC.

In his speech, Mr Tan estimated that some 700 unsold units across 13 developments will be affected by QC in 2016 with charges amounting close to S$100 million.

The ABSD remission clawback for developments with unsold units will also kick in at the end of this year and is likely put further pressure on prices. He said about 6,000 units remain unsold in 33 developments, which will be affected by the ABSD remission clawback in 2017 and 2018.

Several real estate industry players have been lobbying for the removal of the ABSD, which is part of the slew of curbs that have slowed down buying activity in the domestic market.

These players often argue that the Total Debt Servicing Ratio (TDSR) framework will ensure buyers make purchasers within their means even if the ABSD is removed. TDSR limits the amount borrowers can spend on debt repayments to 60 per cent of their gross monthly income.

“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,” Mr Tan said. “It is therefore timely to consider a calibration of the cooling measures.”

Private property prices have fallen 8.4 per cent by the last three months of 2015 since the peak in the third quarter of 2013, data by Urban Redevelopment Authority (URA) showed. However, the nine consecutive quarters of decline is still shy of the more than 60 per cent increase in prices after the Global Financial Crisis.

The Government has repeatedly said the time is not yet right to tinker with the measures. In October, Minister for National Development Lawrence Wong said that even though the market is stabilising, the price adjustments so far had been moderate compared with the price increase in earlier years and the Government did not want to “risk a premature market rebound”.