Home prices starting to fall as stamp duty deadline nears

Residential buildings stand in Singapore, on Jan 12, 2016.
Residential buildings stand in Singapore, on Jan 12, 2016. PHOTO: BLOOMBERG

Possible bargains for buyers as developers face pressure to sell off units or incur duty

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.

Take The Trilinq, believed to be the first site under these rules to still have many unsold units.

The median price for 20 units sold in the fourth quarter last year was $1,329 per sq ft (psf), down from $1,545 psf for eight units sold when the project was launched in the first quarter of 2013. The project in Clementi had sold 220 of its 755 units as of the end of last year.

At Mon Jervois, which could attract ABSD from early next year, the median price for two units sold in the fourth quarter was $1,852 psf, down from $2,087 psf for nine units sold when it was launched in the second quarter of 2013. The project had sold 46 of 109 units as of the end of last year.

And at Kingsford@Hillview Peak, which could also attract ABSD from early next year, the median price during the quarter was $1,288 psf on 23 units, down from $1,340 psf on 97 units in the second quarter of 2013. The project had moved 242 of 512 units as of the end of last year.

Overall, not too many projects will have to pay ABSD this year as they generally sold well if launched before the second half of 2013, or before the Total Debt Servicing Ratio kicked in, said R'ST Research director Ong Kah Seng.

Developers of projects on Government Land Sales (GLS) sites could fork out as much as $39.6 million this year in ABSD, about $566 million next year, and up to $568 million in 2018, he added.

Developments built on non-GLS sites may incur ABSD from the end of this year and early next year.

Some have stepped up incentives to agents to promote sales, said Mr Desmond Sim, CBRE research head for Singapore and South-east Asia.

Qualifying Certificate (QC) rules, which stipulate that non-Singaporean developers must finish building a residential project within five years of buying the site and sell all units within two years of completion, are another source of pressure. A developer that wants extra time on either deadline must pay extension charges. However, unlike ABSD, the amount is pro-rated according to the number of unsold units.

"As the ABSD charges will kick in first, developers are now given a shorter timeline to clear the units if they want to avoid the hefty fine," said Ms Christine Li, research director at Cushman & Wakefield.

ABSD charges will apply even if there is only one unsold unit, "in stark contrast with QC extension charges, which are more progressive, especially in the first year".

Developers can deal with ABSD by buying the unsold units themselves, provided it is a manageable number, she added. But they will have to pay 15 per cent ABSD on these units, so they must see if the cost saving is indeed worth it.

A version of this article appeared in the print edition of The Straits Times on January 20, 2016, with the headline 'Home prices starting to fall as stamp duty deadline nears'. Print Edition | Subscribe