Developers' ability to take on new projects constrained by property cooling measures, says Redas

SINGAPORE - Private developers' ability to take on new projects will be constrained by the latest round of property cooling measures, as the construction sector continues to grapple with manpower shortages, rising material costs and cash flow issues caused by the Covid-19 pandemic.

The developers are also concerned they may not be able to sell all the units in their existing projects within the stipulated timeline, as sales are expected to slow down due to the increase in additional buyer's stamp duty (ABSD) rates, said Mr Chia Ngiang Hong, president of the Real Estate Developers' Association of Singapore (Redas), at an event on Wednesday (Feb 9).

Under the new set of measures, which kicked in on Dec 16 last year, developers purchasing land for any residential property have to pay a higher land ABSD rate of 35 per cent, up from the previous 25 per cent, on top of a non-remittable component of 5 per cent.

Developers will have to fork out the 35 per cent ABSD if they fail to complete and sell all units within five years

Measures imposed on buyers include the raising of ABSD that must be paid for purchases of additional properties, tightening of the total debt servicing ratio (TDSR) for borrowers, and lowering of the loan-to-value (LTV) limits for Housing Board loans.

Mr Chia said the real estate sector had anticipated better times ahead, and many had not expected 2021 to end with another round of property cooling measures, which he described as "tough".

"The quantum of increase in (land) ABSD of 35 per cent is hefty on developers who are already working with thin margins and battling rising construction costs," he said.

"Many Redas members had expressed their disappointment, especially when the property market is just emerging from the challenging Covid-19 situation, and serious vulnerabilities still prevail across industries, in particular the prolonged delay in project completion timeline and pressure to sell out existing projects," said Mr Chia.

The Government has committed to boosting private housing supply through the Government Land Sales programme, starting with a 40 per cent increase in the first half of 2022.

Mr Chia said the association hopes the authorities will extend the sales period for projects acquired before Dec 16, and tweak the formula on land ABSD based on unsold units.

In response, Minister for Culture, Community and Youth Edwin Tong, who attended the event on Wednesday, acknowledged the concerns raised by developers and reiterated that the measures are intended to "stabilise the property market and ensure housing affordability".

"The timing and scope of the measures were carefully considered after monitoring the market for several quarters. Despite the near-term uncertainties posed by Covid-19, the property market remained buoyant," said Mr Tong, who is also Second Minister for Law.

Private housing prices have gone up by about 9 per cent and HDB resale prices by about 15 per cent since the first quarter of 2020.

"We decided to act given clear upward market momentum and the increasing risk of property prices running ahead of market fundamentals and impacting housing affordability," said Mr Tong.

He noted that while most construction work has resumed in Singapore, challenges such as the slower inflow of migrant workers due to border controls and supply chain disruptions remain.

A $1.36 billion construction support package, among other temporary relief measures, has been introduced to tide contractors and developers through the last two years, said Mr Tong.

"As we shift towards living with Covid-19 and the sector continues to recover, firms will be better placed to adapt, partnering each other even more closely for long-term sustainability and resilience," he added.