HOUSING developers will enjoy a lower Additional Buyer’s Stamp Duty (ABSD) clawback rate for developments that have sold at least 90 per cent of units within their prescribed sale timeline, said Finance Minister Lawrence Wong in his Budget speech on Friday (Feb 16).

Currently, housing developers are granted an ABSD remission of 35 per cent out of the 40 per cent ABSD, provided they sell all the units in their development within a prescribed sale timeline. The remaining 5 per cent is non-remittable. 

Here are some quick takes from analysts and observers on the latest announcement:

City Developments Limited spokesperson:

• “We welcome the positive news that housing developers will be granted some flexibility under the ABSD regime. It signals the government’s efforts towards addressing some of the challenges faced by developers in meeting ABSD timeline requirements under the current market landscape.”

• “Although the policy adjustment may not be significant in scope as the ABSD clawback is still calculated based on the land acquisition cost and not on the unsold units, it provides some relief to the property sector and we appreciate the gesture.”

ERA Singapore chief executive Marcus Chu:

• “Housing developers will have more flexibility with the ABSD clawback if they sell at least 90 per cent of their units. Developers will pay the full 25 or 35 per cent, depending on when the site is purchased, as long as there are unsold units.”

• “The recent GLS biddings drew more muted responses as developers are cautious amid the elevated interest rate environment and slower new home sales rates.”

• “Lowering the ABSD clawback based on the proportion of units sold will give developers some respite and confidence to continue to bid for upcoming GLS sites, allowing them more time to sell their balance units.”

• “Some of the larger units, due to their higher price quantum, typically take a longer time to sell. For a 700-unit development, 1 per cent unsold units equals seven units. But the ABSD savings could be pretty substantial. To illustrate, a S$1 billion site that has 1 per cent of its units unsold can now save up to S$100 million.”

PropNex Realty chief executive Ismail Gafoor:

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• “We think that while it offers some flexibility, the rate of reduction is not very significant, and housing developers will still be motivated to try to sell all of the units within the five-year timeframe.”

• “For instance, if the developer managed to sell 99 per cent of the units, it is still subject to a 25 per cent ABSD remission clawback with interest (lowered from 35 per cent) – this is still a hefty sum and a heavy burden on developers.”

• “Hypothetically, if the developer had bought a site for S$400 million after Dec 16, 2021, and the project has 500 units, failing to sell the last 1 per cent of the units (five units) within the five-year ABSD deadline would mean an ABSD remission clawback of S$100 million plus interest based on an ABSD rate of 25 per cent – compared with S$140 million plus interest under an ABSD rate of 35 per cent – which is still a substantial amount.”

Mogul.sg chief research officer Nicholas Mak:

• “Although it would be more helpful if the government were to permanently lengthen the deadline for larger residential developments from the current five years because larger developments require more time to sell all the units, the current adjustment to the ABSD regime could still help some developers, and it is better than nothing.”

• “For some private housing projects, especially the larger ones, it is often more challenging, and hence, requires more time, to sell the last 10 per cent of the remaining units in the project. These remaining units could be the bigger and more expensive ones, such as penthouses or those with less attractive orientations or on lower floor levels.”

• “A possible reason to introduce this ABSD concession is that the government could be expecting the private housing sales to slow down this year.”

• “Overall, this ABSD concession is not going to affect property prices or demand.”

OrangeTee Group chief researcher and strategist Christine Sun:

• “Developers are finding it increasingly difficult to sell their entire residential projects in a timely manner due to higher interest rates and cooling measures in place. New home sales have already slowed down in December 2023 and January this year.”

• “The market is expected to slow down further amid growing macroeconomic uncertainties and subdued employment prospects. With the new changes, developers now have more time to plan for other marketing activities or explore alternative ways to clear their unsold units.”

• “It is unlikely that this change will have a significant impact as most properties are fully sold by the ABSD timeline. Most developers still prefer to sell out their projects as soon as possible to reduce their holding costs. Nevertheless, this change could still benefit the luxury segment more as it has been hit hardest by the ABSD increases, especially the 60 per cent ABSD for foreign buyers and investors.”

Huttons senior director of data analytics Lee Sze Teck:

• “The reduction in ABSD clawback rate is a welcomed move. The ABSD is onerous on developers as they are penalised for failing to sell all their units within a prescribed timeline, which is set at five years. This is very different from the Qualifying Certificate scheme, where developers pay only 8 per cent of the land price to extend the time period by one year.”

• “Nevertheless, this will lower the risks to developers. This may result in a stable market, as developers do not need to make aggressive adjustments to prices to sell out the project.”

• “This change is unlikely to result in developers bidding higher for land. Macro-prudential measures like loan-to-value and total debt servicing ratios will cap buyers’ ability to pay higher (prices) for a private home. Hence, developers will bid for land, which will enable them to price homes within an affordable and acceptable price range to buyers.”

Savills Singapore executive director of research and consultancy Alan Cheong:

• “The tiered clawback of developers’ ABSD rates is basically a symbolic olive branch handed out to developers.”

• “As developers have an aversion to paying extra for their land, they will still hold to the existing marketing play book of selling as many as they can upfront. Nevertheless, this will still give some balm to sooth developers’ anxiety.”

Deloitte Singapore real estate sector tax leader Chai Sook Peng:

• “The home-buying demand has been weak due to tentative buying sentiments amid elevated interest rates and uncertain economic conditions. Lowering the ABSD clawback for housing developers which sell at least 90 per cent of the units in their development within a prescribed sale time provides timely support to help developers cushion the impact from a slower property market.”

KPMG Singapore head of financial services, tax Alan Lau:

• “The government’s move to rationalise the property tax bands and provide ABSD reliefs for developers is designed to address rising property annual values and refine the existing ABSD regime to avoid any unintended consequences for largely sold residential projects. This is certainly a move in the right direction and should not be wrongly read as a roll-back of the government’s property cooling measures.”

For more of BT’s Budget 2024 coverage, go to bt.sg/budget24