Almost 1,400 unsold condo units face a ABSD deadline in 2023
Anaylsts foresee developers to hold firm and may adopt alternative approaches to save on the hefty sum incurred.
Close to 30 private residential projects in Singapore are facing a major sales deadline in 2023 when property developers must offload all unsold condo units or face a hefty sum of stamp duty payment in the tens of millions of Singapore dollars (S$).
As of mid-Feb 2023, approximately 1,400 units throughout these 5-year-old projects were left unsold.
The majority of these projects, totalling approximately 990 residential units, are located in the desirable Core Central Area (CCR).
The city fringe, also known as Rest of Central Region (RCR), accounts for 23.6 percent of unsold units, with the suburbs or Outside Central Region (OCR) accounting for the remaining 7.3 percent.
Cuscaden Reserve, located in District 10 appears to be the most vulnerable, with 182 units left unsold; The Landmark along Chin Swee Road, left with 173 unsold units; and Leedon Green in District 10 with 108 units still on the shelf.
The estimates are compiled based on transaction data by real estate agencies ERA Realty and Huttons.
The Atelier, with 95 residential units still unsold, and also Pullman Residences, left with 113 residential units, are 2 other developments (both located within the Newton precinct) with more than 30 percent of total units remaining unsold.
Real estate developers are liable for an Additional Buyer’s Stamp Duty (ABSD) rate of 40 percent on the acquisition price of the land in residential projects with 5 or more units in total, of which part of it (35 percent) is remittable – provided that the property developer manages to sell all of its units within 5 years.
Otherwise, the ABSD must be paid in full, plus interest.
The ABSD payable for sites bought between the period of Jul 2018 and Dec 2021 is 25 percent, with a 5 percent component that is non-remittable. Land purchased before July 2018 is subjected to a 15 percent rate.
As part of the Singapore government’s temporary relief measures during the COVID-19 pandemic, developers were also granted a six-month extension for sites acquired before June 2020.
SC Global, together with New World Development and FEC (or Far East Consortium) jointly constructed the 192-unit Cuscaden Reserve, which was launched for sale back in Sep 2019 at a median per square foot (psf) price of S$3,327.
Based on the Urban Redevelopment Authority’s (URA) Realis statistics, the 99-year leasehold luxury residential project has only 10 transactions recorded since Sep 2019.
The most recent transaction was a 3-bedroom apartment (1,163 sq ft) unit in June 2022, sold for S$4.5 million (S$3,830 psf).
The Landmark was officially launched for sale in Nov 2020, with an average psf price of S$2,250.
The 396-unit project with a 99-year leasehold tenure is being developed collaboratively by real estate firm ZACD Group, together with SSLE Development (the real estate arm of Sin Soon Lee Group) and MCC Singapore.
The most recent unit sold was on 10 Feb 2023. It was a 517 sq ft unit for S$1.4 million (S$2,646 psf).
In January 2020, Yanlord Land and MCL Land launched the Leedon Green (638 units in total) at a median per square foot price of S$2,785.
The most recent unit transacted at the freehold property was a 2-Bedroom unit (710 sq ft) on February 12, 2023, for S$2 million (S$2,869 psf).
ERA Realty has noted that developers will have a greater motivation to offload all of their residential units before the stipulated ABSD deadline, if they are subjected to a potentially higher ABSD rate or if there are more units in the project left unsold.
This is often accomplished by offering discounts on the balance units and paying realtors a higher fee to seal purchases, ERA explained.
However, it’s being reported that some affected developers sounded confident in selling all residential units in their new launch projects before the ABSD deadline.
If there are unsold condo units by the 3rd quarter of 2023, City Developments Ltd (CDL) will be subjected to an ABSD rate of 15 percent with interest on 2 of its projects: Haus on Handy at Dhoby Ghaut and Amber Park in Katong.
According to a CDL, it’s likely that the stipulated ABSD deadline won’t be a problem for them.
Presently, Haus on Handy has already sold 92 percent of its units, with 15 units remaining; Amber Park condominium is 99 percent sold, with only 6 units remaining.
As of February 2023, 20 to 30 units remained unsold at Frasers Property’s luxury residential project Riviere on Jiak Kim Street. It has 455 residential units in total.
According to reports, discounts being offered range between S$8,000 – S$15,000 at Riviere, almost similar to the sum to be paid in a higher marginal buyer’s stamp duty rate that was announced during Budget 2023.
Similarly, Frasers Property is certain that the high-end project will be fully sold before its ABSD deadline in June 2023 .
Riviere was launched in May 2019 with pricing that starts from S$2,580 psf and has sold 95 percent of its total units at an average psf price of S$2,808.
On February 10, it sold a 1,711-square-foot apartment for S$5.1 million (S$2,992 per square foot).
Riviere was, in fact, one of the top-selling new developments in January 2023, with 13 apartments sold at an average price of S$3,087 per square foot.
Lee Sze Teck, senior research director at Huttons, emphasised that real estate developers who are facing a deadline may hold back on cutting prices.
“Since most property developers are publicly traded, shareholders may criticise the decision, making early buyers upset,” Lee explained.
Instead, developers may choose to sell the balance units to a real estate fund, which could lease them for recurring revenue or sell them for profit in future, he said.
According to Edmund Tie’s Lam, developers may also utilise a holding company or entity to purchase the remaining apartments.
He said that forking out the ABSD for these deals would be “less punishing” than forking out the 15 percent ABSD based on the price of the land when acquired.
He remarked that for new launches with a lower take-up rate, the property developer may just find it more cost-effective to pay the ABSD amount based on the price paid when the land was acquired.
“In this manner, the developer will be free to keep the apartments and try to sell them off when the real estate market improves.”
The majority of unsold condo units are within the CCR, reflecting the region’s reliance on demand from foreigners, according to ERA.
While Singaporeans continue to make up the bulk of purchasers (70 percent), he claims this is substantially lower compared to other areas, where Singaporeans make up 85 to 90 percent of purchases. During the COVID-19 pandemic, border restrictions inevitably slowed sales in the CCR.
According to Savills, several high-end projects are only focused on attracting wealthy individuals and affluent homebuyers who rarely buy a property in Singapore.
It added that the ABSD deadline payment is not an issue for developers and it’s just a matter of time before they find a buyer.
From the implementation of the ABSD in 2011 to the end of 2017, property developers reportedly paid the government a whopping sum of S$380 million in charges and fees for failure to sell off every unit in their residential projects by specified deadlines, including S$200 million in ABSD costs.