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REDAS Calls For Review Of Cooling Measures

Much have been said and reported about the July 2018 cooling measures.  With effect from 6 July 2018, housing developers are subject to 30% Additional Buyer Stamp Duty (ABSD) of which, 25% ABSD may be remitted subject to certain conditions which include the completion of the project and the sale of all units in five years. The other 5 per cent ABSD is non-remittable and remains payable at the upfront upon the acquisition of the site.

The announcement had caught developers by surprise and dampened property transactions and collective sales. The Singapore financial market and property stocks were also impacted.

The Real Estate Developers’ Association of Singapore (REDAS) is making a new call to the Government to review the ABSD rates to avoid the “land grab” situation in the last two years. REDAS President Chia Ngiang Hong made this call at a Chinese New Year event where Singapore’s Finance Minister Heng Swee Keat attended as the guest of honour.

Mr Chia said that, with a subdued outlook for the market and a 15 per cent hike in ABSD to 30 per cent for land acquisition, developers' appetite for land in Singapore is likely to be severely curtailed as evidenced by recent en bloc tenders where many closed without any bids.

REDAS also felt that the need for developers to sell their units within five years to avoid hefty ABSD rates has pushed “all developers to exhaust their inventory at around the same time”.This could partly account for the land price escalation in 2017 and 2018 because “everyone basically ran out of inventory at the same time”, said Mr Chia.

While excessive land-banking should be discouraged, REDAS felt that some flexibility in the time frame to sell projects can help avoid a bundling of the project development cycle which results in many developers rushing to replenish their land bank. Mr Chia said that there could be a repeat of the 2017 to 2018 “land grab” situation in four to five years’ time if the ABSD is not reviewed, and that could lead to higher prices for consumers.

He also called on the Government to review the loan-to-value limits for first-time property buyers. These refer to loans where buyers borrow against the value of their properties. Loan-to-value limits were tightened by 5 percentage points at the same time as the higher ABSD rates were announced. This does not apply to loans granted by the Housing and Development Board (HDB). Another way the Government can help HDB home owners looking to upgrade to a private property was to review the\ upfront payment of ABSD. This would help the HDB owners in their cash flow planning.

Speaking at the same Chinese New Year event, Mr Heng did not directly respond to Mr Chia’s comments, but said that “bitter medicine” for the property sector is unavoidable at times. He also pointed out that the need to focus on the long term is going to be greater for the property sector, adding that "the Concept Plan set a very important way to develop our little red dot".

In his speech, Mr Heng also stated that the challenge of the real estate industry was “…what are the most significant innovation in real estate that we can think of, where can we push the frontiers of real estate because it's no longer just about physical space, it's about what we use that space for and how we can maximise value in that space."