Developer ABSD - Here we go again?

[daheigou999]

https://www.businesstimes.com.sg/real-estate/unsold-condos-and-absd-time-for-review

 

[NiShiZhu]

Coincidentally, reading the same article, might as well copy here for easy reading.

Default Unsold condos and ABSD: Time for review?
Unsold condos and ABSD: Time for review?

Showroom closures, curbs on foreign buyers, labour and supply disruptions, make it hard to meet ABSD deadlines

Wed, Apr 15, 2020

NISHA RAMCHANDANI


FACED with the double whammy of a weakening economy and the ongoing circuit breaker, developers are expected to see slower sales in the near term, with some making the case for an extension to the additional buyer's stamp duty (ABSD) deadline.

The Business Times looked at whether residential projects approaching ABSD in 2020, 2021 and 2022 could be at risk of not meeting their individual deadlines.




Data crunched by real estate consultancy Cushman & Wakefield at BT's request showed that there are 39 unsold units across five private residential projects and 461 unsold units across 15 private residential projects with ABSD deadlines in 2020 and 2021 respectively (as at end February). These numbers suggest that developers generally should be able to sell their units in time.




Meanwhile, the data also showed there are 7,934 unsold units across 45 projects facing ABSD deadline in 2022, with some projects possibly facing pressure in clearing all their units in time, based on the pace of sales thus far.

The ABSD remission deadline was calculated based on sales and purchase agreements signed and reported in the media. Delays, owing to factors such as court cases, may not be reflected in the numbers if they were unreported.




In Singapore, developers are required to develop any residential site they buy, and sell all units in the new project within five years to qualify for upfront remission of ABSD on the land purchase price; if a developer fails to do so, it will have to stump up the 25 per cent ABSD, with interest. Sites acquired before the ABSD hike on 6 July 2018 are subject to a lower ABSD rate of 15 per cent.

Christine Li, Cushman & Wakefield's head of research (Singapore & South-east Asia), said: "Things are still very fluid, but with the extended lockdowns in Singapore and across the globe, and disruptions both on the supply and demand fronts, it is hard to predict when things will normalise."




While household balance sheets are stronger today compared to past recessions, a sharp and deep global recession would hurt the economy and average households. As such, affordability could be an issue impacting the pace of sales for developer projects, especially if there are job losses or wage cuts, she said.

Developers have had to close sales galleries due to the circuit breaker in place until May 4, while border closures mean that foreign buyers are unable to come to Singapore's shores.




The severity of the impact on new homes sales will ultimately depend on how prolonged the Covid-19 outbreak is, analysts said.

Ong Teck Hui, senior director (research & consultancy) at JLL Singapore, said: "Developers face the dual challenge of weaker buyer sentiments due to an expected recession as well as the impediment to sales from the circuit breaker to contain the spread of Covid-19. As showflats are the marketing backbone for projects, sales progress is expected to be significantly impeded."

Suspended marketing activities have resulted in a shortened window of sales before ABSD deadlines, he pointed out, adding that projects which have a moderate number of unsold units as well as an ABSD deadline of 2021 will be under greater pressure.

On the other hand, Mr Ong reckons projects with ABSD deadlines in 2022 "may still have a chance to ride out the crisis" given their longer sales runway, as long as the outbreak is not a prolonged one.

Another analyst, who declined to be named, thinks there is still room for a rebound as long as the Covid-19 outbreak is not protracted. "If things recover within six to nine months, there will be pent up demand from buyers who aren't too badly affected."

But if the outbreak worsens, there is a case to be made for the authorities to extend the current ABSD deadline, Ms Li suggested. She said: "The point is not only to provide much needed relief for developers, but to cushion the impact on the property sector. As it is, the current ABSD rule is too blunt a tool, as it does not differentiate the larger projects of hundreds or even thousands of units, from the smaller ones." Bigger projects - which take a much longer time to sell all their units - run the risk of missing the deadline, especially in a downturn.

Ms Li added: "An extension of the ABSD deadline would help developers to stagger new home sales and manage risks better arising from supply overhang."

"Developers may need some assurances on ABSD deadline flexibility so that the market may be managed towards a soft landing," said Mr Ong, adding that sizeable price cutting to clear units would only result in a downward price spiral at a time when the market is vulnerable.

Desmond Sim, head of research (South-east Asia) for CBRE, expects that some developers poised to launch their projects in the second quarter may now adopt a wait-and-see approach. As a result, the number of launches this year may come down further. Mr Sim added: "Project completions (may be delayed) as construction firms feel the strain from labour shortages and supply chain disruptions."

Developers may dangle incentives such as absorbing maintenance fees or introducing smart home packages to mitigate some of the costs to buyers, Mr Sim said. Developers with less holding power may also offer more competitive pricing, he added.

Some developers BT spoke to said a relaxation of property cooling measures - such as an extension to the ABSD deadline for developers - would be a welcome move as the industry grapples with the fall-out from the global pandemic.

In response to queries, Yen Chong, deputy general manager of Qingjian Realty (South Pacific) Group, said: "We are currently facing unprecedented times with the far-reaching effects of Covid-19. While no one could have anticipated this pandemic, we hope the government will consider reviewing its ABSD regulation to cushion the impact of Covid-19 to ensure the long-term stability of our market."

Qingjian is also working towards enabling homebuyers to virtually tour its JadeScape sales gallery as the space is closed during the circuit-breaker period. According to URA data till end-Feb, 669 of the 1,206 units at JadeScape at Shunfu Road have been sold, leaving 537 units unsold. The project has an ABSD deadline of May 2022.

"We view the current economic situation with concern," said a spokesperson for co-developers Tiong Seng and Ocean Sky, who are marketing Sloane Residences. "We welcome the relaxation of property cooling measures to achieve stability in the real estate market."

Sloane Residences has sold four of its 52 units, according to URA data. The ABSD deadline for the project is August 2022. Nonetheless, the two developers highlighted that buyers will appreciate the project's prime location and efficient design.

Teh Lip Kim, managing director of Selangor Dredging, said they have received requests from buyers asking to abort their bookings as they are unable to cope with the "drastic dip in their income". In addition, their target audience includes foreign buyers, who are unable to visit Singapore owing to the travel ban.

Ms Teh said: "At present, it is vital to relax the cooling measures as a boost to the economy. Extending the ABSD dateline (for developers) would be a good step and (even) better if the government can loosen the guidelines of the total debt servicing ratio as this will help purchasers secure their property with greater confidence and a comfortable financial commitment. This will also help developers sustain the upcoming projects with more financial stability."

Among Selangor Dredging's projects is One Draycott, which has an ABSD timeline of early June 2022. As at end-Feb, it had sold three of the 64 units in the project at Draycott Park in the core central region.

CBRE Research has revised its projection for new homes sales downward to 4,000 to 5,000 units this year, in line with levels seen during the global financial crisis in 2008. Before the circuit breaker was announced, JLL had forecasted 8,000 new homes would be sold this year.

Last year, developers sold 9,912 units in all.

 

[1993newbie]

Also up to developer to price the balance unit correctly to clear their inventory.

MCC land sold its balance units lower as compared to early buyers.

#03-38 vs #04-38 > $174k GAP
#14-42 vs #13-42 > $53k GAP

 

[Polar Bear King]

Just transfer all unsold units to a subsidiary holding co pay the stamp duty simple

 

[daheigou999]

Just transfer all unsold units to a subsidiary holding co pay the stamp duty simple

Loophole closed

 

[Pokémon]

Also up to developer to price the balance unit correctly to clear their inventory.

MCC land sold its balance units lower as compared to early buyers.

#03-38 vs #04-38 > $174k GAP
#14-42 vs #13-42 > $53k GAP

Comparing with those who bought in 2017, PSF prices are around there. Developer did not lose much.

Too bad for the 'not so early' buyers.

 

[yoongf]

Corporate entity ABSD rate is 25%.
The max LTV for corporate owned resi is 15%

If sell again within 3yrs will incur SSD.

Just transfer all unsold units to a subsidiary holding co pay the stamp duty simple

 

[Polar Bear King]

Corporate entity ABSD rate is 25%.
The max LTV for corporate owned resi is 15%

If sell again within 3yrs will incur SSD.

that's why easier to find an ultra-rich uncle to sell to bulk package lor
which bank chairman just bought a bunch of leftover units for 9 digits right?

 

[rider83]

that's why easier to find an ultra-rich uncle to sell to bulk package lor
which bank chairman just bought a bunch of leftover units for 9 digits right?

That was done just before the ABSD

 

[NiShiZhu]

Loophole closed

Had an agent fren who’s quite season told me this loophole not closed yet. They seems to have a way to go around with unsold units to avoid the ABSD. Not sure how true.

 

[Polar Bear King]

That was done just before the ABSD

I think he just did it again recently
maybe I read wrongly

 

[Forever84]

Waiting to see what happen to normanton park when it finally allowed to sell

That one maybe have good discount, haha

 

[daheigou999]

Had an agent fren who’s quite season told me this loophole not closed yet. They seems to have a way to go around with unsold units to avoid the ABSD. Not sure how true.

https://www.99.co/blog/singapore/stamp-duty-loophole-closing/

Company entities will now need to pay 25% ABSD on purchase, so there is no real benefit for developers to offload their unsold units to an intra-group entity

 

[NiShiZhu]

https://www.99.co/blog/singapore/stamp-duty-loophole-closing/

Company entities will now need to pay 25% ABSD on purchase, so there is no real benefit for developers to offload their unsold units to an intra-group entity

Thanks for sharing the article.
In fact I have also read this article before.
But for some projects, I still find it quite peculiar of how developer priced their unit.

For example, grandeur park is reaching its TOP soon and has mainly about 15 of its unsold 5 bedder units. I do noticed there’s some price increase since last one to two months.
Instead of pricing it lower, CEL up the price again. From 2017 to 2020, the 5 bedder pricing has been adjusted 3 times, more of increasing trend. So I was wondering what’s the motivation of CEL doing this.
I ask my agent and he shared with me there are still ways for developer to get around with the remaining unsold units. Thus, it baffles me.

 

[1993newbie]

Queens peak is another development reaching TOP.

Most of the units are selling below 2017 prices and all of it are high floor.

On top of that,Current buyers that is trying trying to flip face direct competition from direct developer.

Thanks for sharing the article.
In fact I have also read this article before.
But for some projects, I still find it quite peculiar of how developer priced their unit.

For example, grandeur park is reaching its TOP soon and has mainly about 15 of its unsold 5 bedder units. I do noticed there’s some price increase since last one to two months.
Instead of pricing it lower, CEL up the price again. From 2017 to 2020, the 5 bedder pricing has been adjusted 3 times, more of increasing trend. So I was wondering what’s the motivation of CEL doing this.
I ask my agent and he shared with me there are still ways for developer to get around with the remaining unsold units. Thus, it baffles me.

 

[Polar Bear King]

Thanks for sharing the article.
In fact I have also read this article before.
But for some projects, I still find it quite peculiar of how developer priced their unit.

For example, grandeur park is reaching its TOP soon and has mainly about 15 of its unsold 5 bedder units. I do noticed there’s some price increase since last one to two months.
Instead of pricing it lower, CEL up the price again. From 2017 to 2020, the 5 bedder pricing has been adjusted 3 times, more of increasing trend. So I was wondering what’s the motivation of CEL doing this.
I ask my agent and he shared with me there are still ways for developer to get around with the remaining unsold units. Thus, it baffles me.

Have de....the Developers don’t want to lower price to spoil earlier buyers mood and tactics. So instead give higher agent fee and bypass that way lor.

Another trick I can think of is to borrow N empty heads to house the flats temporarily for up to 3 yrs for free

 

[shadow84]

Have de....the Developers don’t want to lower price to spoil earlier buyers mood and tactics. So instead give higher agent fee and bypass that way lor.

Another trick I can think of is to borrow N empty heads to house the flats temporarily for up to 3 yrs for free

But if earlier units alrdy sold, and if they are not happy, nth that the developer can do?

How does earlier buyers' mood affect developer in increasing pricing of existimg unsold units?

Im trying to put myself in developer's shoes, why do i need to please existing buyers if they alrdy paid?

 

[daheigou999]

Thanks for sharing the article.
In fact I have also read this article before.
But for some projects, I still find it quite peculiar of how developer priced their unit.

For example, grandeur park is reaching its TOP soon and has mainly about 15 of its unsold 5 bedder units. I do noticed there’s some price increase since last one to two months.
Instead of pricing it lower, CEL up the price again. From 2017 to 2020, the 5 bedder pricing has been adjusted 3 times, more of increasing trend. So I was wondering what’s the motivation of CEL doing this.
I ask my agent and he shared with me there are still ways for developer to get around with the remaining unsold units. Thus, it baffles me.

Increase list price to protect valuation, but offer free ID / higher agent commissions?

 

[daheigou999]

But if earlier units alrdy sold, and if they are not happy, nth that the developer can do?

How does earlier buyers' mood affect developer in increasing pricing of existimg unsold units?

Im trying to put myself in developer's shoes, why do i need to please existing buyers if they alrdy paid?

Some developers care about reputation. You don’t want buyers on your future projects to “wait-and-see” if they know you’re unreliable

Others like Oxley will just slash prices so that they can repay their bonds

 

[NiShiZhu]

Increase list price to protect valuation, but offer free ID / higher agent commissions?

And for that Matter, different developer different approach.
The alps choose to cut price to clear its remaining units instead.
Hmm....I must go and dig out more details on this.