Pressures mounting on developers for unsold stock due to ABSD, QC rules: Redas

PRESSURES are mounting for developers to dispose of leftover units in projects affected by the qualifying certificate (QC) rules and the additional buyer's stamp duty (ABSD).

Trying to drive home this point on Thursday was the president of the Real Estate Developers' Association of Singapore (Redas), Augustine Tan, at the Redas Spring Festival lunch.

Based on estimates collated by Redas from various sources, there are some 700 unsold units across 13 developments affected by QC this year with estimated extension charges amounting to close to S$100 million, Mr Tan said.

"The kick-in in end 2016 of the ABSD remission claw-back for developments with unsold units will put further pressures on prices," he added. "Currently, about 6,000 units remain unsold in 33 developments, excluding ECs (executive condominiums), which will be impacted by the ABSD remission claw-back in 2017 and 2018."

Since late 2011, developers here have had to develop any residential site they buy, and sell all the units in the new project within five years, or pay the ABSD of 10 per cent. Sites bought from Jan 12, 2013, onwards will incur a higher 15 per cent rate.

The QC conditions stipulate that developers with at least one foreign shareholder or director must finish building a residential project within five years of buying the site and sell all units within two years of completion. A developer that wants extra time to sell needs to pay an "extension charge" that is pro-rated based on the proportion of unsold units. Sites bought from the Government Land Sales programme and on Sentosa Cove do not require QC.

Property industry players have long been lobbying for the tweaking of ABSD, which is more punishing on developers because it is a flat rate based on land cost and not pro-rated according to the proportion of unsold units in a project. Hence, a project can face an ABSD remission claw-back even if it has only one unsold unit.

As at the end of last year, there were a record 26,500 vacant private residential units, Mr Tan stressed. The real estate market across all segments is reeling from the compounding effects of an oversupply situation, rising vacancy rates, weak demand and increasing interest rates.

"Furthermore, should the ongoing volatility of the stock markets persist, which is a real risk, this could severely impact the property market," he flagged. Now, economic challenges have also lately reared their ugly head, affecting the jobs of bankers, lawyers, architects, engineers, property agents and contractors.

"There is therefore an urgent need for action to bring stability and ensure a soft landing to prevent further damage to the fragile economy," Mr Tan said.

With safeguards in place such as the total debt servicing ratio (TDSR) coupled with the current economic situation, property prices will be kept in check, making it timely to consider calibrating the cooling measures, he added.