SINGAPORE: The recent adjustments in the Singapore Budget regarding the Additional Buyer’s Stamp Duty (ABSD) have garnered attention, particularly for older single property owners and developers.
Singapore Business Review reports that while the concessions aim to provide relief for certain market segments, analysts suggest that ABSD adjustments’ impact on property developers may be negligible.
The extension of ABSD concessions to single individuals aged 55 and above is anticipated to assist seniors in downsizing their homes and supporting retirement funds by selling their properties.
However, analysts predict this move may not substantially stimulate sales volume.
Ismail Gafoor, CEO of PropNex Realty, views the measure as targeted and needs-based, primarily benefiting seniors looking to right-size their housing.
He said, “We think this is focused on a specific segment of the market, it is needs-based, and will likely not move the needle much in terms of spurring sales volume.
On the whole, this will help seniors who wish to right-size their housing and to monetise their first property to shore up their retirement adequacy.”
Christine Sun, chief researcher and strategist at OrangeTee Group points out that the concession could drive demand towards smaller, older resale properties that were previously less attractive due to factors such as shorter lease balances and lower potential for appreciation.
Sun added, “Moreover, some of these buyers who may have turned to 4-room HDB resale flats as they do not need to observe the mandatory 15-month wait-out period may now turn to buy smaller, resale condos.”
Despite the potential benefits for certain market segments, individuals facing financial constraints may still encounter difficulties.
Alan Cheong, executive director of research & consultancy at Savills Singapore, highlights the upfront payment of ABSD for private replacement properties as a challenge for cash-strapped individuals.
Cheong stated, “As ABSD is still payable upfront for private replacement properties, those who are cash strapped will not be able to cough up the upfront payment despite being refunded if they sell their first home.
Therefore, they have to either rent or find friendly temporary accommodation.”
From a developer’s perspective, the impact of these concessions is expected to be minimal.
Analysts suggest that most properties are typically fully sold within the ABSD timeline, as developers aim to minimise holding costs by selling units promptly.
Sun notes, “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 cost.”
In addition, analysts emphasise that developers will continue to strive to sell all units within the specified timeframe.
Ismail Gafoor highlights that even a slight shortfall in sales could result in substantial ABSD clawback penalties for developers.
Gafoor said, “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 100% of the units within the 5-year timeframe.
For instance, if the developer managed to sell 99% of the units, it is still subjected to a 25% ABSD remission clawback with interest (lowered from 35%) – this is still a hefty sum and a heavy burden on developers.” /TISG