Developers face hefty stamp duty payment if some 1,400 unsold units across these projects are not cleared by 5-year milestone.

NEARLY 30 residential projects are approaching a critical sales deadline this year, when developers will have to clear all unsold units coming up on the site – or stump up a hefty stamp duty payment running into the tens of millions of dollars.

As at mid-February 2023, there were some 1,400 unsold units across these projects that were close to their five-year milestone. The bulk of these developments, with about 990 units, are in the prime Core Central Region (CCR). Some 23.6 per cent of unsold units are in the city fringe, or Rest of Central Region (RCR), and the remaining 7.3 per cent, in the suburbs (Outside Central Region, or OCR).

Projects that appeared most at risk include Cuscaden Reserve in District 10, with 182 unsold units; The Landmark in Chin Swee Road (173 unsold units); and District 10’s Leedon Green (108 unsold units).

The figures are based on sales data as of February 2023, consolidated by ERA Realty and Huttons for The Business Times (BT).

Other projects with more than 30 per cent of total units still unsold include The Atelier, with 95 units unsold, and Pullman Residences in Newton, which has a balance of 113 units.

In residential projects with five or more units, property developers are subject to an Additional Buyer’s Stamp Duty (ABSD) of 40 per cent on the land price, of which 35 per cent is remittable if the developer sells all units within five years. Otherwise, that portion of the ABSD has to be paid with interest.

For sites acquired between July 2018 and December 2021, the ABSD payable is 25 per cent, with a non-remittable component of 5 per cent. Land acquired before July 2018 is subject to a 15 per cent rate.

A six-month extension was also given to developers for land acquired before June 2020, as part of the government’s temporary relief measures during the pandemic.  

The 192-unit Cuscaden Reserve – jointly developed by SC Global Developments, Hong Kong-listed New World Development and Far East Consortium – was launched in September 2019 at S$3,327 per square foot (psf).

The 99-year leasehold project has had 10 transactions since September 2019, the Urban Redevelopment Authority’s Realis data indicated. The latest transaction was for a 1,163 square feet (sq ft) unit at S$4.5 million or S$3,830 psf in June 2022.

The Landmark launched in November 2020 at a median price of S$2,250 psf. The 99-year leasehold project, comprising 396 units, is jointly developed by ZACD Group, SSLE Development and MCC Singapore. Its most recent transaction was on Feb 10, 2023, for a 517 sq ft unit at S$1.4 million or S$2,646 psf.

The 638-unit Leedon Green drew a median price of S$2,785 psf when Yanlord Land and MCL Land marketed the project in January 2020. The freehold development’s latest transaction was for a 710 sq ft unit on Feb 12, 2023, at S$2 million or S$2,869 psf.

Lam Chern Woon, head of research and consulting at Edmund Tie, noted that all residential projects facing the ABSD deadline this year are likely to have acquired their land before July 2018, and are therefore subject to the 15 per cent rate.

ERA Realty head of research and consultancy Nicholas Mak said that developers would have greater incentive to sell all their units before the ABSD deadline, “one way or another”, if they face a higher potential ABSD liability or if there are many unsold units.

This is typically done through discounts for remaining units, and by giving property agents a higher commission to close deals, he said. Other deal sweeteners may be offered, such as selling the unit with interior design or discounts for renovation works.

Ahead of the ABSD deadline, some developers that BT spoke to seemed confident about clearing all units in their projects.

Two projects by City Developments Limited (CDL) : J85 0%– Haus on Handy in the prime District 9 and Amber Park in Katong – will be liable for the ABSD of 15 per cent with interest if there are unsold units by the third quarter of 2023.

A CDL spokesperson told BT that the ABSD deadline is unlikely to be an issue for them. To date, Haus on Handy is 92 per cent sold, and has 15 units still unsold; Amber Park is 99 per cent sold, with six units left.

“Given that we have a good run-time left, we have confidence in clearing our inventory within the projects’ ABSD timelines,” said the spokesperson.

Frasers Property’s : TQ5 0% 455-unit luxury residential development Riviere at Jiak Kim Street had 20 to 30 unsold units as of February 2023.

Word has it that discounts ranging from S$8,000 to S$15,000 – roughly equivalent to the amount payable in higher marginal buyer’s stamp duty announced in Budget 2023 – are being offered for Riviere.

BT understands that Frasers is confident that the luxury project will be sold out ahead of its June 2023 deadline.

Since Riviere’s launch in May 2019, when it was marketed at prices starting at S$2,580 psf, 95 per cent of its 455 units have been sold at a median price of S$2,808 psf. Its most recent transaction on Feb 10, was for a 1,711 sq ft unit at S$5.1 million or S$2,992 psf.

Riviere was one of the best-selling new projects in January, with 13 units sold that month at a median price of S$3,087 psf.

Huttons senior research director Lee Sze Teck stressed that developers facing the deadline might hold back on price cuts. “Most developers are listed, so shareholders may question the decision, and it will make earlier buyers unhappy,” said Lee. Instead, developers might sell the remaining units to a property fund that might lease these units for recurrent income or sell it in the future for profits, he said.

Edmund Tie’s Lam added that developers might also use an entity to buy up the remaining units. Paying the ABSD on these transactions would be “less punitive” than paying the 15 per cent ABSD on the land price, he said. For projects with lower take-up rates, he noted that it might be more “meaningful” for developers to just pay for the ABSD on the land price. “This way, the developer is free to hold the units and sell them when the market recovers.”

Most of the unsold units are in the CCR, in a reflection of home sales there having a strong dependency on foreign demand, ERA’s Mak said. While the majority of buyers (70 per cent) are still Singaporeans, he said this is much lower than in other regions, where Singaporeans account for 85 to 90 per cent of buyers. Border restrictions during the pandemic naturally resulted in slower sales in the CCR.

Alan Cheong, executive director of research and consultancy at Savills, noted that many prime projects are “targeted at the ultra-high-net-worth individuals that only come through the door once in a while”. The ABSD payable is therefore not a problem for developers, he said. “It’s only a question of time taken to find the buyer.”

Chief executive of PropNex Realty Ismail Gafoor said these prime residential properties hold value for both homebuyers and investors. CCR prices now start at S$2,800 psf, compared to OCR prices starting at S$2,100 psf, and RCR prices, from S$2,500 psf.

“The silver lining of the rising prices in the OCR and RCR is that it attracted investors to the CCR properties,” said Gafoor. “Thus, developments in the CCR are moving quite fast.”

“We think most of the existing developers are able to clear (the unsold units) without having to pay a hefty ABSD, or having to resort to cutting prices.”

Developers had reportedly paid a total of S$380 million in fees and charges to the government from the introduction of the ABSD in 2011 to end-2017, for failing to sell all residential units in their projects within stipulated deadlines – including ABSD fees amounting to S$200 million.

Credit: The Business Times