The City Developments Limited (CDL) has recently called for an extension to the existing timeline for the sale of property in the face of low demands in the market.
As of September 30, 2019, the Urban Redevelopment Authority recorded an estimated 32,000 unsold private residential units in Singapore. Currently, there is a policy in effect which mandates that developers complete construction and have all units sold within a timeline of 5 years of acquiring the land. Failure to do so results in levying hefty fees on the firms concerned.
Given the lull in the current demand for residential units in the market, there is a call for amending the existing policy and to extend the deadline to a time period of seven to ten years for selling off all units in a project.
However, even though the increased timeline eases the burden of the builders and developers to an extent, it does not fully address the demand-supply mismatch. The extended time may lower the pressure on the builders to finish construction hastily to begin the selling process. It does not do much to facilitate a significant increase in the buyers’ demand.
Some developers are of the opinion that stretching out the deadline of the additional buyer’s stamp duty (ABSD) would enable developers to launch more viable deals that could effectively bring in a balance in demand and supply.
As of now, all units need to be sold within five years for the firm to be eligible for acquiring ABSD’s remission on the purchase price of the property. This currently stands at 25 per cent. Prior to July 6, 2019, the remissible ABSD was 15 per cent.
Failure to sell off all residential units within the stipulated five years, however, require the developer to pay 25 per cent ABSD, with interest.
The Singapore real estate market saw a rapid rise in sales of lands between late 2016 to 2018. Cooling measures that kicked in in July 2019 impacted the unit prices of the residential complexes already under various stages of construction in the land sold in the previous two years. As a result, several residential complex failed to get sold out in their entirety. Properties in prime locations with higher market rates are in particular facing a scenario of oversupply.
The brunt of the unsold units is currently borne by the developers. Several experts believe the call for the extension of the existing time frame is reasonable considering the country’s current market scenario.
On the other hand, others are of the opinion that the time extension is only a temporary solution to part of the problem. As a huge number of unsold units belong to the higher price range, it is possible that the units fail to find buyers because of their unaffordability.
Currently, an approximated 90% of new launch residential units are selling at a below a million price range. As such unless the unsold units in the higher price range are put on the market with discounted offers, they are likely to attract fewer buyers.
Experts note that until the property developers face a very dire situation, no amount of measures will bring about a cent per cent demand-supply match. There will always be a surplus of units made ready in comparison to demands for residential units. A look at the previous years’ statistics confirms this. The annual average of unsold flats has roughly been around 25,000 units. In 2017, at its lowest point, there were around 18,000 unsold units.
Many believe the time frame needs to be relative as a blanket five-year period remains unfeasible. Depending on the location, budget and scope of the project, the timeline should be extended into a range. Larger land parcel projects especially often find themselves at the losing end in the current timeline of five-year. This in turn considerably impacts the urban renewal policies of the country and the market’s overall stability.
The Government has assured that in the light of the present circumstances of the property market, it will take into account the existing pitfalls and make necessary changes in its policies.