Faced with nearly S$700 million in potential charges for unsold private residential properties this year, developers in Singapore are ramping up efforts to offload the units before the additional buyers’ stamp duty (ABSD) hits, offering discounts and deferred payment schemes to prospective buyers and, increasingly, the bulk sales of unsold units.

About 1,300 units remain unsold in 20 developments that will be affected by the ABSD remission clawback this year, according to data from the Urban Redevelopment Authority and a Deutsche Bank report. Developers of these projects could face about S$697.6 million in ABSD charges, the Deutsche Bank report showed.

On top of that, developers of 17 projects, with a combined 1,124 unsold units, could incur Qualifying Certificate (QC) extension charges this year, the Deutsche Bank report noted.

The potential charges facing developers were brought back into the spotlight after reports last week that Mr Wee Cho Yaw, chairman emeritus of United Overseas Bank, had bought all 45 unsold units at The Nassim for S$411.6 million through his family’s private real estate arm, Kheng Leong, helping the project’s developer CapitaLand escape substantial QC penalties.

Mr Wee’s bulk purchase represented a discount of about 18 per cent.

Property analysts said they expect more of such bulk deals to take place during the rest of the year, as deadlines for the respective charges loom, with the most likely targets being luxury projects in the city centre.

It will almost certainly likely happen for high-end projects in the Core Central Region (CCR) that have been stuck for a long while with unsold stock.

There is, however, still a small chance that this can also happen for mid-range or mass-market condo projects because, after all, such properties are way cheaper on a per quantum basis, so it actually makes good sense for developers to have a bulk sale of such low-end and mid-range condos to avoid paying taxes.

Residential investors will be drawn to properties in upmarket regions such as The Nassim, as such developments offer potential upside in capital values when the market recovers.

In this case (the bulk sale of The Nassim), the property is freehold, so Kheng Leong has the option of either renting out the apartments, or finding buyers on its own as it is not affected by any deadline to offload the properties.

The ABSD, first introduced in 2011 and revised upwards in 2013, is a tax levied on both individual property purchasers and developers. Developers are required to pay an ABSD of 10 or 15 per cent, including interest, on the land cost of a project, unless they build and sell all units within five years of being awarded the site. The amount buyers have to pay depends on their residency status and number of properties they already own.

Among the projects that could incur ABSD clawback in the first half of this year are The Trilinq, Mon Jervois, Hillview Peak, Stratum, Vue 8 Residence, Pollen & Bleu and Sant Ritz.

Malaysian plantation and property group IOI Corp, the developer of the 755-unit The Trilinq at Clementi, could face a S$52.1 million bill this month if it fails to sell the 267 remaining unsold homes, the Deutsche Bank report and URA data show.

Singapore Land, the developer of Mon Jervois (42 unsold units) and Pollen & Bleu (93 unsold units) in district 10, faces fees of S$15.2 million and S$14.4 million, respectively, if the remaining units are not offloaded by February and June, respectively.

Hillview Peak, with seven unsold units, could see developer Kingsford Development fork out S$31 million in ABSD payable, while Elitist Development of the Stratum project on Elias Road faces S$21.6 million for the 14 remaining units.

Likewise, Capital Development, the developer of Vue 8 Residence in Pasir Ris, could see a S$26.9 million bill for 63 unsold homes, and Santarli Corp could pay S$14.7 million for the eight remaining units at Sant Ritz in Potong Pasir.

In addition to the ABSD, developers with foreign holdings also have to meet QC rules that require them to complete construction within five years of buying the land and sell all dwelling units in the next two years. Those who need more time to meet these requirements are required to pay extension charges pro-rated to the proportion of unsold units.

Developers who bought land through the Government Land Sales programme and on Sentosa Cove do not need to apply for a QC.

Among the projects facing QC extension charges is TwentyOne Angullia Park at Orchard. Its developer, China Sonangol Land, was previously reported to be in talks with several parties, including ZACD Property Fund Management, for the bulk sale of the 38 units remaining in the project.

In addition to CapitaLand’s bulk sale of The Nassim this month, several other developers have also made similar arrangements to escape punitive QC charges, including iLiv@Grange’s Heeton and Nouvel 18’s City Developments Ltd.

Besides bulk transactions, other strategies undertaken to push sales include deferred payment schemes — such as those rolled out by Capita-Land at d’Leedon and The Interlace — which allow buyers to move in after paying an option fee, with the balance deferred for a stipulated time period.

Developers are also offering sweeteners such as discounts of up to 8 per cent to individual buyers to move unsold units.

Because property times are just so adverse, buyers are still on the sidelines and jumping only into opportunity buys or newly launched projects with attractive pricing.

The downside to offering discounts though is that they could leave a bitter taste for the earlier batches of buyers who bought the properties at higher prices.

Bulk deals also tend to have a negative impact on the pricing of developments nearby. Prospective buyers would use (the discounted price) as a benchmark to negotiate.

Developers will be cautious not to slash prices too excessively, so as not to upset previous customers.

Developers will be looking out for buyers who have such deep pockets, but they do not come by so easily.

Adapted from: TODAY, 23 January 2017

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