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One of the most established developer of Singapore, City Developments Ltd (CDL), wants to find out the valid reason over Additional Buyer’s Stamp Duty (ABSD) controversial levy implemented by the authority as an indirect factor of the huge development supply overhanging.
Per real estate policy of Singapore, developers should build the residential areas they purchased and sell all the plots or units of the new development in span of 5 years, starting from the day 1 of acquisition to enjoy the upfront exemption of ABSD over the amount of the land purchased. If and when a developer fails to do such, an additional of 25% ABSD plus interest it needs to settle. This 25 % originated from 15% way back July of 2018 up to date.
Sherman Kwek, CEO of CDL has urged the government to stretch the timeline to at least 7 or 10 years for he believes this mellow down some pressures faced by the developers.
“I wish authorities may side on the idea of stretching the timeline of ABSD to 10 years or 7 the least, so that somehow immense pressure on developers side would decrease thus preventing the oversupply scenario from getting worst,” Kwek told during an interview in Bloomberg. He strongly believed that a lengthened timeline yields less of land hoarding indefinitely by the developers.
” With an expanded permissible development plus longer sales period gives chance to developers for a random sales launches thus guarantees a better balanced supply and demand equation,” Kwek explained.
CDL CEO, We Also Have Few “Close Shaves”
According to Urban Redevelopment Authority (URA), Singapore holds close to 32,000 units of apartments that can either be unsold or an existing construction/under construction where market analyst forecasted 4 years for it to be cleared. Previous month, the MAS or Monetary Authority of Singapore alerted that supply glut plays a role in decreasing property prices.
Kwek stressed that previous year’s cooling policy ignited an ABSD penalty which was around 31.25% and they termed it as “petrifying rate”, a compromised 25% penalty that was associated at yearly interest rate of at least 5% that runs for five years.
After being asked if CDL obtained ABSD, he shared that luck was on their side because so far not even one of their projects been trapped by the ABSD despite the fact that they’ve few “close shaves.”
Levied on entire property price without prorating to the left units, the fines are just too big, and unless if the area is really small. I don’t believe that majority of the developers can digest such huge penalty,” he further added.
Singapore Property Development Prices still resilient In 2020
Though with a huge supply overhang, property development prices will be keep stable for the coming year, 2020 while the supply is slowly but continuously engrossed by the real estate market in the succeeding five years, revealed by the 2020 PropertyGuru’s Property Market Outlook.
Concurrently, urban restoration and infrastructure advantages all over Singapore will carry on with upside of each property. Particularly, the incoming Singapore-Johor Bahru, Thomson-East Coast MRT line (TEL), and Rapid Transit System (RTS) can build up property value much higher.
