Five projects racing to beat ABSD deadline

By
/ The Edge Property
|
July 18, 2016 8:00 AM SGT
As the five-year deadline for their Additional Buyer’s Stamp Duty (ABSD) remission approaches, some developers must ramp up efforts to sell units in their projects, while others cannot afford to let sales momentum falter if they want to avoid paying ABSD.
Under the ABSD remission rules, developers do not have to pay ABSD on the purchase of land if they complete and sell all their units within five years of the acquisition date. Those who fail to do so, even if they are left with just one unsold unit, will incur a 10% ABSD if they purchased the land between Dec 8, 2011 and Jan 11, 2013, and 15% if they purchased the land on or after Jan 12, 2013. A 5% interest rate per annum will also be levied.
Several projects are close to the finish line, and their developers must maintain or increase sales momentum to avoid the ABSD (see table). The list is derived from developers’ sale data published by URA for May 2016 and new sale caveats with contract dates in June (based on caveats downloaded on July 6).
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These developments can avoid ABSD if sales momentum is good
Development
Market segment
ABSD deadline
Number of months till deadline
Total units
Unsold units
OCR
Mar-17
9
512
106
OCR
Jun-17
12
463
122
OCR
Oct-17
16
726
236
RCR
Sep-17
15
266
136
RCR
Dec-17
18
429
167

Source: URA, The Edge Property

One of these projects is Kingsford Hillview Peak, where 21%, or 106 remaining units, out of a total of 512 units must be sold by March 2017 to avoid the ABSD. There was a significant pick-up in average monthly sales to 12 units in 2H2015, compared with the low single- digit sales between September 2013 and June 2015. Average monthly sales further increased to 28 units in 1H2016. This might be due to the opening of the Downtown Line and a step-up in marketing efforts. The median price was $1,319 psf for the 19 units sold in June. Based on caveats lodged, the developer has lowered prices for the larger units. At the current pace, the developer is likely to sell all the remaining units ahead of its ABSD deadline in March 2017.
Another development is Vue 8 Residence in Pasir Ris, where an average of nine units were sold per month over the past 12 months. Twenty-six per cent, or 122 units, out of the 463 units in the development remain unsold. Based on caveat data, eight units were sold at a median price of $959 psf in June. With 12 months to go before the ABSD deadline in June 2017, the developer needs to improve sales just a tad, to above 10 units per month, to avoid the ABSD.
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The Glades, next to the Tanah Merah MRT station, has also maintained healthy sales momentum since its launch in September 2013. There are 33%, or 236 units, left from a total of 726 to sell by the October 2017 deadline. URA began publishing the net price of new sale transactions on June 5, 2015, indicating discounts or rebates from developers to buyers. Analysis of the net price indicated in caveat data reveals that buyers of 29 units at The Glades received discounts or rebates averaging 2%. These transactions occurred between May 2015 and November 2015. Monthly sales over the past 12 months averaged 15 units, and 27 units found buyers in June at a median price of $1,403 psf. The developer is likely to avoid paying ABSD if the current sales momentum continues.
At The Venue Residences near the Potong Pasir MRT station, seven units found buyers at a median price of $1,405 psf in June, based on caveats lodged. With 51%, or 136 units, unsold out of a total of 266 units, the developer will need to raise average monthly sales to above nine units from July to the ABSD deadline in September 2017. Based on the net price indicated in caveat data, buyers of four units at The Venue Residences received discounts or rebates from the developer. All four units were 840 sq ft, with the most recent transaction in March at a nett price of $1,180,800 after a 0.8% discount or rebate.
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The fifth project is Alex Residences with 39%, or 167 units, unsold out of a total of 429 units. Analysis of caveat data reveals that discounts or rebates ranging from 1% to 2% were offered to the buyers of 12 units at the project from June 2015 to June 2016. Only one unit was sold in June 2016 — a 1,023 sq ft unit that was transacted at $2,034,050, with the net price at $1,993,369, or 2% lower. The developer will need to move at least nine units at Alex Residences a month to meet the ABSD deadline in December 2017.
The ABSD remission rule has prompted some prospective buyers to believe there will soon be bargain deals for projects — especially those with a large inventory of unsold units — that are nearing the five-year deadline. However, projects that are close to the finish line could have the biggest incentive to offer attractive discounts as developers may not want the hassle of buying the remaining units through an investment company to avoid the ABSD. This option also involves a holding period to avoid paying Seller’s Stamp Duty.
Recently, several developers have begun offering discounts, ABSD rebates and other freebies such as interior design packages in efforts to move unsold inventory. Marketing initiatives have also taken a creative turn, as evidenced by The Crest, where the developer has offered interior design services for the one-bedroom units, staged a laser show and organised events such as wine-tasting and health talks.
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Meanwhile, some other developments such as Sky Vue and Lakeville have less than 60 unsold units and sufficient sales momentum that they are likely to clear their inventory ahead of their ABSD deadlines. Developments with less than 10 unsold units include Echelon, Urban Vista, Jewel @ Buangkok, La Fiesta and Bartley Ridge.