Review ABSD and release more EC sites, suggests PropNex
By Nicholas Lam
/ EdgeProp Singapore |
PropNex suggests that one or two more EC sites could be released in each new GLS programme (Credit: Samuel Isaac Chua / EdgeProp)
Private new home sales have waned, with developers having sold just 135 units in December last year. The full-year sales in 2023 were 6,452 units — the lowest since the 2008 Global Financial Crisis, based on URA data released on Jan 15.
"The demand-side curbs and supply-side top-ups, along with global geopolitical tensions and slower economic outlook, have collectively tamed the housing market in 2023," says Ismail Gafoor, CEO of PropNex, Singapore's largest listed real estate agency by sales force. "We believe there is scope for the government to consider reviewing some of its policies in 2024 to better help Singapore households attain their housing aspirations."
PropNex released three recommendations for the government's consideration ahead of the Budget 2024 to be delivered by Deputy Prime Minister and Minister for Finance Lawrence Wong on Feb 16.
Reassess 15-month wait-out period
Under current HDB rules, homeowners who have sold their private residential properties must wait 15 months before purchasing an unsubsidised HDB flat from the open market (with exceptions for seniors above 55 who intend to purchase four-room or smaller resale flats). Announced at the end of September 2022, the government had indicated that it was "a temporary measure".
PropNex points out that en bloc beneficiaries who had sold their private homes and turned to the HDB resale market to purchase larger flats contributed to the overall price growth. These buyers were more willing to pay higher prices for their desired resale flats.
Former private homeowners preferred larger five-room or executive flats when purchasing a HDB resale flat as their replacement home. With HDB resale flat prices growing at a much slower pace and transaction volume moderating in 2023, PropNex recommends that the government consider assessing if the 15-month wait-out period is still necessary.
Five-room resale flat transactions fell 19% q-o-q to 1,545 units, while the number of executive flats sold declined 22% q-o-q to 430 units in 4Q2023 after the15-month wait-out period was implemented over a year ago.
PropNex posits that private homeowners who had sold their residential property could have rented HDB flats as their interim accommodation instead. The number of HDB rental approvals declined for three straight quarters from 1Q2022 to 3Q2022 but rose about 3.5% q-o-q in 4Q2022 and gradually until 3Q2023.
Review ABSD
Married couples who upgrade from an HDB flat to a private home must pay the additional buyer's stamp duty (ABSD) within 14 days of signing the sales and purchase agreement. While they can apply for an ABSD remission if they sell their HDB flat within six months of purchase, temporary occupation permit (TOP) or certificate of statutory completion (CSC), this upfront ABSD payment is a hurdle for many.
This issue was further compounded when the ABSD rate for Singapore citizens buying a second residential property rose from 17% to 20% as part of the cooling measures announced in April 2023.
The upfront ABSD payment leaves many households with little option but to sell their HDB flat before purchasing a private home to avoid the hefty cash outlay. These households could incur temporary rental expenses, pushing up the demand for HDB flats on the leasing market.
PropNex recommends aligning the application of ABSD with those looking to purchase new executive condos (ECs) from developers. Presently, HDB owners buying new ECs need not pay the ABSD upfront. Instead, they are only required to pay it should they fail to sell their flat six months after their new EC receives TOP.
By aligning the ABSD treatment, PropNex believes that it would help to facilitate the aspirations of HDB owners who wish to make the switch to private housing, particularly families whose monthly household income has exceeded the $16,000 cap for a new EC purchase and are restricted to the private residential market.
Furthermore, 70% of new EC units are set aside for first-timer buyers during the initial project launch, limiting HDB owners looking to upgrade.
Release more EC sites on GLS Confirmed List
Under the Government Land Sales (GLS) programme for 1H2024, only one EC site is on the Confirmed List, in line with the earlier half-yearly GLS site releases for sale.
With limited supply and strong demand for ECs, developers have been bidding more aggressively for EC GLS plots in recent years, hence driving up the prices, notes PropNex.
In GLS tenders that closed in 2023, EC plots garnered an average of nine bids each, compared with an average of just over three for private residential sites.
In 2018, the Sumang Walk EC site in Punggol set a record land rate at $583 psf per plot ratio (ppr). This record has since been smashed with the sale of the EC plot at Tampines Street 62 (Parcel B) at $721 psf ppr in October 2023. Meanwhile, prices of new EC units have hit a fresh benchmark, with the average transacted unit price crossing $1,470 psf at Altura EC in Bukit Batok in 2023.
PropNex suggests that one or two more EC sites could be released in each new GLS programme, which could increase developers' land bids. Hence, future ECs could be priced more affordably.
The recommended changes could help many Singaporean households work towards buying their next desired home, says PropNex's Gafoor. Removing some hurdles benefits most prospective buyers, from HDB flat owners keen to explore the new EC launches in 2024 to private homeowners looking to right-size without the 15-month wait-out period.
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