The Ministry of National Development (MND) has recently announced changes to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers, which will take effect on March 6th. This move is aimed at encouraging developers to undertake urban transformation developments, optimise land use through intensification or integration, rejuvenate older estates, or adopt new construction technologies.
One of the key revisions is the extension of the ABSD remission timeline for developers undertaking complex projects from six to 12 months. This means that developers will have more time to complete and sell their projects without having to pay the ABSD, which is a tax on residential properties bought by foreigners, permanent residents, and corporate entities. It is currently set at 5% upfront, and another 35% if all units are not sold within five years.
The extended timeline will apply to projects that meet specific criteria, such as en-bloc redevelopments with at least 700 units upon completion and those with 1.5 times the number of homes as the existing development. Other projects that qualify include those with complex technical or instructional requirements, projects integrated with major public transport facilities, those approved under the Strategic Development Incentive (SDI) scheme, and those that aim to achieve higher productivity targets through the adoption of new construction technologies, methodologies, or practices.
The changes are expected to apply to all residential land acquired on or after March 6th. The revisions come after last year’s changes, which offered a lower clawback rate for residential developments with at least 90% of units sold.
PropNex Realty CEO Ismail Gafoor believes that these extensions will give developers more flexibility and may help to mitigate development risks, as they now have more time to sell units. Huttons Asia’s senior director of data analytics, Lee Sze Teck, says that the revisions will give a much-needed boost to the en-bloc market, especially for bigger projects.
When contemplating a condo investment, it is essential to evaluate its potential rental yield. Rental yield refers to the amount of annual rental income as a percentage of the property’s purchase price. In Singapore, the rental yields for condos can vary significantly depending on factors such as location, property condition, and market demand. Generally, areas with high rental demand, such as those near business districts or educational institutions, tend to offer better rental yields. Therefore, it is crucial to conduct thorough market research and seek advice from real estate agents to gain valuable insights into the rental potential of a specific condo.
However, Christine Sun, chief researcher and strategist at OrangeTee Group, cautions that developers may still face challenges despite the deadline extension, as there are other considerations at play. For example, the success rate of en-bloc sales will depend on the willingness of buyers and sellers to negotiate prices.
ERA’s managing director of capital markets and investment sales, Tay Liam Hiap, believes that this could be an opportune time for older projects, such as Braddell View and Pine Grove, to explore en-bloc opportunities. These projects may yield some 2,000 new homes, which could take more time to sell. Meanwhile, Ismail Gafoor does not expect the policy change to spark a revival in the en-bloc market, as developers may continue to be cautious due to the high cost of redevelopment, the upcoming private housing supply, and potential policy risks.