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| The Urban Redevelopment Authority said there were around 32,000 unsold private residential units as of Sept 30.ST PHOTO: KUA CHEE SIONG |
Extending the deadline for developers to build and sell all the units on a site could help ease oversupply in the market but may not address flagging buyer demand, said experts.
Their comments come after City Developments Limited (CDL) called for the sale timeline to be lengthened to seven or 10 years to reduce pressure on developers and prevent the worsening of the supply glut.
CDL chief executive Sherman Kwek said in a Bloomberg report yesterday that the glut is an effect of government policy that imposes a levy on firms that do not complete construction and sell all units within five years of acquiring land.
The Urban Redevelopment Authority said there were around 32,000 unsold private residential units as of Sept 30.
Mr Kwek said extending the additional buyer's stamp duty (ABSD) deadline would allow developers to stagger sales launches and ensure better balance between demand and supply.
Developers have to build and sell all units on residential sites within five years to qualify for remission of the ABSD on the land purchase price.
If they fail, they will have to pay the 25 per cent ABSD, with interest.
The remissible ABSD for residential developers was raised to 25 per cent, up from 15 per cent, for land purchased from July 6 last year.
Mr Ong Teck Hui, senior director of research and consultancy at JLL Singapore, said: "The current oversupply is due to the robust land sales between the second half of 2016 and mid-2018, when developers were actively buying sites in a recovering market."
He added that demand has been hamstrung by cooling measures introduced in July last year.
Ms Christine Sun, head of research at OrangeTee & Tie, said extending the timeline for developers to complete and sell all units to seven years is "not unreasonable".
It is "within expectations" for higher-priced properties in prime locations to "take a while to clear".
But Mr Desmond Sim, head of research for South-east Asia at CBRE, said that while extending the timeline for developers could help them move more units, it would not address the flagging demand.
The unsold stock is largely driven by bigger units, he added.
High unit prices may be beyond the affordability of most buyers, Mr Sim added, noting that approximately 90 per cent of new units are sold at below $1 million.
He added that property developers are "not in a dire condition yet", as they have not resorted to giving discounts. Mr Sim noted that the supply-demand mismatch will take around two to three years to clear, but there will never be a situation where there are no unsold units.
The average number of unsold units hovers in excess of 25,000 units, with the lowest in 2017, when it was around 18,000, he added.
ERA Realty head of research and consultancy Nicholas Mak said that developers are definitely under pressure and a five-year timeline for all developments, regardless of the number of units, is "not realistic".
"The five-year ABSD timeline cannot be one-size-fits-all, as it is unfair to projects of larger land parcels," Mr Mak added.
He noted that collective sale bids by mega-sites such as Braddell View, Mandarin Gardens and Pine Grove are unlikely to succeed due to the ABSD ruling because developers may not be confident in meeting the five-year timeline, which would impact urban renewal.
A National Development Ministry spokesman said: "The Government will continue to take the necessary measures to ensure a stable and sustainable property market."
A version of this article appeared in the print edition of The Straits Times on December 12, 2019, with the headline 'ABSD 'extension' may ease glut but experts flag limp demand'. Print Edition | Subscribe
Choo Yun Ting
Source: The Straits Times