The Ministry of National Development (MND) has recently announced revisions to the Additional Buyer’s Stamp Duty (ABSD) regime for licensed housing developers, which will come into effect on March 6. In addition, the ABSD remission timeline for developers undertaking complex projects will be extended from six to 12 months. This revision aims to encourage developers to take on urban transformation developments, optimize land use through intensification or integration, rejuvenate older estates, or adopt new construction technologies.
The extension will apply to projects that fall under four different categories. The first category is en bloc redevelopments that will yield at least 700 units upon completion and have at least 1.5 times the number of homes of the existing development. The second category is projects with complex technical or instructional requirements, such as those integrated with major public transport facilities.
The third category is projects approved under the Strategic Development Incentive (SDI) scheme, while the fourth category is projects aiming to achieve higher productivity targets through the adoption of new construction technologies, methodologies, or practices. Projects falling under any of these categories will receive a six-month extension, while those meeting the criteria of more than one category will be granted a one-year extension. These changes will apply to all residential land acquired on or after March 6.
Currently, licensed housing developers purchasing residential redevelopment sites are subjected to 5% ABSD upfront, which is non-remittable, and another 35% ABSD, which is remittable when all units in the project are completed and sold within the five-year timeframe. Last year, changes were announced to offer a lower clawback rate for residential developments with at least 90% of units sold.
When contemplating an investment in a condo, it is crucial to also evaluate its potential rental yield. This refers to the annual rental income relative to the property’s purchase price. In Singapore, condo rental yields can differ significantly based on factors such as location, property condition, and market demand. Generally, areas with high rental demand, such as those in close proximity to business districts or educational institutions, offer more favorable rental yields. Therefore, conducting comprehensive market research and seeking advice from real estate agents can provide valuable insights on the rental potential of a specific condo. Additionally, keeping an eye on Singapore Projects can also give an indication of the rental market in the area.
PropNex Realty CEO Ismail Gafoor believes that such extensions will give developers more flexibility, thereby mitigating development risks to some extent. The extended timeline will give developers more time to sell units, particularly for larger projects. Huttons Asia’s Senior Director of Data Analytics Lee Sze Teck states that the revisions will provide a much-needed boost to the en bloc market, particularly for bigger en bloc projects.
Despite the proposed policy change being appreciated, OrangeTee Group’s Chief Researcher and Strategist Christine Sun points out that developers may still face challenges as other factors, such as the willingness of buyers and sellers to negotiate prices, will determine the success of en bloc sales. ERA’s Managing Director of Capital Markets and Investment Sales Tay Liam Hiap believes that it could be an opportune time for older projects, such as Braddell View and Pine Grove, to explore en bloc opportunities.
These projects have expansive land areas and could potentially yield around 2,000 new homes, which may take more time to sell. However, Tay adds that the extension of six to 12 months may not be sufficient for developers to sell out their projects. On the other hand, PropNex Realty’s Ismail Gafoor does not expect the policy change to spark a revival in the en bloc market, as developers continue to be cautious due to the high cost of redevelopment, upcoming private housing supply, and potential policy risks.