S’pore ABSD tiered clawback rate a win

Singapore DPM Lawrence Wong

PETALING JAYA: The introduction of a tiered clawback rate for developers’ additional buyer’s stamp duty (ABSD) in Singapore is positive for Malaysian property companies with ongoing developments there, namely, Sunway Bhd and IOI Properties Group Bhd (IOIProp).

During Singapore’s Budget 2024 last week, its Deputy Prime Minister Lawrence Wong introduced a tiered clawback rate, which offers a lower ABSD for developers selling at least 90% of units within five years from land acquisition date.

The new measure took effect on Feb 16.

“The reduction in the ABSD clawback is seen as positive amid existing market challenges.

“Sunway’s ongoing projects show promising take-up rates, while IOIProp’s yet-to-be-launched Marina View project has a September 2026 ABSD deadline,” said Hong Leong Investment Bank (HLIB) Research.

The ABSD on property developers was introduced in December 2011. Developers who fail to develop and sell all housing units within a five-year window are required to pay an ABSD of 10% on the original acquisition price, with an additional 5% interest per year.

According to HLIB Research, this measure was implemented to deter developers from hoarding land.

“Since its inception, the ABSD rate has undergone three increments: from 10% to 15% in 2013, 15% to 30% in 2018, and 30% to 40% in 2021,” it noted.

Following the new measure, developers who sell at least 90% of their units within a five-year timeframe will experience a tiered and reduced ABSD based on the proportion of units sold.

The reduction involves a decremental decrease of 1% in ABSD for every 1% increase in the proportion of units sold, starting from 90%.

“However, it is noted that even for developers who successfully sell 99% of their units, they are still subject to a substantial 25% ABSD.

“With this, developers are expected to remain motivated to sell all units within the five-year timeframe,” it said.

The research firm noted that Sunway has two ongoing projects, Terra Hills and The Continuum, launched in February 2023 and April 2023, respectively.

As of Sept 30, 2023, Terra Hills had a 39% take-up rate with an ABSD five-year deadline set for September 2026, while The Continuum had a 30% take-up rate with an ABSD five-year deadline in November 2026.

Both projects have achieved encouraging take-up rates, and there is still sufficient time to sell their units, added the research firm.

On the other hand, IOIProp’s Marina View project, which was acquired in September 2021 for S$1.5bil, is yet to be launched. It has a five-year ABSD deadline set for September 2026.

“In January this year, the gross development value (GDV) for Marina View was revealed to be S$3.5bil, up from the previously guided S$2.58bil.

“This upward revision in GDV and selling price has allowed the group to build a larger buffer to cushion the impact of ABSD if it sells less than 100% of its units,” said HLIB Research.

The land is for mixed development of hotel and residential. “Based on our assumption that 50% of the land cost is for residential, then if the group sells less than 90% of its units, it would need to pay an additional S$187.5mil in ABSD and S$46.9mil in interest, representing 6.7% of GDV.

“If it sells 99% of its units, the additional payment would be S$112.5mil in ABSD and S$28.1mil in interest – 4% of GDV,” it said.

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