Commentary 33 New Launch Condos Near Their ABSD Deadline In 2022/23
- Ryan J
- November 10, 2022
- 7 min read
With the new condo supply at a current low, the chances of a discount are slim in 2022. But if there’s one thing that could still pressure developers into discounts, it would be the Additional Buyers Stamp Duty. While this was recently hiked in the December 2021 cooling measures to 40 per cent, developers will still be more than eager to avoid the previous 30 per cent tax on the land price. Here are some condos creeping close to their ABSD deadline, which developers may rush to offload:
A quick explanation of ABSD deadlines and discounts
Developers are required to pay 40 per cent ABSD on the land price when they purchase a plot for development. Assuming the developer can complete and sell every unit within five years, they can then claim ABSD remission (although five per cent is non-remissible, so they pay at least 5 per cent ABSD).
The ABSD applies regardless of development size. If even one unit is left unsold, the developer will be unable to claim their ABSD remission. As the penalty for missing the deadline is so steep, most developers would rather sell off the remaining units at a discount, than incur the stamp duty.
(While the developer can sell the units to their own subsidiaries, there is a 35 per cent ABSD on companies buying properties – so even this may not be a cheaper solution than a discount to buyers).
As such, there is a chance – but not a guarantee – that some buyers may be able to capture fire sales or flash discounts, as projects creep close to the ABSD deadline. This is like what happened to 38 Jervois in June 2020, where the developer had to discount prices of up to $547,320 to clear the remaining 16 units in order to avoid paying ABSD. As we mentioned above, the discounts were only applicable if all 16 units were sold, as even just 1 unit remaining would incur the ABSD.
Condos nearing their ABSD
|Project Name||Take-Up Rate||Number of units||Number of units remaining||Tenure||Date Purchased||ABSD Deadline||Days Left (From 10 Nov 22)|
|Parkwood Residences||94.44%||18||1||99 years leasehold||30/08/2017||27/02/2023||109|
|Mayfair Gardens||99.53%||215||1||99-year leasehold (from 26/09/2018)||17/11/2017||17/05/2023||188|
|Riviere||83.30%||455||76||99-year leasehold (from 07/03/2018)||08/12/2017||07/06/2023||209|
|Parc Clematis||98.84%||1468||17||99-year leasehold (from 08/08/2019)||11/01/2018||11/07/2023||243|
|Haus On Handy||79.26%||188||39||99-year leasehold (from 07/05/2018)||07/02/2018||07/08/2023||270|
|One Pearl Bank||90.57%||774||73||99-year leasehold (from 01/03/2019)||13/02/2018||13/08/2023||276|
|Ki Residences At Brookvale||96.67%||660||22||999-year leasehold (from 23/03/1885)||15/02/2018||15/08/2023||278|
|Forett At Bukit Timah||98.42%||633||10||Freehold||09/03/2018||06/09/2023||300|
|Hyll On Holland||79.62%||319||65||Freehold||05/04/2018||03/10/2023||327|
|Pullman Residences Newton||62.65%||340||127||Freehold||23/04/2018||21/10/2023||345|
|15 Holland Hill||88.14%||57||7||Freehold||23/04/2018||21/10/2023||345|
The ABSD deadline is counted by adding 5 years (365 times 5) plus another 6 months extension (182 days) from the date of the land’s purchase (either through the successful purchase of a GLS site or the en bloc). As such, the deadline should be seen as a close approximate rather than an exact day.
Do note that the above list only showcases those within 12 months from today. Other close to the 1-year mark include One Holland Village Residences (368 days), Cuscaden Reserve (369 days), The Landmark (370 days) and Neu At Novena (382 days).
Details to note for discount hunters:
- Discounts could be less probable when the take-up rate is still low
- Developers may not do deals for single-unit purchases
- Higher quantum, freehold units tend to be the ones remaining
- What’s available may not be among the preferred stacks or units
1. Discounts could be less probable when the take-up rate is still low
Some of the smaller or boutique properties, like Jervois Prive or One Draycott, are still far from the 100 per cent take-up rate. But that doesn’t necessarily mean that discounts would definitely be happening. It may seem a bit counter-intuitive, but developers are less likely to give out discounts when the take-up rate is currently low.
Discounts for individual buyers are more likely when the developer is down to a handful of units (e.g., three or four units that are hard to move). When there are still a good number of units left, developers will probably only discount the units for bulk buyers. There would be no point in slashing prices, only to still miss the ABSD deadline because of the volume that must be cleared.
There may be better chances, for instance, with 35 Gilstead, RoyalGreen, or Juniper Hill – these projects seem to be down to a handful of units waiting to go. RoyalGreen and Juniper Hill are also completed at this point, so it may be easier to move these projects as buyers can see the real thing.
2. Developers may not do deals for single-unit purchases
When the discounts do come, there may be strings attached. Again, there’s no point for a developer to sell off a few units for cheap, only to still have one or two remaining and then incur the ABSD.
As such, you may find developers are only willing to give discounts if the remaining units are all purchased en-bloc. Alternatively, the discount may only apply if the developer is able to sell all the remaining units at the given time.
Therefore, for the average buyer, an ABSD-related discount is a rare lucky break rather than a predictable event.
3. Higher quantum, freehold units tend to be the ones remaining
You may notice that many of the projects are in the luxury segment, and the bulk of them are pricier freehold units. This is one of the problems with waiting for ABSD deadlines, or for developers to drop prices: almost invariably, the tougher units to move are the high-quantum ones.
(Low quantum units, such as shoebox units, are typically the low-hanging fruit of the show flat. They are the first to be sold, so you almost never find late discounts on such units. You need to move sooner rather than later for such units).
This does mean that, even with significant price discounts, you may be dealing with a higher quantum than you can handle. Neu at Novena, for instance, is down to about the last 7 units at the time of writing – but some of these units are four-bedders with a quantum of around $3.3 million or higher.
ABSD deadlines can bring about discounts, but that doesn’t always mean the projects in question become more affordable to the average buyer.
4. What’s available may not be among the preferred stacks or units
The biggest gripe about ABSD discounts is that you are often getting the last of the pick. The options tend to range from the least affordable units to units that are the least preferred.
You may find, for instance, that the remaining units are clustered in the block closest to the road (i.e., they’re noisier), or that only low-floor units, or units with undesirable facings, are the ones left behind.
This isn’t always the case, as sometimes you’ll get lucky and find a good unit that was returned at the last minute. But in general, the market gives you what you pay for; so do temper your expectations when discount hunting.
New supply is still low, but rising interest rates and cooling measures are causing worries
From word on the ground, most realtors feel that developers are still confident enough to avoid having to slash prices. Diminishing housing supply, coupled with high demand from upgraders, means developers are less likely to flinch, even months before the ABSD deadline.
There could also be some cases where the developer pays off the ABSD to hold onto the units for rental, or to sell it off at a better time.
However, some realtors also noted that developers are concerned about rising interest rates, and the implications of the two close rounds of cooling measures (December 2021, and September 2022). They may be less confident going into 2023 (given the GLS land bids so far), depending on how wider inflation issues play out.
One realtor also noted that the situation is tougher for projects with a deadline near Chinese New Year, on 22nd January 2023.
He opined that the real estate market tends to slow down close to CNY, and projects with an ABSD deadline close to it may be more aggressive in pushing their last units sooner.
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