The Online Citizen A Community of Singaporeans 
By Property Soul
In my twelve years studying in a Catholic girls school, I was taught to pray if I need to. Till today, whenever I run into troubles, I just keep praying. And I also visit different temples to say the same prayer just in case. I believe that, in the end, some God will do something. It may have nothing to do with my devotion, but the fact that God just can’t stand my nagging any more.
Play it again, Sam
I am not alone.
Recently, stakeholders in the property industry are sharing the same belief: The more you say it, the more chances your wish will come true.
On February 18, President of REDAS (Real Estate Developers’ Association of Singapore) Augustine Tan claimed that there is an “urgent need” to bring stability and ensure a soft landing in the property market “to prevent further damage to the fragile economy”.
A week later, Kwek Leng Beng, Chairman of Hong Leong Group and City Developments, told the press that the government will press the button at the right time. He suspected that the Additional Buyer’s Stamp Duty (ABSD) will be abolished first and he hoped that the authority would do it sooner rather than later.
Not long ago in July 2014, Mr Kwek had told the government to review the cooling measures, or risk losing property investment dollars to other countries.
This Wednesday PropNex put forward a proposal to advise the government why and how to tweak property cooling measures, including loosening ABSD, loan-to-value limits and Mortgage Servicing Ratio.
See how the industry stakeholders are singing the same tune. Their philosophy is: If you want the government to do something, you have to say it again and again.
If you build it, they will come?
But the question is: What make them think that their problem will be solved if the government relax the cooling measures tomorrow?
No one can tell what will happen tomorrow. The uplift of property buying restrictions can be coincided with an untimely stock market clash, financial crisis or economic recession.
In 2005, the government introduced a series of property measures trying to stimulate the property market. That’s when loan-to-value limit was raised from 80 percent to 90 percent. But still, there were few takers.
What the developers and their marketing agents really want is to offload the unsold units to the buyers. Never mind the fact that, the moment buyers sign the Option to Purchase, they are bound by the rules of TDSR, ABSD and Seller Stamp Duty. Buyers are exposed to the risks of supply glut, soft rental, interest rate hike and economic downturn.
Afterall, it is no longer the developers’ problem once their problem becomes someone else’s problem.
Many projects in the market now are on sites where developers bought from the government at all time high. But just because developers have submitted a high bid to secure the land parcels doesn’t mean that buyers have to foot the bill.
Two ways to save the bell
There are two feasible solutions to help clearing developers’ outstanding stock:
1. Stimulate the demand
The government can loosen the existing property cooling measures in TDSR, stamp duties and loan-to-value limits. Or it can increase housing demand by import of more foreigners.
On the other hand, developers can offer attractive discounts on their unsold units. Potential buyers might be tempted to take the plunge if the price is right. Lowering prices can make the units more affordable which automatically expands the pool of buyers.
2. Limit the supply
This is under the complete control of Singapore Land Authority. The government has announced that it would cut land sales. But in the first half of 2016, it is still be selling three confirmed residential sites and another eight sites on the reserve list, with the potential to build 7,420 new homes. This is on top of the 7,825 homes from residential sites released by Singapore land sales in second half of 2015.
REDAS claimed that, as of end of last year, there are over 60,000 units in the pipeline and a record 26,500 vacant units.
There is no way for developers to clear their stock if there is incessant supply in the pipeline.
Developers fighting an uphill battle
Developers have five years to sell all units in a residential project, or pay ABSD on the unsold units. REDAS’ Mr Tan estimated that there are some 700 unsold units from 13 projects that will be affected by the Qualifying Certificate rule by the end of this year, with extension charges amounting to S$100 million.
This is under the law that developers have to obtain Temporary Occupation Permit (TOP) for their projects five years after the land sales and sell all the units two years after TOP. Failing to do so, they have to pay extension charges of 8 to 24 percent of the land cost in the subsequent years. Moreover, land purchased after Dec 8, 2011 are subject to ABSD of 10 percent after five years. The first batch of projects to pay ABSD will be in December this year.
Of course, developers can take the easy way out by selling the unsold units to an investment holding subsidiary or a cash-rich corporate buyer. Or they can simply unlist from the Singapore stock exchange.
Look like industry stakeholders have no choice but continue their prayers until they see the silver lining.
This article was first published at propertysoul.com
