Developers' burden for unsold units set to soar

Developers' burden for unsold units set to soar

Developers that failed to sell all units at their residential projects within a stipulated timeframe paid the Government $24.9 million in extension fees last year.

That was a fall from about $30 million in extension fees collected in 2014, but the figure is set to rise markedly this year, experts say.

The extension fees relate to Qualifying Certificate (QC) rules applying to foreign developers - including Singapore developers listed here but with foreign shareholders.

Credit Suisse estimates the combined QC and additional buyer's stamp duty (ABSD) charges could rise as high as $226 million this year and $1.3 billion in 2017.

Projects set to take the largest hit this year include City Developments (CDL) and Wing Tai Holdings' Nouvel 18 with a $38.2 million QC charge, and $15.2 million for China Sonangol's TwentyOne Angullia Park near Orchard Road, a Credit Suisse report last month said.

It estimated that Hotel Properties and CapitaLand's joint venture projects, d'Leedon near Farrer Road and The Interlace in Depot Road, could also chalk up combined QC fees of more than $22 million if units remained unsold by the year end.

Credit Suisse said its report was based on the last available data on unsold units as at Dec 31, or earlier.

This means it does not capture the more recent transactions.

For example, the report indicated that there are 140 unsold units at The Interlace, and 190 unsold units at d'Leedon. However, CapitaLand told The Straits Times that 130 units were still available at The Interlace, and 185 units are still unsold at d'Leedon as at Jan 31.

GuocoLand said Goodwood Residence has only five unsold units, compared with 41 in the report.

CapitaLand told an earnings briefing last month that its share of QC extension fees could potentially be about $7 million if the units remained unsold by the year end.

Under the QC rules, foreign developers must sell all units at their projects on private residential land within two years of obtaining a Temporary Occupation Permit (TOP). Failing that, the developer pays extension charges pro-rated to the proportion of unsold units.

The Credit Suisse report also pointed to Michaels' Residences and Robin Residences as being affected by ABSD remission claw- back this year.

The ABSD rules, introduced in December 2011, require developers to build and sell all new units within five years of a site's contract purchase date or pay a 10 per cent levy - later raised to 15 per cent for sites bought from Jan 12, 2013.

However, analysts say the charges may have been overstated in the Credit Suisse report.

"The QC fees estimate is based on the assumption that developers do not sell any more units. That's unlikely. As they continue to move units, the fees payable will drop," said Century 21 Singapore chief executive Ku Swee Yong.

The ABSD charges could also be less if projects with only a handful of unsold units sell out by their respective deadlines, Mr Ku noted.

Sales of new homes have been tepid in recent years, owing to a raft of property cooling measures. The looming QC and ABSD deadlines are further expected to force developers' hand, resulting in price cuts to clear unsold stock.

One example is The Trilinq in Clementi, which could face ABSD charge early next year. Its median price was $1,359 psf in the first quarter, down from $1,545 psf when launched in the first quarter of 2013.

"Developers tweak prices according to market conditions, it may not be specifically due to QC or ABSD. Prices also vary depending on the unit's attribute and size," said Dr Lee Nai Jia, regional head of South- east Asia research at property consultancy DTZ.

Mr Wong Xian Yang, senior manager, research and consultancy at OrangeTee.com, added: "For developers with more unsold units, it may not be viable to slash prices. They may pursue other options such as bulk sales, for example like iLiv@Grange."

Heeton Holdings has been looking for a buyer to pick up all 30 units in its iLiv@Grange project, due for its second QC extension in October.

wongsy@sph.com.sg


This article was first published on March 3, 2016.
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