Developers get reprieve on completion, sale, ABSD, QC deadlines
Government grants temporary 6-month extension for project completion, sale relating to ABSD remission and project disposal under QC regime.
The government has rolled out temporary relief measures for the property sector, giving developers much-needed breathing room as the Covid-19 pandemic disrupts construction timelines and dampens home sales.
The temporary measures, which kick in immediately, are:
- a six-month extension of the project completion period (PCP) for residential, commercial and industrial development projects;
- a six-month extension for the commencement, completion and sale of housing units in residential development projects relating to Additional Buyer's Stamp Duty (ABSD) remission for housing developers;
- an extension of the PCP and/or disposal period by up to six months for residential development projects under the Qualifying Certificate regime for foreign housing developers; and
- a six-month extension for the sale of the first residential property in relation to ABSD remission for the second residential property bought by a Singaporean married couple.
However, developers and individuals must meet certain criteria to qualify for these reprieves. For instance, to qualify for extension of the ABSD timeline for completion of the residential development and the sale of all units, the land must have been purchased on or before June 1, 2020; and the original timeline for completion and sale of units must expire on or after Feb 1, 2020.
In a joint statement on Wednesday, the Ministry of National Development, Ministry of Finance, Ministry of Law and the Ministry of Trade and Industry said: "The government will continue to ensure that prices for private residential properties remain broadly consistent with economic fundamentals." They also emphasised that the other existing residential property market cooling measures remain in place.
They added: "The government will continue to closely monitor the impact of the pandemic on the progress of work within the construction industry and on the property sector, and will adjust our policies as necessary."
For their part, developers are expected to provide relief and support to their main contractors - especially during the circuit-breaker period - when work progress is disrupted.
The pandemic, together with public-health measures rolled out by governments worldwide, have hampered supply chains and affected labour flows. Meanwhile, the ongoing two-month circuit-breaker in Singapore has resulted in work suspended at construction sites, forced developers to shut their sales galleries and brought house viewings to a standstill. This, in turn, has affected construction timelines and slowed the sales of residential homes.
Karamjit Singh, chief executive of Showsuite Consultancy, said: "While the fundamentals surrounding the housing market remain on relatively firm footing, the disruption brought about by the circuit breaker and slowdown to the economy can well lead to negative sentiments that cause undue distress and panic."
He added the pre-emptive move to extend timelines now - as opposed to when the deadline-crunch is poised to peak - helps to bring about some stability.
While the relief measures are seen as much needed, they did not come as a big surprise to analysts. ERA Realty's head of research & consultancy, Nicholas Mak, said: "The temporary relief measures announced would just neutralise the effects of the circuit breaker period."
Even when the circuit breaker is lifted, it would still take another one to two weeks for property transactions to recover to earlier levels, Mr Mak pointed out.
Vijay Natarajan, property analyst at RHB Securities, told The Business Times: "The measures will give some buffer to developers to sell their residential units over a longer period of time and (allow them) to pace out sales of their project, thus supporting the market. Otherwise, developers would have to cut prices significantly. Already, a price correction is inevitable, given the dismal state of the economy."
According to the Urban Redevelopment Authority, prices of private homes slid one per cent in the first quarter of this year before the circuit breaker kicked in.
Noting that the second quarter will be a washout for sales, Mr Natarajan added: "There will be a price correction for 2020, but it's a question of how much?"
Christine Li, head of research (Singapore and South-east Asia) for Cushman & Wakefield, said: "This will give developers, especially (those with) large developments, some reprieve as some already have challenges meeting the five year ABSD remission deadline."
According to Cushman & Wakefield's calculations, the impact on developments coming up against ABSD and PCP deadlines this year is minimal. It estimates there are over 30 unsold units across five projects with an ABSD deadline in 2020 and 15 projects with about 400 unsold units with an ABSD deadline in 2021.
Ms Li added: "However, the Covid-19 pandemic is unprecedented and developers' new home sales have been severely impacted due to social distancing and the two-month-long lockdown. We are of the view that the extension should not be a one-off measure, as Covid-19 continues to evolve with a potential second and subsequent waves."
Even when the circuit breaker is eventually lifted, social distancing measures will likely remain in place - which will temper crowds at showflats - while the economic malaise will weaken buyer sentiment, market watchers pointed out.
Analysts said residential projects currently being marketed which stand to benefit from the additional breathing room delivered by the measures include SingHaiyi's The Gazania and The Lilium, 10 Evelyn by Amara Holdings, Sloane Residences by co-developers Tiong Seng and Ocean Sky, Selangor Dredging's One Draycott, Meyerhouse by UOL and Kheng Leong as well as Petit Jervois by SC Global.
Welcoming the temporary relief measures, a spokesperson for the Real Estate Developers' Association of Singapore (Redas), said: "Given that the COVID battle is still very volatile and likely to be long-drawn and coupled with major disruptions and economic fallout both in Singapore and globally, we hope the government will continue to monitor the situation closely and provide flexibility to assist the built environment sector return to normalcy."
Pointing out that the pandemic could drag on till year-end, Huttons Asia's head of research Lee Sze Teck suggested that the government look into extending the relief measures from a six-month period to a 12-month period in the case of such a scenario.
Meanwhile, a spokesperson for Frasers Property said that there would be some benefit from the six-month extension in the construction, completion and sale period for residential developments. The spokesperson added: "Given the current uncertain climate and depending on how the pandemic situation evolves, we hope cooling measures can continue to be adjusted accordingly."
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