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Singapore developers’ tactics over ABSD could lead to intervention

July 3rd, 2012 · No Comments

In an action to surge Singapore’s property sales a number of  Singapore property developers are reimbursing the destructive additional buyer’s stamp duty (ABSD).

Being introduced by the government in late 2011, ABSD was introduced to suppress Singapore’s residential property market.

This has caused many eyebrows raising particularly on the part of regulators and may have to intervene in this new tactic deployed by developers to increase property sales that was crippled by ABSD. Reimbursement of the stamp duty from developer to purchaser has been the cause of several worries over the possible distortion of property and loan values.

 This most recent strategy surpass the ordinary marketing gimmicks of furniture vouchers and discounts to defray ABSD.

A property consultant who refuses to be named told Asia One: “The ABSD reimbursement is being made in this way so that it does not affect the pricing…which may upset their earlier buyers who did not get to enjoy the discount.”

He verified that a full reimbursement of the steepest ABSD rate of 10 per cent to foreigners buying residential property could tantamount to a considerable discount that is not quantified in the Urban Redevelopment Authority’s (URA) records.

Wide scale returns of ABSD could disrupt the government’s policy to uphold transparency in the market, according to industry assessors.

Sales caveats may not reveal the actual purchase price of the property as “discounts” are given only after the buyer has completed the transaction, in contrast to discounts which are accounted for into the reported transacted price.

In reply to Business Times queries, the Ministry of National Development (MND) said: “As long as they do not distort prices, there is no need for the government to intervene against such business decisions and practices.

“We will therefore continue to monitor the market closely for now to ensure transparency.”

Developers, wholly or partially, reimbursing the ABSD include Cheung Kong (Holdings) Ltd, Far East Organisation, Allgreen Properties and Aspial Corporation’s World Class Land.

Projects involved range from high-end to mass-market developments. Cheung Kong, Hongkong Land and Keppel Land are jointly developing Marina Bay Suites in the Marina Bay area; Thomson Grand in Upper Thomson – a Cheung Kong project; an Allgreen project, Holland Residences in the Holland Road area.

Ever since the implementation of its reimbursement scheme in February, Cheung Kong has sold just about 165 units at Thomson Grand; around ten per cent of sales were to foreigners. Units retailed between US$1,250-1,450 per square foot.

Marina Bay Suites’ management said: “more than 70 per cent of the units have been sold and we continue to sell our apartments through private previews and regional road shows, some of which were done in partnership with marketing agents.”

Keppel Land has made appropriate clarification that it does not offer ABSD reimbursements for its solo projects.

A spokesman from Property Enterprises Development (Singapore), Cheung Kong’s subsidiary said: “The reimbursement of ABSD will be payable to the purchasers upon the payment of the 20 per cent of the purchase price, the proof of the Certificate of Stamp Duty on the Agreement and the duly executed sales-and-purchase agreement.”

The Real Estate Developers’ Association of Singapore (REDAS) said: “it supports MND’s decision on fair and transparent practices which will enable homebuyers to make an informed decision.

In addition to price transparency the practice of ABSD reimbursement has raised concern over the distortion of loan value.

Ku Swee Yong, CEO of International Property Advisor said: “Buyers who take loans should declare the value of such incentives to the banks when they apply for the loan by giving the bankers the Offer to Purchase and all other side letters. Otherwise the loan-to-value ratios might exceed MAS’s limit.”

The Monetary Authority of Singapore (MAS) corroborated that when securing home loans, consumers should reveal to the bank any rebates or discounts obtained from the seller or any other party in the transaction. The bank will subtract any discount, rebate or any other benefit offered from the purchase price previous to calculating the loan amount, according to Asia One.

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