Lower developer ABSD rate expected to benefit large collective sale projects more

Following the government's reduction in the Additional Buyer's Stamp Duty (ABSD) clawback rate for developers, Singapore's collective sale market appears to be gaining traction, with several projects relaunching for en bloc sale, including two mega-sites that can yield more than 1,000 units each upon redevelopment.

Analysts interviewed noted that while the revised rules may not have a major impact on the overall en bloc market, it is still a positive development for large collective sale sites, helping to boost developers' confidence in taking on mega-projects.

Several more projects are expected to relaunch their collective sale bids this year, with some potentially lowering their reserve prices in line with market trends.

Large en bloc sites are anticipated to benefit more from this ABSD clawback rate reduction. As private residential projects developed on these parcels can yield over 1,000 units, an unsold 10% equates to around 100 units—a substantial buffer that can significantly alleviate pressure on developers of large sites.

However, as the reduction in the ABSD clawback rate is relatively modest, it is unlikely to have a major impact on the broader collective sale market overall.

Deputy Prime Minister and Minister for Finance Lawrence Wong announced in his Budget 2024 statement that, with immediate effect, developers who sell at least 90% of the units in a residential project within five years of acquiring the site will see a lower ABSD clawback rate. The reduction ranges between 1 and 10 percentage points, depending on the proportion of units sold within the five-year timeline.

For instance, if a developer sells 99% of units within five years, the ABSD clawback rate will be lowered from the original 35% to 25%. If 98% of units are sold, the clawback rate will be 26%, and so forth.

Several Projects Relaunch En Bloc Bids

ABSD has long been a major concern for developers, many of whom worry about their ability to sell all units within five years, leading them to approach large collective sale projects with caution. This regulatory revision should provide a slight boost to their confidence and help improve deal completion rates.

Last year's property cooling measures dampened market sentiment, prompting many projects to halt their collective sale processes. With the market now stabilising, many are expected to relaunch their en bloc tenders.

Unlikely to Shift the Broader Market Landscape

Some owners of en bloc developments may consider lowering their reserve prices in response to prevailing market trends. However, replacement home costs remain high, which owners must factor in when revising prices to avoid limiting their options for replacement housing.

Even if owners reduce their asking prices, developers grappling with rising costs and subdued demand remain prudent in land acquisitions, especially when it comes to large-scale sites.

Large collective sale deals frequently hit roadblocks, primarily due to the wide gap in price expectations between developers and owners. While the move to lower the ABSD clawback rate is welcome, it ultimately falls short of resolving the fundamental hurdles faced by mega en bloc sites and is unlikely to fundamentally alter the market landscape.