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reporter2
22-02-16, 16:01
http://www.straitstimes.com/forum/letters-in-print/developers-must-find-ways-to-deal-with-property-curbs

Developers must find ways to deal with property curbs


The Real Estate Developers' Association of Singapore (Redas) has persistently called for the Government to remove some of the measures that were intended to control runaway property prices ("Time to ease property curbs, say developers"; last Friday).

It seems that developers are getting nervous, as the five-year deadline for them to complete and sell all units, under the qualifying certificate and additional buyer's stamp duty rules, approaches.

Did these rules slip their minds when they were assessing the various scenarios before putting in a bid for land sites?

Instead of asking the Government to calibrate the cooling measures, I suggest they face reality and start cutting prices to move inventories.

Two other reports on the same day caught my eye ("Luxury home price slump draws interest from funds" and "Strong turnout, healthy bids for Yio Chu Kang EC site").

I can draw two conclusions from these reports.

First, developers know their risk-reward composition, seen in the fact that 10 developers are still keen to bid for residential sites, despite the current climate.

Second, the state of our property market is not so dire, since local and overseas funds still see opportunities.

The property business can take a leaf out of the book of other sectors.

The retail and food and beverage sectors, and small and medium-sized enterprises have long pleaded for lower foreign worker levies, as they traditionally rely on cheap foreign labour.

With their requests denied, some are adopting automation and redesigning workloads.

Property developers seem to prefer to lean on the Government to make things easier for them, rather than seek novel ways to sell their projects. They can do better.

All should be prepared to see lower profits. After all, isn't this part of the cycle? But, if a product is at the right price, and the current market sentiment is factored in, buyers will turn up.

So, instead of lobbying ministers at every opportunity, developers should bite the bullet and start drawing up new plans to sell their units.

Derek Seet Chang Hui

watchlist88
23-02-16, 21:56
Well, developers are still putting very high land bids even with cooling measures in place. Given that land bid is the single most important factor that determines the selling price, ask yourself why they are bidding so high and then asking the government to give them chance, remove ABSD, QC charges etc. It is all profit driven mentality to pass down the land cost to the buyers of their projects so the developers won't lose anything. And they still gain their profits selling to you ! Nothing much to pity those at REDAS and their counterparts. I fully support the government to maintain cooling measures ... can't imagine the land bid price will have shot up to what levels without it.

Kelonguni
23-02-16, 22:46
I believe they are asking Govt to give buyers a chance.

Talk about GST and COE, everybody agrees down better. Nobody will actually ask for them to be increased to keep prices affordable.

Asking for tax increase for developers is asking for the costs to go up. Good luck if you are hoping to buy thereafter with the cut in future supply.

Be careful of what you wish for or you might just get it.


Well, developers are still putting very high land bids even with cooling measures in place. Given that land bid is the single most important factor that determines the selling price, ask yourself why they are bidding so high and then asking the government to give them chance, remove ABSD, QC charges etc. It is all profit driven mentality to pass down the land cost to the buyers of their projects so the developers won't lose anything. And they still gain their profits selling to you ! Nothing much to pity those at REDAS and their counterparts. I fully support the government to maintain cooling measures ... can't imagine the land bid price will have shot up to what levels without it.

watchlist88
24-02-16, 09:30
Hi Bro Kelonguni,

The original intention of the taxes on developers is because the government cannot control free market forces on how they price the land bid, so they try to tame the developers by imposing the ABSD & QC taxes. The signal to them is not to not to be too optimistic cause if they can’t complete in time and sell fully, be prepared to be taxed.

Therefore, I don’t get what you mean by developers passing on their taxes to buyers and causing higher prices ?

I can only think of 2 ways they can pass on to buyers but that is not sensible if they want to clear their unsold units :

1) They add on the taxes to existing project with unsold units. This will translate to higher PSF, so it will be even worse cause buyers will smell it a mile away.
2) They distribute the taxes from the project into other existing projects or future projects. This will similarly translate into slightly higher PSF but in poor market conditions with wary buyers, will not work well either. Note that there is a cumulative effect too because if they have many projects that are taxed, then the cumulative effect of distributing into other projects may put them into a position of not being price competitive with other developers.

As for the reduced land sales programme, we know that developers are hungry for land banks now to develop projects so they are still bidding pretty high for the land. Therefore, if I am the policy maker, my original intention is that the ABSB & QC taxes on the developers was to tame the developers and it is not working as well as I thought. So what should I do next ? I definitely cannot remove it as it will cause land price bids to shoot up again, thus translating to higher prices for buyers. I may have to think of other ways to tame the developers cause I had successfully tamed the buyers with TDSR and ABSD !

Perhaps you can enlighten us on :
1) How does removing the ABSD & QC taxes on developers give buyers a chance to buy because there is no guarantee that developers will lower their prices ?
2) How the developers can pass on the ABSD & QC taxes to buyers ?

Kelonguni
24-02-16, 10:56
Hi Watchlist88, if only 1 developer pays the charges due to inability to price properly and cope with the charges then the scenario will unfold as you described. But if every other developer pays these charges, these will ultimately be factored in their future prices for buyers. Currently, we still have high supply so due to abundant choices, buyers can still flit around and there is no way developers can jack up price currently to cover tax. But with the severe reduction in new GLS over the next few years, the existing supply will be absorbed in a few years, and the time coincides with the time when many developers will start paying the QCs. That will also be the same time when GLS prices may go sky high for developers to replenish land banks, so there is leeway for these taxes to be passed to new buyers.

We can take time to ponder on whether the reasoning is logical.


Hi Bro Kelonguni,

The original intention of the taxes on developers is because the government cannot control free market forces on how they price the land bid, so they try to tame the developers by imposing the ABSD & QC taxes. The signal to them is not to not to be too optimistic cause if they can’t complete in time and sell fully, be prepared to be taxed.

Therefore, I don’t get what you mean by developers passing on their taxes to buyers and causing higher prices ?

I can only think of 2 ways they can pass on to buyers but that is not sensible if they want to clear their unsold units :

1) They add on the taxes to existing project with unsold units. This will translate to higher PSF, so it will be even worse cause buyers will smell it a mile away.
2) They distribute the taxes from the project into other existing projects or future projects. This will similarly translate into slightly higher PSF but in poor market conditions with wary buyers, will not work well either. Note that there is a cumulative effect too because if they have many projects that are taxed, then the cumulative effect of distributing into other projects may put them into a position of not being price competitive with other developers.

As for the reduced land sales programme, we know that developers are hungry for land banks now to develop projects so they are still bidding pretty high for the land. Therefore, if I am the policy maker, my original intention is that the ABSB & QC taxes on the developers was to tame the developers and it is not working as well as I thought. So what should I do next ? I definitely cannot remove it as it will cause land price bids to shoot up again, thus translating to higher prices for buyers. I may have to think of other ways to tame the developers cause I had successfully tamed the buyers with TDSR and ABSD !

Perhaps you can enlighten us on :
1) How does removing the ABSD & QC taxes on developers give buyers a chance to buy because there is no guarantee that developers will lower their prices ?
2) How the developers can pass on the ABSD & QC taxes to buyers ?