http://propertysoul.com/2016/03/11/s...it-comes-true/
Say it until it comes true
March 11, 2016
Play it again, Sam
If you build it, they will come?
But the question is: What make them think that their problem will be solved if the government relax the cooling measures tomorrow?
No one can tell what will happen tomorrow. The uplift of property buying restrictions can be coincided with an untimely stock market clash, financial crisis or economic recession.
In 2005, the government introduced a series of property measures trying to stimulate the property market. That’s when loan-to-value limit was raised from 80 percent to 90 percent. But still, there were few takers.
Many projects in the market now are on sites where developers bought from the government at all time high. But just because developers have submitted a high bid to secure the land parcels doesn’t mean that buyers have to foot the bill.
Two ways to save the bell
There are two feasible solutions to help clearing developers’ outstanding stock:
1. Stimulate the demand
The government can loosen the existing property cooling measures in TDSR, stamp duties and loan-to-value limits. Or it can increase housing demand by import of more foreigners.
On the other hand, developers can offer attractive discounts on their unsold units. Potential buyers might be tempted to take the plunge if the price is right. Lowering prices can make the units more affordable which automatically expands the pool of buyers.
2. Limit the supply
This is under the complete control of Singapore Land Authority. The government has announced that it would cut land sales. But in the first half of 2016, it is still be selling three confirmed residential sites and another eight sites on the reserve list, with the potential to build 7,420 new homes. This is on top of the 7,825 homes from residential sites released by Singapore land sales in second half of 2015.
REDAS claimed that, as of end of last year, there are over 60,000 units in the pipeline and a record 26,500 vacant units.
There is no way for developers to clear their stock if there is incessant supply in the pipeline.
Developers fighting an uphill battle
Developers have five years to sell all units in a residential project, or pay ABSD on the unsold units. REDAS’ Mr Tan estimated that there are some 700 unsold units from 13 projects that will be affected by the Qualifying Certificate rule by the end of this year, with extension charges amounting to S$100 million.
This is under the law that developers have to obtain Temporary Occupation Permit (TOP) for their projects five years after the land sales and sell all the units two years after TOP. Failing to do so, they have to pay extension charges of 8 to 24 percent of the land cost in the subsequent years. Moreover, land purchased after Dec 8, 2011 are subject to ABSD of 10 percent after five years. The first batch of projects to pay ABSD will be in December this year.
Of course, developers can take the easy way out by selling the unsold units to an investment holding subsidiary or a cash-rich corporate buyer. Or they can simply unlist from the Singapore stock exchange.
Look like industry stakeholders have no choice but continue their prayers until they see the silver lining.