By Mr. Propwise
It’s still early days, but in this article we look at the early impact of the ABSD on sales in December 2011, and also some clarifications by the tax authorities on the finer details of whom it applies to.
Clearer guidelines on ABSD
With the revision of the e-Tax Guide by Inland Revenue Authority of Singapore (IRAS), several points of confusion over the ABSD were clarified.
Does ABSD apply on the pre-discount or post-discount price?
As many developers have started to offer cash rebates and vouchers to attract buyers, one question involves the amount of stamp duty that a foreigner has to pay – 10% of the discounted price or of the pre-discount price. The answer to this is that if not all buyers had received the discount and the final price paid is lower than what most other buyers paid, the foreign buyer will have to pay the ABSD based on the pre-discount price.
Will the ABSD be levied on sites with unclear zoning?
On whether the ABSD will be levied on sites with unclear zoning, it was stated that the ABSD will only be levied for sites that are zoned residential in the Master Plan. If the land was rezoned residential when it was not originally so in the Master Plan, the ABSD will have to be paid for the development charge paid for rezoning and remissions will not be applicable. Companies purchasing industrial or commercial buildings that sit on a land zoned residential will also have to pay the ABSD.
Questions on the remission of ABSD
On whether remission will be granted, IRAS stated that remission of the ABSD for sites that yield four or less units may be allowed on a case-by-case basis if the developer is developing the residential properties for sale and is a firm “lawfully carrying on the business of housing development.”
Previously, only licensed developers developing projects yielding five or more units were allowed remission. Should developers purchase more plots of land to amalgamate with their first and the ABSD was not levied on the first plot purchased, whether remission will be granted on the second plot will be considered on a case-by-case basis.
The ABSD will also not be levied on development charges since there is no buyer’s stamp duty (BSD). Inheritance is no longer considered a means of acquiring property, and the date range for a developer to maintain a majority stake in its subsidiary to qualify for remission of ABSD is also qualified.
Fewer private home sales in Dec 2011
With the introduction of the ABSD in early December 2011, private home sales, excluding Executive Condominiums (ECs), have fallen by 63% to 632 units versus November 2011. Including ECs, private home sales fell by 63.9% from the previous month.
The introduction of the new stamp duty also created some buyer’s remorse, as about 100 units (including ECs) were returned to developers, up from 70 in November.
Nonetheless, a record of 18,920 units was sold in 2011, up from 17,344 in 2010. If ECs are excluded from the figure, the total sales for 2011 will be 16,027 units, slightly below the 16,292 units in 2010.
2011 was a record year for home sales, but if December is anything to go by, 2012 will be a much tougher year. The strength of sales in the Year of the Dragon will depend on the economic situation (not looking good at the moment with the lowered guidance given the precarious global situation), the prices set by developers (still unwilling to cut prices aggressively) and the foreign demand (the unknown factor).