ABSD clawback has negligible impact to property developers: analyst

They are expected to retain the current playbook of selling as much stock upfront.

Whilst older single property owners seeking to downgrade their flats will see their financial woes eased with the government concessions announced regarding reselling flats, it will overall have little effect for property developers.

The latest iteration of the Singapore Budget saw the announcement of an ABSD concession extended from just married couples to include single people aged 55 years old and above.

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“We think this is focused on a specific segment of the market, it is needs-based, and will likely not move the needle much in terms of spurring sales volume. On the whole, this will help seniors who wish to right-size their housing and to monetise their first property to shore up their retirement adequacy,” said Ismail Gafoor, CEO of PropNex Realty.

Certain market segments will benefit, particularly older properties, said OrangeTee Group’s chief researcher and strategist, Christine Sun.

“These smaller, older resale properties may have been less attractive in the past because of their shorter balance lease and lower potential for capital appreciation. Moreover, some of these buyers who may have turned to 4-room HDB resale flats as they do not need to observe the mandatory 15-month wait-out period, may now turn to buy smaller, resale condos,” Sun noted.

She added that the shift in demand could end up moderating the number of 4-room resale flats sold for a million dollars over the following year– a property type that saw a spike in such deals in 2023.

But whilst it provides some cushion, cash-strapped individuals will still be in trouble, said Alan Cheong, executive director, research & consultancy, Savills Singapore.

“As ABSD is still payable upfront for private replacement properties, those who are cash strapped will not be able to cough up the upfront payment despite being refunded if they sell their first home. Therefore, they have to either rent or find friendly temporary accommodation,” Cheong noted.

This does reduce the weight of money cascading down the housing hierarchy, reducing some pricing pressure on the smaller and older apartments segment of the private market, Cheong said.

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For property developers, analysts said that the impact will be negligible.

“It is unlikely that this change will have a significant impact as most properties are fully sold by the ABSD timeline. Most developers still prefer to sell out their projects as soon as possible to reduce their holding cost,” Sun said.

Nevertheless, the luxury segment may enjoy more benefit from this, as they have been hit hardest by the ABSD increases.

Analysts also noted that developers will still likely try to sell all their properties, or have sold all the properties within the timeframe offered..

“We think that while it offers some flexibility, the rate of reduction is not very significant, and housing developers will still be motivated to try to sell all 100% of the units within the 5-year timeframe,” said Gafoor. 

“For instance, if the developer managed to sell 99% of the units, it is still subjected to a 25% ABSD remission clawback with interest (lowered from 35%) – this is still a hefty sum and a heavy burden on developers,” he added.