Unsold Condo Units In Singapore
DEVELOPERS have collectively paid up to $55.1 million in extension fees for unsold units in Singapore private condo projects since 2012. They could potentially fork out another $80.7 million to extend the sales period for another year if they do not sell their inventory by year-end.
A total of 24 condo projects, mostly high-end ones, are still not fully sold two years after receiving their temporary occupation permits (TOPs) between 2010 and 2012. All developers with non-Singaporean shareholders or directors need to obtain QCs to buy private land for new projects because they are deemed "foreign developers" under the Residential Property Act (RPA). This means the QC rules apply to all listed developers. Privately owned Far East Organization and Hoi Hup are among the few developers exempted from the rules.
Given that the QCs allow developers up to five years to finish building a project and two more years to sell all the units, the heat is on developers to clear their unsold units in Singapore.
To extend the sales period, developers pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent from the third year onwards. The charges are pro-rated based on unsold units in Singapore.
Some market watchers noted that the QC rules should mark a distinction between larger and smaller projects, given that it takes a longer time to move all the unsold condo units in Singapore.
Century21 chief executive officer Ku Swee Yong said that demand for high-end projects had been hit hardest by higher additional buyers' stamp duty (ABSD) since January 2013 and a borrowing cap under the total debt servicing ratio (TDSR) since June last year.
Even if a developer decides to set up an investment company to buy the unsold condo units in Singaporeand rent them out, the company could be hit by a 15 per cent ABSD and is restricted by a loan-to-value limit of 20 per cent.