CAPITALAND LIMITED (SGX:C31)
CITY DEVELOPMENTS LIMITED (SGX:C09)
Singapore Residential Sector - Some Help Arrives With Timeline Extension
- Extension of Project Completion Period (PCP), Additional Buyer’s Stamp Duty (ABSD) and Qualifying Certificate (QC) deadlines by six months with conditions.
- Much needed relief given supply chain and operational disruption.
- Preferred SG developer picks: CapitaLand (SGX:C31) and City Developments (SGX:C09).
Temporary relief measures to support developers and individuals
- Singapore’s Ministry of National Development (MND) announced on 6 May 2020 some temporary relief measures to lend support to property developers and individuals due to the adverse impact from COVID-19 pandemic. These measures would be implemented with immediate effect, and include
- an extension of the Project Completion Period (PCP) for residential, commercial and industrial development projects by six months;
- extension by six months for the commencement, completion and sale of all housing units in residential development projects for the remission of the Additional Buyer’s Stamp Duty (ABSD) for housing developers;
- extension of the PCP and/or disposal period by six months for foreign housing developers under the Qualifying Certificate (QC) regime, and
- extension of time by six months for the sale of the first residential property for the remission of ABSD for the second home purchase by a Singaporean married couple.
- As a recap, under the ABSD regulation, housing developers are subject to a non-remittable ABSD rate of 5%, and they are to commence, complete and sell all housing units within five years from the purchase of land, or they will be subject to a 25% ABSD on the purchase of the land.
- The new temporary relief measure would provide some breathing space for developers. We believe they would be able to better pace out their launches and there would also be less pressure for them to offer wider discounts in the near-term. This new measure applies to land which was purchased on or before 1 Jun 2020, and the original timeline for completion of the residential development and sale of all housing units in the development must expire on or after 1 Feb 2020.
- Under the QC regime, which was tweaked on 6 Feb 2020, a developer that is not considered a Singapore company is required to complete a project development within five years and to dispose all units within two years of completion. Failure to meet these requirements would subject the developer to extension charges amounting to 8% of the land purchase price for the first year of extension (pro-rated by the number of unsold units), 16% for the second year and 24% for the third and subsequent years. This does not apply to land bought from Government Land Sales.
- To qualify for the waiver of extension charges under the new temporary relief measure, approval requiring the completion and sale of all units in the residential development must be issued on or before 1 Jun 2020, and the original timeline for completion and sale of units in the residential development must expire on or after 1 Feb 2020.
Further policy easing possible should fundamentals deteriorate further
- The rationale for the aforementioned timeline extensions is because of the disruption to supply chains, manpower and sales operations, given the suspension of work at construction sites and closure of developer showflats during the ‘Circuit Breaker’ period.
- We are not surprised with the government’s latest initiative and had highlighted in our 21 Apr 2020 report that we believe there was increasing scope for the Singapore government to potentially recalibrate some of its housing policies, given the dampening effects of COVID-19, and that it is not far-fetched to suggest that some measures such as an extension of ABSD timelines for developers and review of Sellers Stamp Duty (SSD) may be considered in the near-term.
- MND also mentioned that the authorities will continue to ensure that prices for private residential properties remain broadly consistent with economic fundamentals. Given expectations of an economic contraction this year, we believe the government will tolerate home prices moving in the negative territory, but there is room to provide further policy support should the decline come in worse than the government’s expectations. We are projecting private residential prices to fall by 5-10% in 2020.
- Within the Singapore developers sector, our preferred picks are CapitaLand (SGX:C31) and City Developments (SGX:C09).
- CapitaLand Share Price; CapitaLand Target Price; CapitaLand Analyst Reports; CapitaLand Dividend History; CapitaLand Announcements; CapitaLand Latest News.
- City Developments Share Price; City Developments Target Price; City Developments Analyst Reports; City Developments Dividend History; City Developments Announcements; City Developments Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-05-08
SGX Stock
Analyst Report
3.99
DOWN
4.240
12.010
SAME
12.010
