ABSD tweak, housing affordability, urban rejuvenation lead property players’ Budget wish list

Property players are calling for market cooling measures to be relaxed and for more to be done to tackle housing affordability ahead of Budget 2025 in February.

They also pressed for more efforts in promoting urban renewal, whether through the collective sales market or incentive schemes. This will help ensure sustainable growth in Singapore’s real estate market, while maintaining its position as a wealth hub, they said. 

There is scope for the Additional Buyer’s Stamp Duty (ABSD) regime to be tweaked to ensure that genuine homebuyers, such as first time-buyers or buyers looking to right-size to smaller private homes are not negatively impacted, said Ismail Gafoor, PropNex’s chief executive officer.

Under the current ABSD regime, a Singaporean family looking to upgrade from an HDB flat to a S$2 million private residential property will have to pay S$400,000 in ABSD should they decide to buy their new home first before selling their current one, said ERA Singapore’s chief executive officer Marcus Chu.

Helping genuine homebuyers

ABSD remission applies only to married couples where at least one party is a Singaporean citizen and single Singaporean seniors right-sizing to a lower-value private property. They would have to pay the ABSD first and then apply for a refund later. 

ERA’s Chu noted that this is “impractical and unrealistic” as many Singaporeans are “genuine upgraders, and not multi-property investors”. 

There may also be a need to review the executive condominium (EC) model which has become unsustainable amid rising prices, Chu said. 

He said: “Based on the maximum household income ceiling of S$16,000, EC buyers can only borrow a maximum of around S$1 million from the banks. With most new EC prices ranging S$1.3 million to S$1.8 million, most new EC buyers have to come up with significant cash to fund their purchase.”

EC prices have risen 40 per cent from S$1,093 per square foot (psf) in 2019 to S$1,531 psf in 2024, PropNex data indicated.

The mortgage servicing ratio could be raised to 40 per cent from 30 per cent for new EC launches, PropNex’s Gafoor said.

Relaxing ABSD rules

Stringent ABSD rules have also suppressed foreign buyer activity, and there could be room to lower rates to boost demand without compromising local housing affordability, said Galven Tan, Knight Frank Singapore’s chief executive officer. 

Prime non-landed housing sales fell 22.1 per cent in 2024, from S$1.7 billion to S$1.4 billion in 2023, according to Knight Frank data. 

Tan said: “Foreign buyers have historically accounted for only a small percentage of total private residential transactions – just 6 per cent before the pandemic, and an average of 4.7 per cent during the pandemic years. Their activity is largely concentrated within the Core Central Region where properties typically exceed S$5 million and overlap minimally with local housing needs.” 

Tweaking or reducing the land ABSD, which has caused developers significant “distress” would also be welcomed by the industry. 

Developers pay 40 per cent ABSD on land purchased for residential development. Five per cent is non-remittable, and developers have to sell at least 90 per cent of units within five years of acquiring the land to have the clawback rate for the remaining 35 per cent lowered. 

Market watchers have suggested lowering the threshold to qualify for ABSD remission, reducing the land ABSD rate, or extending the five-year timeline. 

Promoting urban renewal 

More can be done to promote continual urban regeneration in land-scarce Singapore, real estate players said. 

Limited land supply will, for instance, restrict the expansion of industrial zones, leading to higher rents and operational costs, said Bastiaan van Beijsterveldt, Colliers Singapore managing director. 

Chua Yang Liang, JLL head of research and consultancy for South-east Asia, believes it is necessary for the public and private sectors to collaborate further in regenerating assets. 

Initiatives such as the Strategic Development Incentive (SDI) Scheme and the Central Business District Incentive (CBDI) Scheme are “excellent starting points”, said Chua, but they need to be continually improved to encourage greater cooperation, moving beyond “mere financial incentives”. 

Launched in 2019, the CBDI Scheme aims to liven up the CBD with a broader mix of uses, including residential and hotel components. The SDI Scheme, launched the same year, encourages owners of existing commercial buildings to team up with their neighbours to undertake a comprehensive redevelopment that would transform the street or precinct.

Both schemes’ five-year term ended last November. 

Tan of Knight Frank said the two should be extended and tweaked to give developers a bigger increase in the maximum allowable gross floor area, as well as reduced regulatory costs. 

“These kinds of benefits not only make participation more appealing but also push for sustainability and productivity improvements, helping Singapore achieve its long-term urban goals as a city with a quality living environment,” he added. 

Collective sales play a crucial role in urban renewal as well, but industry experts noted a lacklustre market given the mismatch of price expectations between buyers and sellers, among other challenges. 

ERA’s Chu suggested that older 99-year leasehold developments with less than 60 years remaining should require a lower mandatory consensus of 70 per cent from owners, from the current 80 per cent. 

“This will encourage rejuvenation of older strata developments which may be increasingly becoming an eyesore or even have safety risks as the physical condition of the development deteriorates over time,” he said. 

On the public housing front, Knight Frank research head Leonard Tay highlighted growing concern over ageing HDB flats with expiring leases.  

Currently, around 45 per cent of units – or 550,000 flats – were built between 1971 and 1990, said Tay. “By 2071, mass numbers of HDB units will have tenures nearing expiration, with an additional 100,000 units (or more than 1,000 blocks) hitting this milestone every five years thereafter.” 

Instead of demolishing and rebuilding these buildings, Tay said, sustainable modernisation methods could be embraced to breathe new life into them – in line with Singapore’s sustainability goals while revitalising older estates. 

Experts also pushed for better incentives to encourage transparency in financial reporting. 

EY tax services partner Toh Ai Tee noted that many Singapore-listed real estate investment trusts (S-Reits) are now involved in newer activities, offering services related to co-location and co-working spaces or in environmental, social and governance activities. 

Yet, income earned from such activities are not considered part of S-Reits’ regular property management income, and do not qualify for tax transparency treatment. 

Deloitte Singapore’s mergers and acquisitions tax partner Chai Sook Peng and financial services tax partner Klenn Yeo added that flexibility in tax exemptions can help maintain Singapore’s position as the second-largest Reit market in Asia.

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