Shun Tak Said to Forfeit Singapore Condo Project as Stamp Duty Bites

Introduced just one week ago, Singapore’s residential cooling measures may have already frozen one project to death, with a report emerging today that Shun Tak Holdings has forfeited its S$556.7 million ($407.5 million) purchase of the High Point condo complex in District 9.

The Hong Kong-listed developer had agreed in a deal announced on 10 December to purchase the condo complex near the Orchard Road shopping district for redevelopment into nearly 100 new homes, and had put down a S$1 million deposit after reaching an agreement with the condo owners.

By 16 December, however, Singapore’s government had reacted to news of a 9 percent increase in home prices over the last year by hiking stamp duty on new home sales by 5 to 15 percentage points for many buyers and restricting lending, with the Business Times reporting today that the sale of High Point has been cancelled.

The scuttled deal, which would have been Singapore’s second-biggest collective sale this year, comes after analysts had predicted a reduction in new home sales in response to the cooling measures and other high-end collective sale attempts ended this week without finding buyer.

Sales Prospects Dim

While Shun Tak did not reply to inquiries regarding its reported abandonment of the project, and Savills, which brokered the collective sale, declined to comment, the reversal would mean that the developer will be forfeiting its S$1 million deposit.

The cancellation would also mean that the developer controlled by gambling heiress Pansy Ho will be walking away from the rights to develop 226,815 square feet (21,071 square metres) of new homes on the 47,606 square foot freehold site.

The decision to give up on the high-end condo project comes as analysts have dimmed their projections for sales in the coming year as the cooling measures are expected to dampen home buyer enthusiasm.

“In view of limited new launch pipeline in 2022, we expect new home sales to trend down from the current 13,000 units to a normalised 9,000 – 10,000 units, while prices could be flat or increase by 1 percent to 3 percent in 2022,” CBRE’s head of research for Southeast Asia Tricia Song said in response to the measures last week.

The government’s housing sales restrictions raised the stamp duty for citizens buying their second homes to 17 percent from 12 percent, while investors picking up their third or subsequent residential properties saw the tax hiked by 10 percentage points to 25 percent.

Permanent residents had the housing transaction taxes raised to 15 percent for purchases of additional properties and the transaction tax for their second home rose to 25 percent while venturing into third and subsequent properties will now be taxed at 30 percent.

For citizens and permanent residents buying their first homes, the taxes were left untouched at 0 percent and 5 percent, respectively.

The new rules also reduced total debt servicing ratios for individuals, which limit the portion of a borrower’s income that can be committed to loan payments, to 55 percent from 60 percent.

Deals Drop

Singapore’s booming housing market, which in November counted its 16^th straight month of rising prices for used homes, had spawned S$2.65 billion in collective sales this year, according to JLL, with that mark more than 20 times the S$127 million recorded in 2020.

Now that streak of collective deals, where owners of individual condos in a complex band together to market their development en bloc for redevelopment, is likely to falter, with major sales already falling flat this week.

An attempt to sell the Lakepoint condo complex in Jurong Lake ended on 22 December with no buyer agreeing to pay the asking price of S$640 million, according to an announcement by Propnex Realty, which is brokering the transaction.

The real estate agency said in a release that negotiations with potential interested parties are continuing for the 309 unit project. If sold, Lakepoint would have surpassed the High Point deal to rank as the second largest collective sale this year after Hoi Hup Realty’s S$815 million purchase of a Thiam Siew Avenue project last month.

For High Point home owners, the sale cancellation is a second bout of disappointment after an attempt to sell the complex at 30 Mount Elizabeth in 2019 had failed to result in a transaction after a previous round of cooling measures introduced in mid-2018 wiped out developer appetite for sites.

After Singapore developers invested S$10.8 billion in 38 successful collective sales in 2018, in the next year the home purchase restrictions helped slash the number of projects sold to just six with those transactions totalling S$490 million.