Time is running out for developers who purchased land in 2011 with new government rulings. They only have a five year period to build and fully sell all units by next year, 2017.
What happens if they fail to do so? They will face a 10 percent levy on the site’s purchase price plus 5 percent interest. I am not expecting to see any fire sales coming from the developers themselves. I have come across developers who have holding power, and will only relaunch the projects to sell when market sentiments are better.
For projects where more than 60% of the units have already been sold, developers may have additional options available to them. One possible strategy is to set up companies to purchase the remaining unsold units within the development.
Under such an arrangement, the newly established company would pay Additional Buyer’s Stamp Duty (ABSD), currently at 15%, when purchasing the units.
From a financial perspective, developers may compare the cost of paying the 15% ABSD against the alternative of paying the 10% levy on the land purchase price plus 5% interest. Depending on the circumstances, the former may be a more commercially viable option.
Analyzing the above pattern, and how developers will likely react to the looming deadline, I do not expect very drastic cut in their prices, but I am expecting good discounted buying opportunities for investors looking to own a second rental investment.
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