KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research said Sunway Bhd is likely to benefit from the lower stamp duty rate on unsold units in Singapore, announced during the country's Budget 2024 statement last Friday.
Singapore announced a reduced tiered clawback rate for residential property developers' additional buyer's stamp duty (ABSD) effective from Feb 16, 2024.
ABSD on developers was introduced on Dec 8, 2011.
Developers who fail to develop and sell all housing units within a 5-year window are required to pay an ABSD.
HLIB research said the measure was introduced to deter developers from hoarding land.
Those which acquired land on or after Dec 16, 2021, faced a 40 per cent ABSD with an upfront 35 per cent remission. of 10 per cent on the original acquisition price, with an additional 5 per cent interest per annum.
"The reduction in the ABSD clawback rate is seen as a timely and positive initiative by the Singapore government, particularly given the existing cooling measures and the challenging elevated interest rate environment that has made it difficult for developers to sell their entire projects," HLIB research said.
It added however that even for developers who successfully sell 99 per cent of their units, they are still subject to a substantial 25 per cent ABSD.
Considering the high rate, HLIB research said developers are expected to remain motivated to sell all units within the 5-year timeframe.
Sunway currently manages two ongoing projects, Terra Hills and The Continuum, which were respectively launched in February 2023 and April 2023.
As of September 30, 2023, Terra Hills has achieved a 39 per cent take-up rate and is subject to an ABSD 5-year deadline expiring in September 2026, while The Continuum has a 30 per cent take-up rate with an ABSD 5-year deadline set for November 2026.
"Both developments have seen promising uptake, and there is ample time to sell remaining units," said HLIB Research.
In contrast, IOIPG's Marina View project, acquired for SG$1.5 billion in September 2021, is yet to be launched, with the 5-year ABSD deadline also set for September 2026.
In January of this year, the Gross Development Value (GDV) for Marina View was disclosed to be SG$3.5 billion, marking an increase from the initially projected SG$2.58 billion.
"The upward adjustment in GDV and selling prices has provided the group with a larger safety net to absorb the impact of ABSD if it sells less than the full 100 per cent of its units.Assuming 50 per cent of the land cost is allocated to residential development, selling less than 90 per cent of its units would result in an extra SG$187.5 million in ABSD and SG$46.9 million in interest, equating to 6.7 per cent of GDV," the investment bank said.
HLIB research said selling 99 per cent of its units would lead to an additional payment of SG$112.5 million in ABSD and SG$28.1 million in interest, totaling 4 per cent of GDV.
HLIB reiterated its 'Neutral' rating on the sector and highlighted Sunway, Sime Darby Property Bhd, OSK Holdings Bhd, and IOIPG as its preferred choices.