The 5 Most Common Mistakes First-Time Buyers Make (And How to Avoid Them)
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TLDR
The ABSD discount arises when developers approach their five-year deadline to sell 90% of units, facing a 40% penalty on land price for unsold units. Although 44 projects from 2021-2023 were extended, reasons remain vague, raising transparency concerns. Critics argue this favors wealthy buyers who can wait for discounts on high-priced units. Developers rarely offer individual unit discounts, even under ABSD penalties. For buyers, sellers, or investors, strategic advice and market insights are crucial due to varying personal circumstances.
If you’re unfamiliar with it, an ABSD discount occurs when a developer is nearing their five-year deadline to complete and sell 90 percent of their units. Failing to achieve this within the specified timeframe results in a significant penalty based on the unsold units (currently, developers face an ABSD of 40 percent on the land price, with 35 percent being refundable if they meet the deadline).
As developers approach this deadline with only a few units remaining, buyers begin to take notice, hoping for potential fire sales. However, for those seeking opportunities this year, I would advise against getting your hopes up.
A total of 44 projects that had deadlines between 2021 and 2023 received extensions on a case-by-case basis. This has sparked numerous questions among stakeholders: why were some projects granted extensions while others were not?
A solid justification for maintaining opacity
The typical replies to inquiries about the extensions have been phrases like “due to extenuating circumstances” or “site-specific delays,” which don’t really provide any clarity. Furthermore, it’s quite challenging to locate the names of the 44 projects involved, as well as any announcements indicating that they were initially requesting extensions.
Many have argued that maintaining this lack of transparency is unjust, citing reasons such as “buyers deserve to know” and the need for a fair system. However, I suspect that the information regarding this issue—much like the rationale behind why certain individuals are permitted to sell their flats before the Minimum Occupation Period (MOP)—is intentionally kept obscure.
Addressing situations on a case-by-case basis is delicate: once an extension or reprieve is granted for one individual circumstance, many others are likely to come forward claiming their situations are similar.
For instance, if one developer receives an extension due to a subcontractor going bankrupt, it’s probable that several others will knock on the door, asserting that they too have had subcontractor issues and thus require a six-month extension. Consequently, government agencies may find themselves overwhelmed trying to justify the differences between various cases.
Therefore, it’s essential for the real estate sector to maintain a level of discretion; we shouldn’t expect too much detail regarding why a developer was granted an extension.
That said, there is an intrinsic unfairness concerning discounts related to ABSD.
If you’re looking for another illustration of how the wealthy continue to accumulate wealth, the discounts related to ABSD serve as a prime example. It’s quite uncommon for the typical Singaporean to take advantage of these discounts, while the affluent can secure substantial savings.
To begin with, the remaining units usually consist of high-priced options, such as penthouses or premium stack units, which often stagnate on the market due to their price tags exceeding $5 million. This price range is simply beyond the reach of the average buyer, even with a discount in play—allowing the wealthiest purchasers to bide their time for reductions of 10, 15, or even 20 percent, while most buyers lack the financial means to capitalize on such opportunities.
Additionally, developers are generally reluctant to offer discounts on individual units. If there are just seven units left, what advantage is there in discounting them when the developer might only sell four or five but still face an ABSD penalty?
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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