Developers would rather pay the ABSD than slash prime home prices: report

Limited supply will help arrest price falls.

Potential property buyers had first hoped that high holding costs will force prime home developers to aggressively cut prices in order to evade hefty stamp duties.

However, it seems that developers are fairly resistant to sharp price cuts, and would rather suffer higher holding costs than offer sharp discounts.

A report by CBRE highlighted the case of Mon Jervois, which has 59 unsold units as at the end of March 2016. The additional buyer's stamp duty (ABSD) which the developer is required to pay by February 2017 has been reported at around $15 million, which translates to about $250,000 per unit.

Caveats lodged for recent sales at Mon Jervois show that units went at an average price of $2.4 million, which means that the ABSD amount translates to nearly 10% per unit.

"On this basis, it may make more sense for any developer who has the financial muscle or long term plans or a business strategy to pay the ABSD instead of making price adjustments. After all, good sites from the GLS programme are hard to come by," CBRE said.

"While there is pressure on prices, the limited prime supply will help to arrest significant price falls," the report added.