Should Owners in Old Condo En Bloc Sales Get ABSD Concessions on Replacement Homes?

Minister for Law Edwin Tong told Parliament on 8 September that urban renewal is “not merely desirable, but really imperative”. Changes to the Land Titles (Strata) Act passed that day lower consent thresholds for older developments. Developments aged 40 to 59 years will need 70 per cent consent for a collective sale, while those aged 60 years and up will need 65 per cent. Thresholds remain at 90 per cent for developments less than 10 years old, and 80 per cent for those aged 10 to 39 years.

As buildings age, upkeep costs rise: cracking and spalling of concrete, structural repairs, and the life-cycle costs of major building components such as lift shafts. Strata owners face growing maintenance fees and sinking-fund contributions. About one in 20 non-landed private residential units are aged 40 years or older, or around 20,000 homes in close to 250 developments, and the number will only grow. Redevelopment generates economic activity, and a condominium sold en bloc may yield many more homes, as well as units that better meet modern needs.

Yee notes that some elderly homeowners may not want to move, especially if frail, and that a developer acquiring an en bloc site typically offers affected owners much less rehousing help than the Housing and Development Board gives to owners of public flats under the Selective En bloc Redevelopment Scheme, or Sers. The second hurdle is ABSD, which can be a major stumbling block for owners of units sold en bloc who want to buy a replacement home. ABSD does not apply to non-residential properties.

ABSD rates for a Singapore citizen are not applicable on a first home, 20 per cent on a second home and 30 per cent on a third and subsequent home. For a permanent resident, the rates are 5 per cent, 30 per cent and 35 per cent respectively. A non-PR foreigner pays 60 per cent on any home, and an entity pays 65 per cent on any home, according to IRAS data cited in the article. Yee gives two examples. A citizen who owns a large old flat for owner-occupation and another smaller investment home would pay 20 per cent ABSD to buy a replacement home if the owner-occupied flat is sold en bloc. A non-PR foreigner buying a replacement home after selling a Singapore residential unit en bloc would pay 60 per cent ABSD.

Yee suggests that, for owners of developments that are 40 years and older who sell in an en bloc sale, a lower ABSD could apply: 6 per cent for a citizen buying a second home, 8 per cent for a PR buying a second home and 12 per cent for a non-PR foreigner buying a first home. He suggests these lower rates apply only when the affected owner buys the replacement home within, say, a year of completing the en bloc sale. He also asks whether more help could be extended to elderly homeowners in finding a suitable replacement home and moving house.

He acknowledges the purpose of the current ABSD regime, which gives citizens buying a first home clear priority over others and helps reduce speculation. His argument is that making ABSD less of a hurdle for owners of old non-landed developments could make them more receptive to a possible en bloc sale, and speed up redevelopment.