Singapore’s recent unwinding of some property curbs, which initially appeared to boost prospects for developers, may instead be creating new problems. After regulators closed a tax loophole that allowed developers to offload apartments in bulk to institutional investors and wealthy Singaporeans, many of the city state’s builders now face an unpalatable choice: discount unsold luxury homes or pay stiff penalties for missing government-mandated sales deadlines. Opting for discounts could push home prices even lower, prolonging a three-year slide in property values. The alternative could be even more costly. About 2,098 homes remain unsold in 57 projects and penalties on these could total about S$647 million (US$463 million) this year, according to industry estimates based on official data. “This could incentivise them to give greater discounts to buyers who have been waiting on the sidelines for further price corrections,” said Christine Li, director of research at Cushman & Wakefield in Singapore. “Paying the penalties will still be the last resort.” She believed weaker developers might give steeper discounts while major ones held out. This could incentivise them to give greater discounts to buyers ... Paying the penalties will still be the last resort Christine Li, Cushman and Wakefield The city state, which has one of the highest rates of home ownership in the world, also has among the most stringent regulations. Under regulations aimed at preventing land hoarding, all property developers with non-Singaporean shareholders or directors are required to complete construction of projects and obtain a temporary occupation permit within five years of land acquisitions. They have a further two years to sell the apartments or face fines. Since December 2011, developers have been given a five-year deadline to sell all units in a development or pay at least 10 per cent of the land price as a penalty. One way around that was the bulk sale of apartments through a share transfer to big investors, which pay a lower stamp duty than individual buyers. With the rule changes last month, that loophole has been shut by equalising the tax rates. The tax advantage, and a 20 per cent decline in luxury home prices since 2013, helped buyers such as Blackstone Group and wealthy investors cherry-pick prime properties. Blackstone has bought a 10-storey apartment block and 18 units in Singapore’s prime residential district since 2014. CapitaLand, Singapore’s largest listed developer, in January sold 45 units at The Nassim, a luxury condominium development near the Orchard Road shopping strip, to Wee Cho Yaw, the city state’s second-richest man. Singapore developer CapitaLand takes the long-term view on China City Developments, the city state’s second-largest developer, sold its Nouvel 18 project to a group of wealthy Singaporean investors through a S$977.6 million financing deal last year. On March 10, Singapore announced an easing of some restrictions after price declines since 2013 made homes more affordable. The move spurred a sharp rally in the shares of Singapore developers on optimism that prices would recover. Since then, the initial euphoria has faded. CapitaLand, which surged 3.6 per cent on the day the curbs were eased, has since declined 0.5 per cent. City Developments, which jumped 9.3 per cent in the two days following the announcement, has since dropped 2.6 per cent. Wing Tai Holdings jumped 8.1 per cent on the day and has since fallen 1.8 per cent. The government should give developers more time to sell units, and rules related to foreigners holding stakes in developers should be changed, CapitaLand’s Singapore chief executive Wen Khai Meng said last month. Top Global chairman Sukmawati Widjaja offered to buy the remaining shares in the company, which has a market value of S$106 million, citing the potential penalties on unsold apartments.