ABSD hike may see more investing in property SPVs

The significant jump in the additional buyers' stamp duty (ABSD) for corporate entities has made it more compelling for them to buy shares in special purpose vehicles (SPVs) that own properties, rather than purchase apartments directly.

At least two such potential deals have been advertised in the last two days. On Tuesday, there was an advertisement in The Business Times for the sale of 36 units at Goodwood Residence, through an SPV that owns the apartments.



Yesterday, 21 Anderson was put on the market, Royal Oak Residence, with a similar arrangement as one of the available purchase options.

Transaction of real estate through SPVs is not a new phenomenon. But the government's latest move to raise the ABSD to a hefty 15 per cent from 10 per cent for corporate entities has made it more compelling for companies to consider this route.

This is because the ABSD applies only when investors buy the units of a development directly. But it does not apply when the transaction is through the sale of shares in companies, even if they own real estate.

Corporate entities were one of the groups that were the hardest hit by the ABSD, which was raised to a hefty 15 per cent over a week ago. When the ABSD was first introduced at end 2011, these buyers had to pay an ABSD of 10 per cent. ABSD comes on top of the 3 per cent buyer's stamp duty.

Source: Business Times –24 January 2013