THE IMPACT OF QUALIFYING CERTIFICATE AND ADDITIONAL BUYER'S STAMP DUTY ON DEVELOPERS' LAND ACQUISITION BEHAVIOUR

Abstract

This paper represents one of the few attempts to analyse the impact of the Qualifying Certificate Extension Charge (QCEC) and Additional Buyer’s Stamp Duty (ABSD) from residential developers’ perspective. As the Qualifying Certificate rules are only binding on foreign developers building on private land, while the ABSD affects all developers and all land sites, this unequal distribution of development risk opens room for analysis on whether foreign developers may re-strategise their land acquisition choices between government and private land sources. The impact of their choice on land bidding competitiveness and prices are also assessed. Results from the binary logistic and hedonic regression models reveal that foreign developers increased their demand for less-risky Government Land Sales (GLS) sites after the penalties’ implementation. Initially, after QCEC was rolled out in January 2011, demand only increased marginally and there was little evidence showing an increase in bidding competitiveness and land prices, since rising home prices provided optimism on sales turnover and moderated the QCEC risk. However, after ABSD kicked in in December 2011 and enhanced the development risk on private land, foreign developers’ demand for GLS sites strengthened. Correspondingly, rising bidding competitiveness in the GLS market led to a progressive increase in land prices (6.62% to 30.7% higher than the pre-penalty implementation period). It was only until the past two years where foreign developers seemed to have regarded the QCEC and ABSD risks as a norm given little evidence of a change in land acquisition strategies. Nonetheless, bidding competitiveness and land prices continued their uptrend. This increase was not attributed to developers’ strong desire to acquire less-risky GLS sites, but as a reflection of the general boost in market confidence over the anticipated price recovery in the near term.