If you've been renting in Singapore and wondering why costs stay stubbornly high even as new projects keep launching, there's a policy conversation happening right now that could directly change your options. And if you're a developer, an investor, or someone thinking about buying a condo for rental income, this discussion matters to you too. The question being floated is this: should developers be allowed to hold onto a portion of completed condo units as long-term rental stock, without being hammered by ABSD penalties for doing so?
Right now, developers in Singapore face a significant financial penalty if they don't sell all units in a residential project within five years of land acquisition. The current ABSD structure sits at 35% on the land price, with 30% remittable only if that full sell-out condition is met. If even a handful of units remain unsold past the deadline, the clawback kicks in. That's a powerful incentive to clear inventory fast, even at aggressive discounts.
The pipeline ahead is substantial. We're looking at roughly 60,000 to 65,000 private residential units in various stages of planning, launch, or construction. New launch activity in 2026 is shaping up to be around 50% higher than 2024 levels. Yet despite that incoming supply, condo rents haven't collapsed. They've stabilised after a cumulative surge of 40 to 50% post-COVID, with gross yields sitting at roughly 3.5% to 4.0% in the OCR, 3.0% to 3.5% in the RCR, and 2.3% to 3.0% in the CCR.
The underlying problem is structural. When developers are forced to sell everything within five years, they never build up a meaningful rental buffer. Supply hits the market in waves, rents spike during construction delays, then moderate when projects complete. The cycle repeats. Allowing developers to retain a defined portion of units as long-term rentals, without the ABSD clawback, could theoretically smooth those spikes and give renters more stability.
In my view, this is one of the more thoughtful policy ideas I've seen floated in a while. The current ABSD framework is blunt by design. It was built to prevent land banking and speculation, and it works well for that purpose. But it has an unintended side effect: it structurally prevents the private market from ever developing real institutional rental stock at scale.
What I'm seeing on the ground is that tenants, particularly locals waiting for their BTO or resale completion, are caught in a squeeze that policy keeps inadvertently creating. Every time there's a construction delay or a surge in foreign talent arrivals, rents spike hard because there's no buffer stock. Developers don't hold units. Individual landlords can't absorb the demand fast enough. And everyone suffers. A policy adjustment that lets developers designate, say, 10% to 20% of a project as long-term rental inventory could act as that buffer.
Here's the thing most people miss though. This only works if the yield math is viable for developers. At CCR price levels of S$3,000 to S$4,000 psf, gross yields below 3% don't justify holding costs over a long horizon without very generous ABSD relief. In the OCR and RCR, where yields are more respectable, the numbers are more defensible. So any policy that emerges will likely be most impactful in the mass-market and city-fringe segments, which is exactly where rental affordability pressure is most acute for ordinary Singaporeans.
If you're currently renting, this policy discussion signals that policymakers are taking rental affordability seriously. A formal framework for developer-held rental stock won't arrive overnight, but the direction of thinking is toward more supply stability. Don't make long-term housing decisions based on current rent levels alone. If you're a Singaporean renter who qualifies for a BTO, keep that option firmly on the table.
If you're a condo investor, this is a conversation worth watching closely. If developers are eventually allowed to hold rental inventory without penalty, you'd see more professionally managed rental stock entering specific segments. That's not catastrophic for individual landlords, but it does mean the OCR and RCR rental markets could face softer competition dynamics in the medium term. Right now, with yields at 3.5% to 4.0% in the OCR, entry prices in the S$1,500 to S$1,900 psf resale range still make sense for patient investors. I wouldn't panic out of a well-located investment, but I'd be selective about what I buy next and very focused on tenant demand fundamentals.
If you're an HDB upgrader thinking about when to make your move into the private market, this discussion actually reinforces the case for acting with intention rather than urgency. A pipeline of 60,000-plus units, combined with potential policy changes that could increase rental supply, suggests the market isn't going to run away from you dramatically on the upside. What matters more is your own financial timeline, the gap between what you sell your HDB for and what you pay for your next home, and whether you're buying for own occupation or investment.
Singapore's rental market has been caught in a structural loop for years, tight supply spikes rents, new completions ease pressure, delays spike rents again. Allowing developers to retain a portion of units as long-term rental stock without punishing ABSD consequences is a genuinely interesting solution, but the details will determine whether it actually helps tenants or just reshuffles who collects rent. I'll be watching this space carefully. If you want to talk through how any of this affects your specific situation, whether you're buying, selling, or investing, reach out directly. WhatsApp me at +65 97501055 or visit keithtanboonkee.com and let's have a real conversation.
25 years experience · 1,000+ transactions · 4,379 TOP units managed
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