Further property curbs unlikely

Budget Day is coming up. Will there be anymore changes in the property industry following the most recent announcement on the Additional Buyers Stamp Duty? While the verdict is still out on the effects of the ABSD, property veterans are not expecting big shifts in policies.

Fresh property curbs are unlikely in the upcoming Budget, especially with the market still digesting the hefty additional buyer’s stamp duty (ABSD) on foreign buyers, introduced in December. The ABSD may be tweaked by the end of this year, said participants at BT’s pre-Budget roundtable. But the only property-related measures they expect on Budget Day are extensions of the conservancy charges and property tax rebates. PropNex CEO Mohamed Ismail is of the view that the extra 10 per cent ABSD that foreigners now have to fork out for a residential property is a temporary measure. ‘I don’t think this is a policy for the long-term, I think it’s for a time,’ he said.

Are foreign investors shunning residential property and going for industrial and commercial properties instead? Image courtesy of ThinkStock.

But Citigroup economist Kit Wei Zheng understands this to be a ‘structural and not a cyclical measure – the ABSD is here to stay’. ‘It’s a tax on the capital transaction, a form of capital control even,’ he said, explaining why he thinks the ABSD will remain. ‘It sends a potentially negative message to foreign property investors, but from the government’s perspective, given the scale of gross, not net, capital inflows, the policymakers think it’s justified,’ said Mr Kit of what he called ‘a game-changer’. Hence, while the rate may be tweaked in response to market cycles, or even zero-rated, its presence will stay, he said.

Mr Ismail thinks some changes to the rate will come ‘maybe not at the Budget, but by year-end or so’. ‘The high-end market will be affected and the signalling needs to be considered,’ he said. ‘Foreigners who buy Singapore property are not really looking for rental yield – Singapore has never been a good market to buy for rental yields. Foreigners like Singapore for its capital gains – stability, land-scarce. But if on the capital gains end it loses its shine, the high-end segment will be hit,’ he said. Other major changes are unlikely too, he thinks. ‘I really don’t think anything exciting is going to come out this Budget, this is my personal view. If any other new measure comes out, people are going to totally lose confidence,’ Mr Ismail said.

Property taxes were raised last year, will rebates be given this year to help Singaporeans tide over?

Noting that there have been calls from small businesses for rebates to help with rising office and shop rentals, Mr Ismail thinks these are unlikely too. What may continue, with the post-election ‘Singaporeans-first’ policy priority in mind, are the property tax rebate and rebates on service and conservancy charges, he said. ‘With the economy not so certain, tax rebates for anything five-room and below may help,’ said Mr Ismail. ‘The other incentive to do that, is that it will bring down the consumer price index (CPI) automatically, and the government is still concerned about inflation,’ added Mr Kit.

Editor’s Commentary:
Will your regular Singapore citizen on the ground be able to expect any rebates on property taxes and other incentives to help tide them through the rough year ahead?