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24 Apr

Close to 80 per cent drop in home sales to foreign buyers

Permanent residents (PRs) aside, sales from foreign home buyers have dipped by 78 per cent in Q1. Are these numbers representative of the real estate market in Singapore? Are there untold implications hidden in these numbers?

Home purchases by foreigners plummeted 78 per cent in the first quarter as the effects of the 10 per cent additional buyer’s stamp duty hit hard. Most foreigners have retreated hastily from the market, buying just 293 homes in the first three months of the year, an analysis of caveats by Dennis Wee Group (DWG) found. This is 78 per cent down from the 1,358 homes bought by foreigners in the fourth quarter. Permanent residents (PRs) are not included as foreigners in these figures.

What do the recent residential property prices and sales figure indicate?

Among PRs, home purchases dipped just 7.5 per cent to 790 units, while Singaporean purchases fell 12 per cent. Tough cooling measures unveiled on Dec 8 slapped a 10 per cent additional buyer’s stamp duty on all home purchases by foreigners. But PRs had to fork out only an extra 3 per cent on their second and subsequent home purchases. Experts say the policy shift has caused foreigners to pull out of the market in a knee-jerk reaction as they reevaluate their options.

They say some foreigners might still see long-term potential in Singapore’s property market and are attracted by rebates offered by some developers to cushion the impact of the tax, but others are simply watching and waiting. Mr Lee Sze Teck, senior manager of research and consultancy at DWG, said he expects the number of foreigner purchases to hover at these subdued levels for the next one or two quarters. ‘Whether the foreigner market picks up again depends on prices and whether market conditions are favourable in the later part of the year. If things pick up, then they will be back because Singapore is one of the more stable countries in the region,’ he added. Jones Lang LaSalle’s South-east Asia research head Chua Yang Liang said uncertainty in the global economy might also have taken a toll. The new rules might have prompted more foreigners to rent instead of buy, DWG added. This could have led to median rents of private homes inching up 2 per cent in the first quarter, Mr Lee said.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
As long as Singapore’s political and economic stability is the draw, the property market will continue to be favourable. However, the situation here could also be closely linked to the global markets. What signs should we look out for to more accurately spot risks and property investment opportunities?

16 Apr

Less foreign home buyers in the suburbs

Have restrictions on foreign buying of Singaporean properties really put a hold on home purchasing activity? Reports have shown that numbers are gradually decreasing, but is this dip significant?

The extra taxes recently imposed on home buyers here may have helped put a lid on the hot property market, but some areas continue to be popular and have even seen an increase in sales among Singaporeans and permanent residents (PRs). On the other hand, since the additional buyer’s stamp duty (ABSD) was rolled out, the preference of foreign buyers for homes in the city fringe areas has dropped. Instead, their demand for prime district 9 – which is traditionally popular with foreign buyers – has remained strong, said property expert Nicholas Mak. In his study, the head of research at SLP International Property Consultancy compared the popularity of the various districts in the four months leading to the implementation of the ABSD – August to November last year – and in the four months after, from December to the end of last month. Mr Mak also analysed the number of caveats lodged among the different home buyer segments in those two periods.

Idyllic Suites condominium in Geylang.

These details follow news reports yesterday that $110 million was collected from ABSD takings in the four months since it was rolled out on Dec 8 last year. From then, Singaporeans had to pay 3per cent ABSD for their third and subsequent properties, while PRs did the same on their second and subsequent properties. Foreigners and non-individuals, such as companies, have to pay 10 per cent ABSD on any residential property purchase. The Inland Revenue Authority of Singapore said that a good chunk – $66.2 million – of the ABSD takings came from foreigners who snapped up 369 private homes in the four-month period. In his analysis, Mr Mak said that districts 19, 18, 15 and 14 were the most popular areas among local, PR and foreign home buyers before the ABSD. In the four months after, these districts generally experienced no impact and remained top choices for Singaporean and PR buyers. ‘This could be because of the number of launches in district 19 (Hougang/Punggol), for example,’ Mr Mak said.

Minton private condominium apartments in Hougang.

But he noted that foreigners, who had increasingly bought homes outside the prime districts, have pared back their purchases. For instance, District 14 – which encompasses Geylang and Paya Lebar – was top among foreign buyers before the ABSD was implemented. Post-ABSD, the district does not figure in the top three list of these buyers. The number of caveats lodged by Singaporeans and PRs islandwide has also increased, while those by foreigners and companies have dipped across the board for the various lease types, said Mr Mak. This data supports earlier reports that the tough cooling measures have served the purpose of edging out foreigner-demand for properties. ‘The absence of foreigners gives more opportunities to Singaporeans to buy,’ Mr Mak said.

And such a trend is likely to continue, said Propnex chief executive Mohamed Ismail. ‘I don’t think foreigners will get used to throwing an extra 10 per cent over time… the resistance will continue,’ he said. ‘Those who are still buying are those who have got a discount from the seller, or those who have a long-term perspective and feel that the ABSD will be justified with a higher capital appreciation in the long term.’

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Should Singapore’s real estate sector be left on its own to manage the supply and demand chain plus home pricing? Do locals now have a higher chance of purchasing a property? Or is there a possibility that the ABSD may be more effective in earning revenue through taxes instead of balancing the property market proper?

4 Apr

Private home prices drop – first in 3 years

Is it a case of new is better? As more home buyers and investors are favoring new properties over resale private homes, the latter market has slowed somewhat as signified by the drop in private home prices – the first time in 3 years. What of this new trend?

Private home prices have fallen for the first time in almost three years, according to estimates out yesterday. Overall prices fell 0.1 per cent in the three months to March 31 – the first decline since the global financial crisis in the second quarter of 2009 and a reversal from the 0.2 per cent rise in the fourth quarter last year. The decline had been tipped for a while, given the slowing pace of price increases over the past two years as the Government introduced five rounds of cooling measures. Prices have risen about 55per cent from the middle of 2009 to now. Experts say weaker economic conditions and cooling measures have subdued demand, hitting sales activity and resale prices.

Singapore property prices will continue to rise

The Singapore property market is moving seems to be moving in many different directions. How will policy-makers cope with upcoming trends?

One clear sign of the slowing market is that resale transactions were down by half across all segments in the first quarter over the previous three months. The numbers from the Urban Redevelopment Authority (URA) also point to a tale of two diverging sectors, with the higher-end city centre and fringe homes slumping, while mass-market homes powered ahead. City centre home prices dipped 0.9 per cent, and prices fell 0.7 per cent in city fringe areas. Foreign demand has been fizzling out since a 10 per cent additional buyer’s stamp duty was introduced in December. But suburban prices rose 1.2 per cent – double the 0.6 per cent gain in the previous quarter – thanks largely to a string of popular mixed-development suburban projects and small apartments launched in the period.

While acknowledging the strains on the sector, experts noted the strength of the mass-market homes segment, which has accounted for more than 80 per cent of new home sales so far this year. ERA Realty key executive officer Eugene Lim said the 50 per cent decrease in resale transaction volumes had taken its toll on private residential prices. Ms Chia Siew Chuin, Colliers International’s director of research and advisory, noted: ‘The sustained price increase (for suburban homes) is underpinned by robust demand for new mass-market projects that is fuelled by low interest rates and the continued availability of project launches. ‘Creative promotions and sweeteners dangled by developers to cushion the impact of the additional buyer’s stamp duty have also enticed home buyers to commit.’ For instance, suburban mixed-use projects such as The Hillier and Watertown, priced at between $1,200 and $1,300 per sq ft, helped drive up values in the first quarter.

Watertown condominium in Punggol.

Experts are divided on the likelihood of further cooling measures in the light of yesterday’s figures. Jones Lang LaSalle head of research for South-east Asia Chua Yang Liang noted that it is ‘challenging’ for the Government to deal with a market moving in two different directions. The chance of more measures is higher, given stronger-than-expected growth in suburban home prices, together with record new home sales of more than 3,100 units in February. ‘This divergent market is likely to continue into the second quarter of this year, unless there are further government interventions,’ Dr Chua said. ‘In my opinion, the state could discourage excessive purchases by raising eventual holding costs, such as a temporary increase in residential property tax rate for investment purposes.’

Credo Real Estate executive director Ong Teck Hui added: ‘Had the indices for the city centre, city fringe and suburban segments all declined, the risk of intervention might have been less. ‘But now we have a situation where the suburban segment is bucking the trend, leaving the market with the lingering uncertainty of further cooling measures.’ Colliers’ Ms Chia thinks further cooling measures are unlikely in the short term. A host of factors working to take the heat off record-high home prices, such as the slow resale market, the languishing high-end sector, the bumper supply of state land released, and home buyers’ resistance towards ever-increasing prices are already in play this year, she said. She expects overall prices to fall 5per cent this year, while PropNex chief executive Mohamed Ismail expects city centre and city fringe home prices to fall 5 per cent but suburban prices to rise 3 to 5 per cent. URA’s flash estimates are based on transactions in the first 10 weeks of the quarter. They will be updated in four weeks.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
The resale private homes and HDB flats sectors both seem to have taken a small beating. Will they rebound after all the buzz around new mass-market private residential properties and BTO flats dies down? 

2 Apr

Will more cooling measures be implemented?

Property buying remains high in Q1. But will this instigate the government to roll out even more cooling measures? The last measure was the hike in stamp duty, targeted in particular at foreign home buyers. What else will they come up with to cool the real estate market?

The likelihood of the government implementing a sixth round of cooling measures is now much higher than two months back. That being said, measures, if implemented, are likely to happen only in the second quarter of this year, said Png Poh Soon, head of consultancy and research at Knight Frank. ‘A few months doesn’t really constitute a trend so naturally, the government will look – it may take one to two quarters to observe if this is a sustainable trend or if (the spike in sale volumes) is short-term,’ he said.

New private property sales remain high in Q1 of 2012. Photo by ThinkStock.

Based on Urban Redevelopment Authority (URA) figures for the month of February, a total of 2,413 private homes – excluding executive condominiums (ECs) – were sold, representing a 29 per cent month-on-month jump, and more than double the number sold in the same period last year. Including ECs, a total of 3,138 units were sold in February, up 51 per cent from January’s 2,077 units. The robust buying sentiment has revived conjecture that the government might roll out additional cooling measures. This follows a series of cooling measures which culminated in the implementation of an additional buyer’s stamp duty in December last year.

Said Mr Png: ‘When the sixth round comes in, it could be a refinement of the existing five rounds of cooling measures, or it could be something drastically new. The way I look at it, it’s likely a tightening of existing measures.’ ‘The market is actually in mixed flux. The resale market is quite dead, (but) new sales are doing very well. Is this (a sign of) a very stable and sustainable market? This is a question many people are interested in.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Stable or fluctuating. It is hard to tell within 3 months of the new year. But as we move into Q2, trends may begin to form and it is not too soon to consider the possibility of new cooling measures.

 

28 Mar

HDB upgraders stuck in limbo?

Lower COV prices, more private property deals, ramped up supply of new BTO HDB flats. All good news, it seems. But for HDB upgraders, things may not be looking up, precisely because of these reasons. What considerations do you face if you belong to this group?

With cash-over-valuation (COV) figures – the cash premium paid by buyers over an HDB flat’s valuation – continuing to fall amid a slowing resale market, HDB upgraders are facing an increasingly uphill task of moving into the private market. While HDB has stopped providing overall COV figures for resale flats, data from PropNex Realty, based on the firm’s February resale deals, shows that median COVs have continued to fall in the range of $3,000 to $7,000, except for three-room units. Based on the firm’s January resale deals, median COV across all the flat types dipped by between $3,000 and $6,000. The median COV across all flat types is now about $25,000, compared to $35,000 in the fourth quarter of last year, industry players estimate.

All eyes will be on the HDB resale market this year as the property cooling measures take effect. Are results of a slowdown showing yet?

The lower COVs have made it harder for people upgrading to private property since they will have less cash on hand, noted Chua Chor Hoon, head of Asia Pacific Research at DTZ. HBD upgraders constitute an important source of demand for mass market private projects. The fall in COVs across the island – except for five-room and executive units in a handful of towns – is a harbinger of a weaker HDB resale market in 2012, said Ms Chua. Property watchers said a combination of demand and supply side factors is reining in the HBD resale market by keeping both buyers and sellers on the sidelines. Png Poh Soon, Knight Frank’s head of consultancy and research, added: ‘Prices of resale flats have appreciated significantly. For existing owners, there is no reason for them to sell at a lower price as private properties are not cheap either. To upgrade and avoid taking excessive financial burden, many need to sell off their existing HDB.’  ‘(On the other hand) buyers with financial constraints will turn to BTOs (build-to-order flats) because it is cheaper (while) those who can afford ECs (executive condominiums) believe they are getting a better deal as the price quantum between some resale flats and ECs are very close.’

‘Existing HDB owners looking to sell their units are therefore caught in a bind… Owners of resale units asking for higher prices may have to market their units longer so that they are able to attract the ‘right’ type of buyers. So long as private market prices continue to hold, HDB resale prices should remain stable. If the former increases further, HDB resale prices will also escalate.’ That more alternatives – in the form of the ramp-up in supply of BTO flats and ECs – are now available to buyers has also played a part in lowering demand. ECs, a public-private hybrid, which are sold with condominium-like facilities, may be particularly attractive to buyers, given that the price quantum between some resale flats and ECs is only between 10 and 15 per cent, pointed out Knight Frank’s Mr Png.

Twin Waterfalls Executive Condominium in Punggol.

Various policy changes have further sweetened the allure of ECs. For instance, the monthly household income ceiling was increased from $10,000 to $12,000, making it easier for first-timer households to take the EC route, noted ERA Realty key executive officer Eugene Lim, in a report issued in February. Further, Minister for National Development Khaw Boon Wan’s promise to modify existing balloting rules for second-time buyers looking for BTO flats has further encouraged many to hold back their move into the resale market, he added. ‘Should the new rules substantially increase the number of BTO flats made available to second-time buyers, the HDB resale market may be greatly impacted since these buyers form the bulk of the resale market,’ said ERA’s Mr Lim. ‘When that happens, demand for resale flats will come only from families that have immediate housing needs, those downgrading from private properties, and singles and permanent residents who do not qualify to buy new HDB flats.’

In addition, as part of the cooling measures implemented in August 2010, owners of private property – including overseas residential properties – have to sell their private homes within six months of taking possession of the HDB flat should they purchase HDB resale flats. This is another factor dampening demand. And the price gap between new private properties – with the accompanying attractive discounts and sweeteners offered by developers – and HDB units may not be as big as it may seem, noted Mr Png. ‘While psf prices have increased for private homes, the quantum difference between HDB resale and private units may not be excessively wide. This is because the size of new private homes are shrinking. Potential resale home buyers may prefer new private properties than older HDB resale flats,’ he said.

The new Seawind private residential project in the East Coast.

According to Ong Kah Seng, director at R’ST Research, about one in seven homes sold by developers last year were shoebox apartments (up to 500 sq ft). Buyers snapped up a record 2,037 such units last year. Even as demand is being siphoned from the HDB resale market, recent policy changes, including the minimum occupation period of five years and the lowering of the loan-to-value limit to 60 per cent, alongside low average completion rates of new HDB flats between 2002 and 2010, have resulted in a general supply shortage of resale flats. Supported by a buoyant rental market, more HDB owners also prefer to rent out their HDB units rather than sell it, since they would have to first sell any private property, if they should wish to buy a HDB flat again, after upgrading. ‘Those who are not able to afford to purchase an additional private property will prefer status quo, and sit on a ‘paper gain’,’ suggested Mr Ong. ‘Moreover, the longer term price outlook for HDB resale flats are on the uptrend, particularly those in mature estates which have good property fundamentals.’

MacPherson Residency HDB BTO flats in Geylang, part of HDB's latest March 2012 release of new HDB flats. Photo courtesy of HDB.

In addition, the increase in BTO flats, which mainly helps first-timers, cannot assuage the main bulk of demand for HDB resale flats from second-timers, singles, private property owners, and permanent residents, which remains high, said PropNex Realty’s chief executive, Mohamed Ismail. According to percentage breakdown given by MND, first-timers constitute 23 per cent of total demand. ‘Moreover, BTO flats take three years to be completed, some newly married couples would still prefer to buy a HDB resale flat,’ Mr Mohamed added. In 2011, resale HDB transactions yielded only 24,633 units, a 24 per cent drop from 2010 figures. On the other hand, HDB resale flat prices hit a record high, after posting a 10.7 per cent increase in 2011. Prices increases are expected now to slow.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Has the resale HDB flat market been left in the lurch as other properties such as new private condos, BTO flats and even executive condominiums surge ahead?

24 Mar

Pros and cons of investing in a Shoebox Apartment

3 bedrooms in the space of 5 HDB carpark spaces. Believable and livable? Some say ‘No’ while others see potential profit from rental yields. The debate continues. What do you say? 

News that a developer is cramming three bedrooms into a tiny flat has put the spotlight on the regulations determining such matters, and it appears the builders have plenty of leeway. In fact, developers can put as many rooms into a flat as they like, although the Urban Redevelopment Authority (URA) does review a project’s overall design, site configuration and unit layout to ensure a good living environment. So how Natura, a joint development between Macly Group and Roxy-Pacific Holdings in Hillview, will fare with plans to build 635 sq ft three-bedroom units remains to be seen. Unsurprisingly, potential buyers told The Straits Times that their chief complaint is space constraints.

Natura condominium in Hillview - Are the units really too small to live in?

Mr Heri Setiabudi, who is in his late 30s and works in the supply chain sector, said such an apartment is ‘basically just too small’. ‘If you’re thinking of renting it out, I don’t think people, especially the foreigners, will rent such a small unit… Even if you are single but intend to start a family, (it’s too small),’ he added. A manager who wanted to be known only as Alex, 35, said the units may attract investors who ‘are thinking of… subletting (them) as three separate rooms’. But he said he would not invest in them because of a ‘lack of flexibility’. ‘I don’t think these will be very long-term tenants. I can’t imagine someone who will live there for more than 12 to 24 months.’ A 22-year-old newlywed undergraduate, who wanted to be known only as Mr Ong, said such a flat is not large enough to ‘raise a normal-sized family, which has about two kids on average’.

Real estate consultants were more neutral, with most preferring to adopt a wait-and-see attitude. Mr Tan Kok Keong, OrangeTee’s head of research and consultancy, predicts buyers at Natura will likely be HDB dwellers eager to upgrade to private homes but ‘may be a bit stretched at the moment’. He added that expatriates would likely rent them, but ‘being an untested size, I think it’s a bit challenging for people to hope to get very good rental’. HSR Property Group special adviser Donald Han noted that it was ‘creative’ of the developers to give buyers the option of pulling down a wall between two adjoining rooms to enlarge the space. ‘It could be a marketing technique for one to try selling three bedrooms at a cost-competitive, affordable rate,’ he said, adding that such a concept allowed for ‘flexibility on how you can create more rooms in the future’ and may appeal to newlyweds.

Guillemard Edge condominium by the Macly Group also has small shoebox apartments available.

Mr Colin Tan of Suntec Chesterton International said Natura’s units are comparable to small flats in Hong Kong, but noted that Singaporeans may not be accustomed to the constrained living space. ‘Hong Kong (people) are conditioned (to live in) small flats… Our basic housing is the HDB flat, which is quite big, (so) we don’t have that kind of tolerance,’ he said, adding of the 635 sq ft units: ‘It’s liveable, but you can’t buy too many things.’ OrangeTee’s Mr Tan said consultants will not know how the flats will fare until they are launched, which Macly has said is likely to be next week. ‘The market has shown itself to be very surprising to analysts like me,’ Mr Tan added.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Though these small units may be ideal for singles or expatriates, how feasible are they in the long run if you are looking at property investment? Are they better for owner-occupiers and if so, are the prices too steep?

1 Feb

Prices of Small apartments rising fast

Official numbers have revealed a rise in prices of small apartments – at almost double the speed of larger apartments. Location is still a differentiating factor and in general, property experts are not expecting the prices to drop too drastically.

Prices  for small apartments islandwide as well as for larger apartments outside the Central Region rose about twice as fast as prices of larger apartments in the Central Region last year. This trend, while similar to the one in 2010, was more pronounced last year. According to flash estimates released by the National University of Singapore for its Singapore Residential Price Index (SRPI) series, the sub-index for small apartments islandwide (up to 506 square feet) rose 11.8 per cent for the whole of 2011. Central Region comprises Districts 1-4 (which includes the financial district and Sentosa Cove) and the traditional prime residential districts of 9, 10 and 11. The overall SRPI rose 9.2 per cent last year.

Prices of small apartments in the Central Region are rising especially quickly.

SRPI tracks prices of completed private apartments and condos, excluding executive condos. The current SRPI basket, fixed in December 2009, comprises 363 private residential projects completed from October 1998 to September 2009. NUS’s Institute of Real Estate Studies (IRES), which compiles the index, is revising the basket and the new basket will be reflected in the SRPI for January 2012. Among other things, IRES will add some projects completed between October 2009 and September 2011. These projects must have at least 40 units each and be relatively well transacted. At the same, IRES is expected to remove from its basket projects which are over 10 years old.

Urban Redevelopment Authority figures released recently show that developers sold 15,904 private homes in 2011, down 2.4 per cent from the record 16,292 units in 2010. Including ECs – a public-private housing hybrid – developer sales totalled a record 18,787 units in 2011, up 8.3 per cent from 2010. Some consultants suggest that home buying could come off 10-20 per cent in 2012, given the weaker economy and the recently introduced additional buyer’s stamp duty which seeks to cool home buying by investors and foreigners.  However, some market watchers note that going by anecdotal evidence at least, interest remains strong among Singaporeans. ‘People say they believe prices are not going to come down too much. They’re waiting to buy for upgrading, investment and, in some cases, to provide an annuity for retirement, ie, rental income,’ says DTZ South-east Asia chief operating officer Ong Choon Fah. ‘While low interest rates are spurring interest in property, buyers are taking a longer-term view – including the limited supply of land in Singapore.’

Is the luxury real estate market in a glut? Helios Residences by Wing Tai Holdings Limited in Cairnhill Circle.

Knight Frank chairman Tan Tiong Cheng reckons that a price reduction of about 10 per cent may be enough to entice most buyers in the mid and mass markets. ‘The high-end still has an oversupply, so a bigger price reduction may be necessary to encourage both local and foreign buying.’ Fragrance Group and World Class Land have sold 181 units at Parc Rosewood condo in Woodlands since Saturday. The average price is $960 per square foot. The five-storey, 99-year leasehold project will have 689 apartments. A good mix of units – one, two and three bedders – have been taken up. Singaporeans are believed to account for 80-85 per cent of buyers, with permanent residents making up the rest. Buyers comprise singles, young couples, families and investors – some living in the surrounding Woodlands area.

Far East Organization, Fraser Centrepoint and Sekisui House continue to achieve impressive sales at Watertown in Punggol, moving  148 more units over the weekend. They have now sold 744 units in the project since Jan 18. Transacted prices range from $980 psf to $1,500 psf. So far, 901 of the project’s 992 units have been released. The most popular are the one and two-bedroom suites (527-646 sq ft) and the two- and three-bedroom units (904-1,259 sq ft). All 385 suites have been been sold. Ninety per cent of the project’s buyers are Singaporeans. Market watchers credit strong sales to the developers’ marketing strategy, offering much-coveted waterfront living integrated with a mall (Waterway Point) and the Punggol MRT Station.

Mixed-used developments such as The Hillier are hot properties to watch this year.

Next to the upcoming Hillview MRT Station, where Far East is developing another mixed-use project, The Hillier, the property giant found buyers for another 26 residential units over the weekend, taking total sales to 386 units. It has released 479 of the project’s 528 units. The most popular are one-bedroom Soho-style apartments (506-624 sq ft). Singaporeans account for over 80 per cent of buyers. Far East also sold 19 units at other projects over the weekend.

The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
Will home buyers be tempted to invest in property with the intent to rent it out? Is the minimum-occupation-period enough of a deterrent in preventing property speculation?

 

17 Dec

Stamp Duty increase might not go away

The new stamp duty increment might be here to stay. Or so analysts think. What circumstances may make it go away? Will a softening property market be reason enough to eventually do away with this huge rise?

The new buyer’s stamp duty could be a permanent fixture and stay in place even after the property market cools, according to Bank of America Merrill Lynch. Property measures imposed in 1996 to differentiate between foreigners and locals were eventually rescinded but this time it is different, said bank economist Chua Hak Bin. ‘The 1996 measures were seen as more of a move to cool the market, but this round seems more like a political move,’ he said. He added that the latest steps are in line with the Government’s aim to differentiate the privileges and rights of Singaporeans, permanent residents and foreigners.

Is buying a home becoming more difficult with the new stamp duties in place?

Dr Chua noted that differentiated pricing and treatment in employment rules and services like health care and education have already been imposed, following concerns among Singaporeans about living costs, congestion and the influx of foreigners. Under the new measures, foreigners must pay an extra 10 per cent stamp duty when they buy a residential property. Permanent residents who buy a second and subsequent residential properties have to pay an additional 3 per cent stamp duty. Singaporeans who buy their third and subsequent properties will also be taxed at an extra 3 per cent. ‘The measures come at a time when foreigners make up around 40 per cent of the luxury market and are seen to be making headway into the mass-market home segment. Singapore is also seen as a good place to park capital,’ said Dr Chua.

The new measures are similar to the ones introduced in 1996, which ruled that foreigners were not allowed to take out Singapore dollar mortgages and could only get a loan-to-value (LTV) of 70 per cent on foreign-currency loans. Permanent residents were also affected and limited to one Singapore-dollar housing loan. These measures were lifted in 2001 after the property market cooled. Dr Chua said there is still room to fine-tune the new measures, which have been labelled overly harsh by businesses and property players. Any relaxation could take several years, he said, and would likely affect measures that do not differentiate between the various buyer types, like the LTV ratios or the seller’s stamp duty.

How will Singapore fare in the global economy next year? Will doing well be reason enough to lower the stamp duty? Image courtesy of thinkstock.

Other market watchers said the fate of the buyer’s stamp duty will depend on how the global economy fares in the year ahead. Associate Professor Sing Tien Foo of the National University of Singapore’s department of real estate cautioned that the effects of the measures could be disastrous if the debt crisis in Europe persists. ‘While the measures will help stabilise the market and eliminate speculators, it will also block liquidity from entering the property market,’ he said. ‘This may result in a sharp downward spiral of prices.’

Source: The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.

Editor’s Commentary:
It may be too early to determine if the economy will revert stamp duties. This may after all, depend on what buyers want and how popular Singapore property remains for foreign investors.

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