Property sector update

Here is a report by Kim Eng Research about the latest implementation of additional buyer’s stamp duty (ABSD) in the Singapore property market.

Kim Eng is expecting a drop of 10 – 20% in mass-market home prices next year due to the new cooling measure.

But what we find most interesting about the report is the list showing foreigner as a percentage of total buyers for selected new projects – these range from 2% for The Greenwich to a whopping 56% for Silversea!

Click the link below to read the full report:
http://www.scribd.com/fullscreen/75444842?access_key=key-jez0skaiifz11m92z52

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Now is not the time to cool private property market…really?!

The wife and I came across this article by Mr Andrew da Roza in the forum page of The Straits Times yesterday.

Reference: Now is not the time to cool private property market

While only time will tell if the Government’s latest set of property cooling measures is counter-intuitive, we felt that Mr da Roza’s arguments against the additional buyer’s stamp duty (ABSD) for foreigners are flawed on at least two counts:

1.   There is a fundamental difference between immigrant and foreigner. Based on several on-line definitions of the former, an immigrant is a person who leaves one country to settle permanently in another. Taking this definition of immigrant within the Singapore context, one would be referring to PRs and “new citizens”, i.e. those who are prepared to sink their roots in Singapore and contribute towards the betterment of our country. This is opposed to foreigners who are just working here (because the prospects for them in Singapore are currently better than what they can find elsewhere, but they will not hesitate to move once the situation changes) or foreign investors (who are moving money into Singapore because it currently offers the best returns/stability, but will pull their money out at the first sign of change ).
The new set of property control measures already allow PRs and Citizens to own at least one property without having to pay the ABSD. This should help fulfil the aspirations of home-ownership for these two groups of people living in Singapore. And should they wish to purchase additional properties for investment (read: profit) purposes, the Government has no obligation to help them.
As far as foreigners who are working or investing in Singapore are concerned, they are mostly here under the notion of “greener pastures”. And once the economic situation deteriorates, those who can find alternative employment/investment elsewhere will move – a fact acknowledged by Mr da Roza.
Given such, the wife and I question the wisdom of trying to “attract” foreigners (and their money) into Singapore by providing them with a level playing field for private property purchase.

2.   Mr da Roza also mentioned that “even China and Hong Kong have relented in the face of imminent global recession and are moving to lift their property cooling measures”. The wife and I are particularly interested to know where he gets his facts from. The information we have gathered suggests that both China and Hong Kong are still very determined to keep property prices in check, but they will consider relaxing their property cooling measures if the global economic situation starts to affect local property prices adversely. We believe this is the same stand that our Government will adopt. The whole premise of the ABSD is not to crash the property market, rather to prevent a property bubble from emerging.

And contrary to Mr da Roza’s final comments, if something is not done to rein in the sky-high property prices that are still prevalent despite the economic problems that have surfaced around the world, potential buyers such as Ms Lim and Ms Yang are more likely to be left holding negative equity in their new matrimonial homes should they decide to plunge into the property market now…


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Discounts galore from developers post-ABSD…

Developers are already offering packages on homes to offset the stiff new stamp duty measures that came into effect only two days ago.

Far East Organization is offering a 5% relief package to affected buyers at all of its already-launched projects.

It will reimburse buyers 3% of the unit price to offset the new stamp duty. Buyers will also get a furniture voucher worth 2% of the flat price.

They will get the voucher only after putting down a 30% deposit if the project has not been completed.

The package applies across the board to Singaporeans, permanent residents (PRs) and foreigners, so foreigners will still be worse off after the new measures.

Far East’s already-launched projects have another discount that differs between properties.

Prices of units at its Seastrand project in Pasir Ris Drive 3 are discounted by up to14%, making the cheapest unit an estimated $937psf. But with only three- and four-bedroom units left and the smallest three-bedder at 1,109sqft, the minimum purchase now would cost about $1.04 million before stamp duty.

With an additional 10% buyer’s stamp duty for foreigners of $104,000 now, Far East’s relief package would help a buyer save almost $52,000 – about $30,000 initially and the rest subsequently.

However, a Far East agent said that unofficially the discount rate could go up to 16% of the original unit price. This means buyers can negotiate a 21% discount off the original total price by combining the uniform 5% cut with the discount that applies to the Seastrand.

This would more than offset the extra stamp duty incurred, although it is believed that the discount applies on a case-by-case basis.

Far East has not announced a dateline for its relief package but the agent said it could last until the end of this month.

The Seastrand’s temporary occupation permit (TOP) is expected on Dec 31, 2016.

Wing Tai’s luxury Helios Residences at Cairnhill Circle is also offering a relief package, said a company sales agent.

Buyers will get a cash rebate of up to 2% of the total price upon payment. That goes up to 2.5% at the start of the second year of occupation and 3% at the start of the third year.

They will not be allowed to sell their unit for three years following purchase.

The smaller units can cost around $4.2 million, said the agent, adding that the relief package is meant to help “lessen the burden” on customers.

The agent said the deal is only applicable to Helios Residences, as its target market is foreigners, who are more likely to be affected by the stamp duty imposition, but did not specify a deadline. Helios Residences obtained its TOP on Jan 28.

Sales agents at Keppel Land, UOL and CapitaLand did not know of any discount packages being offered.

Real estate agents at DWG, DTZ and Huttons also said their firms were not offering discount packages, but some said they might be able to negotiate an additional 1% cash rebate.

Source: The Straits Times

Given the partial/full absorption of ABSD by developers through the additional discounts that they are giving on their projects, the latest property measure is looking increasingly like a transfer of wealth from developers to our Government…
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ABSD: Do you know that it applies to Developers too?

Reference: “New terms may hit large collective sales” – The Business Times

To put things in perspective, if a developer buys a residential site for $200 million and is unable to meet the five-year limit to complete building the new residential project on the site and selling all the units, it will have to pay an additional $20 million in ABSD.

And it looks like a much longer wait for “en-bloc aspirants” such as Pine Grove, Laguna Park, Pearlbank Apartments etc…

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ABSD: Case of not all foreigners being equal…

Citizens of five countries that have free trade deals with Singapore, including the United States and Switzerland, will be treated as Singaporean for the purposes of the new stamp duty measures.

When they buy a private home, Americans, Swiss and nationals from Liechtenstein, Norway and Iceland will be treated the same as Singapore citizens, the taxman said in a guide on Wednesday.

This will enable them to avoid the new 10% additional buyer’s stamp duty that foreigners now have to pay when they buy a private home.

Free trade agreements usually ensure that a country’s citizens are accorded certain trade protections when they are in the partner nation.

The Additional Buyer’s Stamp Duty (ABSD), as the new levy is called, was announced by the Government on Wednesday and hits foreigners hardest. They have to pay an additional stamp duty of 10% when buying a home.

But the foreigners from the five countries can apply for remission or a relief.

The Inland Revenue Authority of Singapore (Iras) website says they must provide identification, acceptance to option to purchase/sale, the purchase agreement and the ABSD declaration form.

Under the new rules, permanent residents (PRs) buying a second and subsequent property will pay an additional 3% stamp duty, while Singaporeans buying their third or subsequent homes must pay an extra 3%.

The rule is also that for purchases made by two or more parties with mixed residency status, such as a Singaporean with PR, the higher rate will be imposed.

But Iras also gave examples of situations where remissions can apply. These are in cases where married couples have mixed residency status.

For example, a PR who currently owns a property while his Singaporean spouse owns none can apply for relief from the additional stamp duty when they co-purchase a home.

In another scenario, a PR and a Singaporean spouse co-own a property. When they next jointly buy a property, they can apply to be exempt from the 3% levy.

the relevant documents have to be submitted to Iras.

Relief will also be provided for qualifying developers.

Iras also said that people who want to downgrade from private housing to an HDB flat will be allowed a concessionary period to sell their private residential properties. The application for relief in such cases can be made through the HDB.

More details about relief schemes can be found in the ABSD e-Tax guide, which can be downloaded from www.iras.gov.sg/irasHome/page04.aspx?id=910

Source: The Straits Times

The wife and I wonders if the same courtesy will be accorded to us should we decide to buy a private property in… e.g. Liechtenstein, assuming the citizens there get preferential treatment over foreigners for property purchase.

We have not looked at the ABSD e-Tax guide (yet) but reading the Straits Times report, it sure sounds like citizens of the five countries that have free trade deals with Singapore are treated better than our PRs when comes to buying a second property….

Disclaimer: We are NOT according animal status to any nationality here.

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Property market slowdown: So this time’s for real then?

The Singapore property market is bracing for a slowdown, with experts predicting a steep drop in transaction volume and prices over the next few months, following the latest cooling measures.

At least one real estate agency thinks the immediate reaction will be a slowdown in the private property market.

CEO of PropNex Realty Mohamed Ismail said he expects a price correction of approximately 15 to 20% in the central core region, and a correction of 10 to 15% in the mass market segment in the next six months.

PropNex also expects transaction volume for properties to dive by as much as 40% in the core central region – like Orchard and Marina Bay. This is because of the significant number of foreign buyers for such properties.

Meanwhile, PropNex expects transaction volume to fall by as much as 20% in the mass market segment.

Analysts expect buyers to adopt a wait-and-see approach.

Mr Mohamed said: “It takes a very bullish decision from a foreigner to come and invest in Singapore in today’s market, having to pay a 13% stamp duty upfront, and (being) subjected to the Seller’s Stamp Duty in the next four years, of 16%, 12%, 8% and 4%.

“And even if you sell after four years, if he buys a property today, he must expect at least a 25 to 30% increase in the property price to break even, taking into consideration other costs and interests and all other elements.”

Under the latest changes, foreign buyers of private properties in Singapore will now have to fork out 10% more in stamp duty while permanent residents and Singaporeans are also affected with an increased stamp duty on their second and third properties respectively.

PropNex said the new measures could have been targeted to preserve affordable pricing in the mass market segment – homes costing less than $2 million where prices have surpassed $1,000psf.

It argues that having a blanket policy will impact the high-end market which has been the investment interest of the foreign buyers.

Norman Lu, a foreign buyer, said: “We are very disappointed about this rule. Because even though we are foreigners, we have been working in Singapore…we also contribute to this country. So as a foreigner, we feel that the government does not welcome us.”

Source: Channel News Asia

Mr Lu may have felt hard done by our Government but then again, many countries around the world have similiar policies concerning foreign purchase of private residential properties. Maybe that’s what they meant by “Citizenship has its privileges”…?

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Just when you think the property market cannot be "cooler"…

The government has imposed an Additional Buyer’s Stamp Duty (ABSD) for private property of between 3% and 10% for Singaporeans, Permanent Residents and foreigners to moderate investment demand for private residential property and promote a more stable and sustainable market.

The changes take effect on December 8.

Foreigners will pay 10% Additional Buyer’s Stamp Duty (ABSD) for any residential property.

Permanent Residents owning one and buying second and subsequent properties will pay 3% ABSD.

Singaporeans owning two and buying a third and subsequent residential properties will pay 3% Additional Buyer’s Stamp Duty.

The ABSD will be imposed over and above the current Buyer’s Stamp Duty, which are 1% on the first $180,000 of purchase consideration or market value of the property (whichever is higher), 2% on the next $180,000 and 3% for the remainder.

In a joint statement on Wednesday, the Finance and National Development ministries say the government’s objective is to promote a sustainable residential property market where prices move in line with economic fundamentals.

They said prices of private residential properties have continued to rise, albeit more slowly in the last two quarters.

Prices are now 13% above the peak in the second quarter of 1996, and 16% above the more recent peak in the second quarter of 2008.

They said that even with the current economic uncertainties, the demand for private residential property remains firm.

Given the uncertainty in stock markets and with interest rates remaining low, private property in Singapore continues to attract local and foreign investors.

They added that excessive investment demand will make the property cycle more volatile, and thus increase the risks to Singapore’s economy and banking system.

The government said the higher ABSD rate for foreign buyers in particular is necessary, in view of the large pool of external liquidity and strong buying interest from abroad, and the relatively small size of the Singapore market.

The government said foreign purchases account for 19% of all private residential property purchases in the second half of 2011, up from 7% in the first half of 2009.

For purchases made jointly by two or more parties (eg a Singaporean with a PR, or a PR with a foreigner), the higher applicable ABSD rate will be imposed.

For example, if a citizen purchases a property with a foreigner, the ABSD of 10% will apply.

In the case of a joint purchase by Singaporeans, who each already owns properties, the ABSD of 3% will apply as long as one of the purchasers already owns two properties.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam, said: “We have always had open markets and must keep them that way. However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low.

“The additional buyer’s stamp duty should help cool investment demand, and avoid the prospect of a major, destabilising correction further down the road.”

Nicholas Mak, Executive Director of Research and Consultancy at SLP International, said: “It will curb investment demand for private residential properties quite drastically, especially demand from non-resident foreigners. And I think in the next one to two months or so, demand from non-resident foreigners will almost dry-up.”

Home buyers are mixed in their views.

One Indian foreigner said: “I know there is a stamp duty, but any increase in that will probably take it out of my level where I want to buy.”

An Indian who is a Permanent Resident said: “Nowadays, HDB properties are also difficult to buy, because of more conditions. So they have to buy property here. Definitely they’ll keep buying more irrespective of whether the stamp duty is increased or not.”

One Singaporean said: “It probably wouldn’t have an effect in the short-term, because the property market prices are still rising, people are still speculating.”

Minister for National Development Khaw Boon Wan said: “We are ramping up the supply of new Executive Condominium units through the Government Land Sales Programme.

“This will help higher-income Singaporeans own private condominium units in an affordable way, as the sale of new EC units is restricted to Singaporean households only.”

Singaporean first-time buyers and upgraders, and buyers of HDB flats will not be affected by the new measure.

Certain reliefs will be provided so that the measure will not impact home occupation demand by residents.

For example, relief will be provided for Singaporean-foreigner/PR married couples buying their homes.

Reliefs will also be provided for qualifying developers and for purchases falling within the scope of Singapore’s international trade agreements.

The government will continue to ensure an adequate supply of private housing to meet-medium term demand.

There are 41,000 unsold private housing units in the pipeline.

The government will inject sites that can potentially yield a total of 14,100 units in the 1H2012 Government Land Sales (GLS) Programme, similar to the supply in previous GLS programmes.

Of these, about 7,000 units will be from sites on the Confirmed List.

These numbers take into account the ample pipeline supply and the dampening effect of the ABSD.

The government will also expand the supply of executive condominiums (ECs) in 2012 and is prepared to release sites that can potentially yield 5,000 EC units for the entire year.

Sites for 3,500 EC units will be made available in 1H2012, including 3,000 EC units on the Confirmed List.

The Confirmed List quantum is comparable to the 3,000 EC units from five sites sold for the whole of 2011. More details will be provided in the press release for the 1H2012 GLS Programme on MND’s website.

The Government will continue to monitor the property market and adjust its property policies in step with changes in the market and the economy.

Source: Channel News Asia

The wife and I have just returned from our short family vacation (literally that is, since we have only touched down like two hours ago) and this is the first piece of property news we happened to chance upon. 

The Additional Buyer’s Stamp Duty (ABSD) should appease (somewhat) those who are worried by the increasing number of private home purchases by foreigners, which they claimed have driven up property prices. It will also help to dampen the flow of “hot money” into our private property sector (which is probably the larger factor in driving up prices), given the current double-whammy of much higher buying and selling stamp duties. 

And for Singaporeans that already own two private residential properties and wanting to buy a third, we reckon they should not complaint (too much) about the ABSD.

So maybe the government is finally listening, as they said they would…  

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