THERE is confusion in property circles concerning the application of the new stamp duty to certain types of real estate.
The major grey area centers on whether commercial units like shops or offices constructed within residential developments on residential-zoned land will be covered by the additional buyer’s stamp duty (ABSD) and seller’s stamp duty (SSD).
Industry players explain that there is ambiguity on what really defines a ‘residential property’ that would incur the duties: Will it be based on the approved use of the units or the zoning of the land under the Urban Redevelopment Authority’s (URA) master plan?
They add that queries to the Inland Revenue Authority of Singapore (Iras) have produced varying replies, particularly on the subject of units in mixed-use land zoning.
There also appears to be complexity pinning down precisely how the ABSD will be applied considering that the present e-tax guide is vague on this area.
An Iras spokesman said that ‘in general, properties approved for commercial use on residential land should not be subject to the ABSD or SSD’.
However, there are exceptions. This would include Singapore property that was accorded provisional approval for commercial use by the URA such as a residential shop house being given temporary approval as an office or shop space. In similar cases, the seller’s stamp duty of up to 16 per cent is applicable.
Nevertheless commercial units in condominiums – minimarts, for example, or salons – on the ground floor of certain blocks that have acquired long-term approval for such use are not likely to be slapped with any of the stamp duties.
The Iras spokesman further added: ‘When the use of the property is not residential on a land zoned residential, we will need to examine the facts of the case to determine if the property is residential property within the scope of ABSD and SSD.’
The taxman did not explain further on what precisely these criteria are.
While there are most likely a small number of commercial units that will be subject to the extra stamp duties, experts say the ambiguity only added more questions within the industry as to what exactly the ABSD applies to.
Mr Lee Liat Yeang, a partner at Rodyk & Davidson’s Real Estate Practice Group, said Iras should formulate a clearer definition of ‘residential property’ for the application of ABSD.
The ABSD should be applied in accordance to the approved use specified by URA rather than the zoning of the land under the URA master plan, he said.
‘According to the e-tax guide, Iras appears to be looking at the masterplan zoning in order to establish whether the approved use is residential in whole or in part.
‘But the master plan shows only the general parameters of possible uses for the land upon which URA will then approve specific use for properties,’ he added.
Mr Lee cited the fact that there are full commercial-zoned lands sites such as Eon@Shenton that have acquired URA approval for residential, office and retail uses.
There are also approved commercial units built on land zoned fully or partially residential under the master plan.
‘Iras should speedily tackle this definition issue of residential property in order for the public and lawyers to distinguish whether ABSD is payable in the purchase of specific property which has approved use different from the zoning,’ he added.
Notwithstanding the depressing economic outlook and latest cooling measures, private home sales in February continued strong and set a new record with transactions hitting 3,138 units including executive condominiums (ECs).remain
Data from the Urban Redevelopment Authority (URA) make public that with the exclusion of ECs, the figures mark a 118 percent increase year-on-year to 2,413 units, in contrast to the 1,105 units recorded in the same period last year.
Top selling projects through the month were Parc Rosewood at Woodlands, which sold 380 units at a median price of S$994 psf, and Guillemard Edge at Geylang, which sold 275 units at a median price of S$1,215 psf.
As for ECs, Twin Waterfalls saw 257 units sold at a median price of S$727 psf while The Tampines Trilliant sold 187 units.
Most sales occurs in the OCR (Outside Central Region) with a record of 1,830 transactions. ECs accounted for 23 percent of the total private home sales volume, as 725 units were snapped up in February backed by the higher income ceiling for acquiring ECs.
“Singapore property developers had held back the launches in December 2011, especially after the ABSD. However, encouraged by the strong take-up rate of properties in January 2012, developers’ timely release of new launches in February had gained momentum and many had pushed ahead with their launches in the OCR while activity remained muted within the Core Central Region (CCR),” noted Mohammed Ismail, Chief Executive Officer of PropNex Realty.
The numbers are still strong “even after a seemingly draconian round of ABSD measure and after five rounds of property cooling measures that began in 2009,” said Alan Cheong, Director, Research & Consultancy at Savills (Singapore) Pte Ltd.
“It could be that Singaporeans have an innate desire to own properties. This desire, built up over a generation of public housing policy is evidenced by the fact that 87 percent of Singaporeans own their homes.”
Cheong further commented that the run up in the stock market could also be influential in improving buyers’ sentiment.
“However, the main demand driver has been low mortgage rates which are generally below 1.5 percent,” he noted.
The rich in Singapore are losing confidence in their wealth and are searching for solid investment options.
According to Channel News Asia, a Standard Chartered survey concluded that many of Singapore’s affluent have declined in wealth confidence owing to unsure economic landscape.
The study by Standard Chartered Bank and Scorpio Partnership is a Future Priority Report 2012 that aspires to capture sentiments of over 2,700 wealthy individuals across nine markets in Asia.
The Singapore property markets included 300 individuals from Singapore with an average annual income of S$159, 290 (US$126,000).
The study demonstrated that as the confidence level is lower than the year before (76 per cent) a majority of Singapore’s affluent (70 per cent) stay confident in increasing their wealth in the next 12 months.
Channel News Asia noted that while “Singaporeans are bullish on Asia,” about a third of Asian respondents view Europe and North America as “offering good wealth creation prospects in the next 12 months.”
Throughout a five-year horizon these numbers have increased considerably, predominantly for the Middle East, Latin America, and Africa.
The Singaporeans survey was shown to enlarge their wealth to an average of S$4.5 million (US$3.6 million) from a present average wealth of S$1.5 million (US$1.2 million).
The Asian affluent showed a liking for tangible investment options, stating gold (44 per cent), high interest savings (43 per cent), and real estate (34 per cent) as their top choices.
Nonetheless, it was reported that “Singaporeans are less bullish on gold and opt for high interest savings and shares as investment preference.
To realize the wealth gold over an average of 10.9 years, they require 10 per cent annual returns on their wealth.
Still, the average Asian affluent is perceived as more insistent, aspiring to increase their wealth by 12 per cent per annum over the next 10 years to S$5 million (US$4 million).
The highest money goal is set in South Korea (US$6 million), followed by India (US$4.8 million) and China (US$4.5 million).
SINGAPORE: Resale prices of HDB flats went up in the first quarter of 2012, at the same time the prices of private homes dropped for the first time since 2009.
HDB flash estimates reflected an increase of 0.6 per cent in the January-March quarter, the smallest increase in resale prices ever since the third quarter of 2006. The rise was also lower than the 1.7 per cent gain recorded in the fourth quarter of 2011.
HDB will release the resale price index for the full quarter on 27 April.
HDB has said it is dedicated to present 25,000 new flats under the Build-To-Order scheme this year and will put on sale 4,640 new flats next month in Choa Chu Kang, Kallang/Whampoa, Punggol and Sengkang.
Independently, a flash estimate by the Urban Redevelopment Authority (URA) illustrate a 0.1 per cent turn down in the price index for private homes in the first quarter this year, compared to a 0.2 per cent increase in the fourth quarter of 2011.
Prices of non-landed private residential homes dropped by 0.9 per cent in the core central region and 0.7 per cent in rest of central region during the quarter.
However, prices outside the central region increased by 1.2 per cent, compared to a 0.6 per cent rise in the previous quarter.
Remarking on the newest HDB figures, real estate agency ERA said resale prices are becoming stable and cash-over-valuation premiums are falling.
ERA’s key executive officer Eugene Lim said HDB resale prices have hit a ceiling and home-buyers are fascinated with the new BTO flats.
ERA added that the most recent move to apportion 15 per cent of BTO flats in non-mature estates to second-time HDB buyers has also encourage home-buyers toward this segment.
In general resale transaction volume has fallen, with larger flats such as five-room and executive flats witnessing a bigger decrease in resale volume compared to three- and four-room flats.
Base on its analysis, median COV for all flat types have dropped by between 16.7 per cent to 18.2 per cent.
ERA anticipates median COV to continue to fall and become constant at S$15,000 by year’s end.
On private homes’ resale prices, Jones Lang LaSalle’s head of research for Southeast Asia Dr Chua Yang Liang said weaker economic conditions have softened investors’ demand for private homes.
Together with latest government measures aiming at cooling the Singapore property market, sales volume and resale prices for private residential market have been further dampened.
He further noted that prices for private homes in the core central region fell 0.9 per cent, the biggest initial quarterly decline ever since 2004.
Nevertheless there is still a demand for mass market homes, with prices in the outside central region going up by 1.2 per cent, double that the fourth quarter of 2011.
Leasing activity in the private residential market is predicted to slow this year as the vague economic outlook causes companies to be more prudent in employing expatriates. Nevertheless there may be some leasing opportunities taking place from latest cooling measures, particularly December’s announcement of the 10 per cent additional buyer’s stamp duty (ABSD) on foreigners who purchase private homes.
Expatriates who are likely to pay the ABSD are expected to keep away from buying private homes as far as possible. Even those who are not liable to pay the duty may carry on leasing homes for fear that housing prices may drop shortly right after they make their purchases. This provides some support for the residential leasing market and alleviates drastic falls in rentals.
There are usually two groups of foreigners who purchase residential property: The first compose of those who are not in Singapore and purchase properties here for investments purposes. On the other hand, the other group consists of those who work here and come to a decision to acquire a home after growing familiar with Singapore.
The spate of corporate expansions in 2010 and the first half of last year have resulted in an increase in expatriates coming to Singapore, whether on partial or full housing packages or on local terms. Some of these foreigners who signed one-year leases may have purchased a residential property last year, at the same time as some who manage to sign a two-year (or one-plus-one year) leases are all set to look for a Singapore property to buy.
But with the ABSD, this group of foreign buyers is even more likely to think twice before committing to a private home in the event that prices fall after the purchase, mainly for resale homes. Given the new measures, this group may hold back their decision to buy and would rather renew leases for a year, or extend by half a year if this is possible.
Around 12,000 new homes will be finished this year, in excess of the 15-year average of about 10,000 new units per year. This number is not appalling as the recent years have witness rapid population growth in Singapore.
The new units that will come on stream this year will be considered as moderate supply if there is a continued economic growth momentum. This implies that the leasing market this year will be demand-led instead of supply-driven. The real supply-led concerns will surface in 2014, when about 20,000 units are projected to be completed.
The demanding economic conditions this year are expected to persuade new property owners to be more realistic in their asking rentals in order to procure tenants. As rentals for new units become competitively priced, older apartments in inferior physical condition is likely to suffer rental pressure. There may be some “flight to quality” by tenants whose leases end, to move to newer apartments if the asking rents are attractive.
The slowdown is not a new occurrence in a mature property market such as Singapore. After going through quite a a small number of property market cycles, homeowners here identify that property ownership and investment is for the long term.
Having a long-term view also denotes that many owners of centrally-located properties are aware that they have to “put up a little” through the year by presenting more competitive rentals. There can be potential for raising rentals in due course when economic growth picks up pace again. While this reflects increasing the maturity and market sensitivity of owners, it also signify that competition in the leasing market will become more powerful as more owners become more and more strategic.
The challenging economic climate is eroding the financial stability of some property owners, including those who have bought homes for owner-occupation.
More owners, including some who bought resale apartments in centrally-located areas for own use last year and are liable for seller’s stamp duty if they resell their properties within four years, are now considering renting out a room or two to ease their financial burden.
Meanwhile, more mid- to senior level expatriates are opting to live in lower-cost accommodation upon the expiration of the lease in light of the weakened economic and business conditions. Expatriates having housing allowances are focusing more on functionality than on luxury, reflecting their sensitivity to the companies’ running costs in Singapore.
As such, luxury apartments of 2,000 sq ft and above may lose some shine to the “second best high-end” apartments in the central area. The latter include the River Valley and Somerset area, where “walkability” to the main Orchard Road area can be an attraction to young professionals. Some well-positioned areas like Novena, Bukit Timah, East Coast, or even new growth areas like one-north may also be pretty attractive for the mid-level expatriates who are on partial housing allowances or on local terms.
SINGAPORE: The Urban Redevelopment Authority or the URA and the Housing & Development Board (HDB) are releasing six residential sites for sale in April 2012.
The aim is to give Singapore property developers and home-buyers with more options for private housing.
In a statement, the URA said that collectively, the six sites will give way to about 2,380 units as part of the total 14,100 residential units to be released under the Government Land Sales (GLS) Programme for 1st half 2012 (1H2012).
The three land parcels at Sengkang Square, Buangkok Drive and Pasir Ris Drive 3, which can yield about 1,780 housing units, will be opened for sale this coming Monday under the Confirmed List.
In addition, two additional residential sites at Alexandra View and Farrer Drive will in addition be made accessible on Monday for application on the Reserve List.
For the meantime, the land parcel located at Farrer Road will be released for sale on the Reserve List on April 30.
Furthermore, new home sales in Singapore continued to be strong last month.
A total of 3,032 units of new homes were disposed last March, and of which 2,393 were private homes and at the same time the rest were made up of executive condominiums.
The 2,393 units of private homes sold last month were marginally lower than the 2,413 units transacted in February.
In March, the star performers were Ripple Bay which sold 326 units, and then followed by The Minton with 118 units sold and finally the Riversound Residences which sold 115 units.
All the top-selling projects are to be found in the suburban areas.
With regards to executive condominiums, the number of units transacted also dipped slightly – from 725 units in February to 639 in March.
The best selling EC projects last month were Twin Waterfalls, with 369 units changing hands, and The Tampines Trilliant with 153 units sold.
A total of 8,247 units of new homes that includes executive condominiums were sold for the first quarter.
Latest newspaper articles have increasingly laid blame on real estate investment trusts (REITs) for the increasing occupancy costs in retail and industrial properties.
In fact, in my earlier article in this newspaper titled “Hawker centres and REITs: An inflation face-off?” (Nov 25, 2011), I also highlighted that REITs, in their relentless pursuit of superior shareholder returns, have generally been very proactive and efficient in raising the rental rates of their investment properties. This is in the best interests of REIT shareholders; unfortunately, it also results in higher rental costs, which eventually filter through to the inflation basket.
However, while potentially resulting in higher inflation, REITs also have their benefits. And having followed the Singapore REIT sector since its birth in 2002, I feel it is my accountability to also emphasize such benefits.
First, the introduction of REITs has given a cost-effective way for investors in Singapore property, particularly the retail investors, to gain exposure in a pool of diversified commercial or industrial properties. Prior the introductions of REITs, common investors were largely shut out of commercial and industrial real estate owing to the usually large amount of capital involved. REITs have helped to entice retail money into these previously unreachable property sectors, thus increasing the investment options of ordinary Singaporeans.
This, in turn, has boosted the supply of commercial and industrial properties in Singapore. Even if REITs largely purchase existing buildings from property developers, they efficiently free up capital in the property developers, who then gain the incentive to build new commercial and industrial buildings. In fact, many property developers who are large REIT sponsors in Singapore have been recycling the capital they make from the sales of their investment properties to their sponsored REITs to put up new retail properties. This helps to create a more exciting retail mall scene in Singapore. One might even say REITs have helped to improve Singapore’s profile as a tourist and commercial hub.
Second, REITs also help to improve the quality of existing commercial and industrial buildings. Due to their focus on shareholder returns, REITs are usually very active in enhancing the premises, facilities and services of their investment properties whenever the occasion arises. This has resulted in better quality investment properties (especially the retail malls) that are more exciting to visit. For example, many retail malls (such as Plaza Singapura and IMM Building) have been successfully restored and enhanced by their REIT owners.
Last but not least, the Singapore REIT sector was created to provide an additional high-yielding financial instrument for Singaporeans to invest their savings in order to realize a steady income upon retirement. This is especially important given Singapore’s ageing society. The sector has developed well over the past decade with more than 20 REITs being listed currently, offering investment opportunities into various investment property asset classes. In fact, the Singapore REIT sector is at present the second-largest in Asia, just behind Japan, another ageing society.
Thus, like in most situations, the case for or against REITs is not an uncomplicated one as it involve both social and financial benefits and costs. I guess the key question is whether Singapore as a society values the social and financial benefits of REITs more than its costs.
SINGAPORE: The quantity of new private homes disposed within the first quarter of this year crossed the 6,600 mark – a record high, according to Singapore property analysts. Nevertheless have prices of private home sales peaked?
Riversound Residences and the Palm Isles were amongst last month’s top four selling projects, every one situated in the suburbs.
The month of March have raked in over 2,300 new private homes, a little lower than February’s 2,400.
Yet, the initial three months of 2012 have witnessed monthly sales of private units reached above 1,500 units – still considered high by many property analysts.
Whereas analysts do not see a bubble forming in the property market, they said additional cooling measures may well have a momentary effect. And the mid tier and high end market will still see correction of an estimated 15 per cent by the end of 2012, dragging overall prices by 5 per cent.
Chia Siew Chuin, director of research, Colliers, said: “When we talk about a property bubble, one has to be aware that we not only look at sales per se, but also at prices. The number of sales in this period is really supply-driven, but it is also likely to be at the expense of very little price movement we have seen in the market.”
Still, a number of analysts said developers are catering to demand, launching at least 2,000 units each month in 2012 – a number only achieved in April last year.
Chris Koh, director, Chris International, said: “The number of units being pushed out and the numbers being taken, you can see does not differ much. Like what we have shared, 2,500 units against a 2,300 take-up is actually a very healthy number.”
Different market outlook between the mass and luxury markets are expected to affect prices.
Ong Teck Hui, executive director, Credo Real Estate, said: “Where we are just talking about OCR where the volumes have been pretty strong, then the outlook for this year is fairly positive. We are likely to see a stable market with some slight upside in prices, perhaps 3-5 per cent. For CCR, in particular, the softening of prices is likely to continue.”
With the record high number of new private home units being taken up, analysts predicted that 2012 is destined to surpass last year’s sales of 16,000 units.
Mr Khaw said that the Singapore property market has shown indications that it’s moving towards a more sustainable path, as he responded to questions on whether the government’s various cooling measures have achieved their intended results.
Mr Khaw repeated that private home prices recorded an insignificant decline in the first quarter of this year (0.1 per cent fall quarter-on-quarter), following nine consecutive quarters of moderating price increases.
He further stated that the said decline can be attributed partly to the intervention, which includes five rounds of cooling measures over the past two years, the most recent of which were imposed in December aiming at foreign-investment demand.
The force of those moves could be observed in the quick decline of the proportion of housing sub-sales — a proxy indicator of speculative activity — to about 4 per cent, while the percentage of foreign buyers for private homes has dropped “sharply” to 7 per cent. Mr Khaw further revealed. However he fails to mention the time frame or original quantums next to which he made the comparisons.
With regards to public housing market, it has provided first-timers much advantage as the latter are now given a chance to choose a Build-To-Order flat in the event that they will apply for the same.
HDB resale prices have become more reasonable, increasing by 0.6 per cent in the first quarter of 2012, so far, the smallest price growth in recent years.
MP for Holland-Bukit Timah GRC, Liang Eng Hwa, asked Mr Khaw on how will the government do to pace out the supplies of land sales.
“The minister mentioned about some supplies coming in and so on to cool the market. I’d like to ask how the government plans to pace out the supplies of land sales so that while we meet immediate demand, we will not… in the next three to five years, have an oversupply situation, especially in the scenario when there could be an economic slowdown,” asked Mr Liang.
Mr Khaw replied: “The member’s concern about potential oversupply if we are not careful is something I think we all ought to be mindful of, because cycles sometimes get a little bit too exuberant and then when they crash, they can create other kinds of problems.
“That’s why we continue to be very vigilant and monitor closely the situation. Clearly, the market is heading towards a soft landing but we have not landed yet. So, stay seated with your buckle on.”
The plans by the Monetary Authority of Singapore to scrap its Financial Investor Scheme (FIS) are not likely to diminish foreign investors’ appetite for Singapore residential properties.
Singapore property agents said the reason behind is such property investors add less than one per cent of overall residential property transactions in Singapore.
The scrapping of the FIS may be visualized as yet an additional measure to curb Singapore’s red hot property market.
The provision of the scheme provides that foreigners who desire to apply for permanent resident status can decide to invest up to S$2 million in properties in Singapore, out of a total investment of at least S$10 million in Singapore assets such as bonds or equities for at least five years.
Mohamed Ismail, chief executive officer of PropNex, said: “The FIS…was actually never intended to target foreigners to come in to buy the S$2 million property. It was more towards a PR status. What we have realised here is that foreigners are interested to invest in Singapore properties for its right fundamentals, regardless whether they get PR or not.”
However agents acknowledge Singapore could lose a little of its attractiveness from foreign investors whose primary motive for investing properties in Singapore is to acquire a permanent residency status.
Tan Kok Keong, director for Research and Consultancy at OrangeTee, said: “There are still a lot of wealthy people who believe in the growth of Asia and the growth of Asia’s economy, so in that light, I think Singapore would play a very important part of their asset allocation, which means that over the medium and long term, we still think that all these rich people will still find residence properties worth investing in to ride on the growth of Asia.”
Some realtors are instead more concern as regards to changes in the Global Investor Programme (GIP) that is run by the Economic Development Board (EDB).
Angela Lee, managing director of Lianco International Property, said: “They are more concerned (about) taking it as a platform and bringing their children here to study. At the same time, they are doing a one-stop service by bringing the business back to China as well. So, S$2.5 million is a lower platform for them to start with…”
Under GIP, a foreigner has to invest S$2.5 million in a new company in Singapore or expand an existing business that has an annual turnover of at least S$30 million.
These changes are projected to be announced by EDB on April 15.