Dear Readers,
Hot NEWS!
Additional Buyer's Stamp Duty to curb the property market, specifically the private property market.
'Quick and Dirty' Snap Analysis of the Impact of this Policy
Hot NEWS!
Additional Buyer's Stamp Duty to curb the property market, specifically the private property market.
'Quick and Dirty' Snap Analysis of the Impact of this Policy
First and foremost, the demand for private
property will definitely be affected with most foreign buyers out of the picture
unless 1) there are buyers who are able to fork out 10% of the property price in
cash and 2) if they assess that the pricing and rental yield of the property are
still undervalued even after paying a 10% ABSD.
Singaporean and Singapore PR Property Investors
holding to multiple units will need to go through the same situation facing
foreign buyers, having additional 3% of the property price in cash or CPF and
also to assess if the pricing and rental yield of the property being attractive,
even with the 3% ABSD.
Genuine sellers who wants to sell their house
urgently will lose part of the demand in the property market with the expected
exit of foreign buyers, property investors and also the expected oversupply that
is going to flood the market, coupled with the 41,000 unsold units in the market
(highlighted in YELLOW below).
Overall impact in the market => Decrease in Demand for Private Residential Properties, leading to a stabilizing property market or a declining market. If the market is in decline, then it would mean that property buyers who had bought and do not have the holding power, will be forced to sell their properties below valuation, contributing to a stablizing / declining market. If the market is expected to fall as reported by the various property analysis reports (20-30% decline), together with this measure, it would mean that buyers who do not have enough equity or had refinanced their properties may need to have their properties foreclosed by banks if they do not have enough money to top up the difference in outstanding loan and property valuation.
Buyers who are
dependent on rental income to cover their mortgage would also be
faced with a potential financial problem as they may be required to top up their
mortgage payment in part or in full if the rent for their property is not
sufficient to pay for mortgage or, worst still, they are not able to get a
tenant, in view of the influx of supply flooding the market.
Prayers...
In the worst case scenario, interest rate
increase + decreasing demand for private properties + no tenant = fire sale of
properties leading to a property market crash.
What's
can YOU do?
If indeed you are concerned about your property portfolio
and the measures that the Government had implemented, I
would sincerely advice you to engage a property consultant to share with him/her
on your property portfolio and financial management so that you will be
able to plan your NEXT move. I hope that no one will be caught in a potentially
erratic property cycle that we are heading towards. (Economic Uncertainty, Interest
Rate Fluctuation, Oversupply, Decreasing Demand... Sounds Bad... But ALWAYS look
on the BRIGHT SIDE of LIFE. ACT NOW!)
Lovely
Regards,
Lynn ONG (王丽英)
Lynn ONG (王丽英)
Senior
District Manager
ECG Property Novena District
ECG Property Novena District
L3009759F /
R014-395F
BSc. Real Estate (NUS)
Mobile: (+65) 8479 3149
BSc. Real Estate (NUS)
Mobile: (+65) 8479 3149
Website:
http://www.LYNNONG.net/
Blog:
http://www.lynnlovelyhomes.blogspot.com/
[Blogging on Analysis of Listings and Real Estate News]
[Blogging on Analysis of Listings and Real Estate News]
| Additional Buyer's Stamp Duty for a Stable and Sustainable Property Market | ||||||||||||||||||||||||||||||||||||||||
| 07 Dec 2011 07:40 PM - MND Website | ||||||||||||||||||||||||||||||||||||||||
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The
Government announced today an Additional Buyer’s Stamp Duty (ABSD)to be imposed
on certain categories of residential property purchases. The ABSD will be
imposed over and above the current Buyer’s Stamp Duty, and will apply to
the purchase price or market value of the property
(whichever is higher) for the following purchases:
a) Foreigners and non-individuals[1] (corporate entities) buying any residential property will pay an ABSD of 10%;
b) Permanent Residents (PRs) owning
one[2]
and buying the second and
subsequent residential property will pay an ABSD of 3%; and
c) Singapore Citizens (Singaporeans) owning
two2 and buying the third and subsequent residential
property will pay an ABSD of 3%.
The ABSD will take effect on 8 Dec 2011[3]. Remission of ABSD will be given for options granted on or before 7 Dec 2011 and exercised within 3 weeks (i.e. on or before 28 Dec 2011) or the option validity period, whichever is the earlier. 2) The Government's objective is to promote a sustainable residential property market where prices move in line with economic fundamentals. 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 2Q1996 and 16% above the more recent peak in 2Q2008. 3) 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 investors, local and foreign. Excessive investment demand will however make the property cycle more volatile, and thus increase the risks to our economy and banking system. 4) The Government has therefore decided to impose the ABSD to moderate investment demand for private residential property and promote a more stable and sustainable market. A 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. Foreign purchases account for 19% of all private residential property purchases in 2H2011, up from 7% in 1H2009. 5) The ABSD will apply in addition to the existing Buyer’s Stamp Duty on property purchases, which are applied at following rates: 1% on 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. 6) For purchases made jointly by two or more parties (e.g. 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. 7) Singaporean first time buyers and upgraders, and buyers of HDB flats[4] 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. More details will be provided on the IRAS website.
Adequate
Supply of Private Housing to Meet Demand
8) The
Government will also 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.
9) To give more Singaporean households the chance to own or upgrade to private housing, the Government raised the monthly income ceiling for the purchase of new Executive Condominiums (ECs) from $10,000 to $12,000 in Aug 2011. We will expand the EC supply in 2012 and are 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 5 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. 10) The Government will continue to monitor the property market and adjust our property policies in step with changes in the market and the economy. Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance, 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.” 11) Khaw Boon Wan, Minister for National Development, said, “We are ramping up the supply of new EC 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.” Issued by the Ministry of Finance & Ministry of National Development 7 Dec 2011
ANNEX 1
Existing and Additional BSD Rates
Examples of Additional and Total Buyer’s Stamp Duty Payable Assume property purchase of $1 million
[1]This includes corporate,
trusts and collective investment schemes amongst others.
[2] A person is regarded as
owning a property for the purpose of ABSD as long as he owns part of that
property. Overseas properties will be excluded from the count of properties
owned.
[3] The measure will apply to
a property purchase if the option for purchase is
exercised or the agreement for transfer is executed, whichever is earlier, on or
after 8 Dec 2011. Where no option for purchase is granted and only an
agreement for transfer is executed, then the measure will apply to the agreement
for transfer if it is executed on or after 8 Dec
2011.
[4] The
purchase of HDB properties will not be affected by this measure. Only
Singaporeans and Permanent Residents are eligible to be HDB flat lessees (i.e.
own a flat). Existing residential property owners who buy an HDB flat or a new
unit under the Design, Build and Sell Scheme (DBSS) or the Executive Condominium
(EC) Housing Scheme will not be subject to the ABSD, since the existing
flat/property will have to be disposed of as part of the conditions for the
purchase of the HDB/DBSS flat or EC unit.
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