In what appears to be the toughest round of curbs yet, the Singapore Government unveiled an unparalleled set of stamp duty taxes on the private property market.
(Experts anticipate a sharp drop in foreign demand with the new 10% buyer's stamp duty. Image courtesy of Thinkstock.)
The changes take effect today, and options granted yesterday and earlier, exercised within three weeks, will not be subjected to the new regulations.
Foreign buyers will receive the biggest blow in this bold move. In recent years, this group has been taking up homes in the non-landed private property sector to the dismay of Singaporeans, who fear that these more affluent buyers are further driving prices up.
These buyers now have to fork out a 10% buyer’s stamp duty on any residential property purchase, not inclusive of the pre-existing buyer’s stamp duty of around 3%, applied to either the home’s purchase price or market value, whichever is higher.
Corporate entities—including companies, trusts, and collective investment schemes—are also subject to the new 10% tax henceforth. According to The Straits Times, this second group of buyers were noticeably active in the most recent property boom in 2007 and 2008.
Not surprisingly, Singaporean homebuyers welcome this move. One of them is first-time buyer Yang Sue Ann, a 25-year old civil servant, who told The Straits Times that she had been waiting for prices to fall to buy a home with her fiancé. “These measures will help us greatly in getting our first home. We were thinking of buying at the end of next year but hopefully if prices drop, we can get something by early next year before we get married in June.”
While genuine local home-seekers are pleased, the same cannot be said for Singaporean and permanent resident (PR) property investors who are also affected by the new rules. PRs buying their second home onwards (excluding overseas properties) will face an additional 3% stamp duty. The same goes for Singaporeans who already own two residential properties and are buying their third (and subsequent) homes.
This is the first time in 15 years that foreigners are specifically targeted by cooling measures implemented by the government, which has been accused by some of being partial towards this group. Previously, foreign homebuyers only faced restrictions for landed homes.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam assured in a statement that Singapore’s markets have always been open to foreign investment, and will remain this 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.”
Indeed, the past two years have seen private housing prices continually climbing despite four previous rounds of cooling measures. The measures managed to tame price growths to 1.3% in the three months to September. Yet prices, currently a whopping 13% above 1996’s peak, and 16% above 2008’s, remain out of hand.
A record-breaking 16,292 private homes were sold in 2010, while 13,688 such units were moved in the first ten months of 2011. Foreigners (excluding PRs) constitute 19% of all private home purchases for the second half of this year. They only made up 7% in the first half of 2009.
Analysts told The Straits Times they expect the new measures to reduce private housing demand by up to 25%. Said SLP International head of research Nicholas Mak, “In the next one to two months, the home-buying demand from non-resident foreigners will almost dry up.” Credo Real Estate research and consultancy head Ong Teck Hui felt the measures will have a more severe impact on the “prime and mid-prime” markets, where foreign buyers made up almost 25% of transactions in Q3 this year.
Yesterday, the Real Estate Developers’ Association of Singapore (Redas) also released a statement, expressing its surprise at the measures and its disappointment at “the lack of consultation” from the government. It said the measures were “untimely”, in light of next year’s foreseeable economic slowdown.
Said Redas, “The good take-up rate in the primary market is driven by the increased number of new launches and unique selling points of certain projects. It is not indicative of a return to a speculative market.”
Yesterday the government also released 41 more sites for the first half of 2012, in popular areas like Farrer Road, Tiong Bahru and Tampines. The sites can potentially yield 14,100 private houses. Six of them are for executive condominiums—a private-public housing hybrid that foreigners and PRs cannot buy.
According to TomTom, an in-car navigation device maker, Choa Chu Kang residents hold the less-than-desirable title.
(Among residents with private
transportation, those staying in Choa Chu Kang take the longest time to
travel to the city. Image courtesy of Thinkstock.)
Taking Raffles Place MRT station as the start and end points of the journeys and comparing it to each estate’s most central points, the Dutch company discovered that the neighbourhood—tucked away in the Western corner of Singapore—requires an average commute of 38 minutes to the city centre during peak hours. A clear road would shave off 17 minutes of travelling time.
TomTom’s survey is based on information sourced from “tens of thousands” of TomTom users in Singapore, and was done across 15 neighbourhoods within six months. The company recorded the average weekday speeds of these users during two peak periods: between 8am and 9am, and between 5pm and 7pm. The results were then compared to traffics speeds in the same areas between 1am and 5am, when roads are generally empty. The poll ended February this year.
Meanwhile, the neighbourhood whose residents experience the most congested commute is Clementi. On average, residents spend 25 minutes on the road during their morning ride—10 minutes more than during off-peak hours. The trip from Raffles Place back to Clementi is slightly easier on commuters, taking up a 23-minute average (twice the time it would take on an uncongested road).
The survey results came as no surprise to Clementi resident Nicol Zhou, 25, who said he takes about 35 minutes to get to his Singapore Land Tower workplace. He told The Straits Times, “I've [gotten] used to it and I'm from Jakarta originally so I don't see the traffic problem as being all that bad. It's still manageable to take half an hour to get to work.” According to TomTom, the upmarket town of Bukit Timah has the second-worst morning commute, while Bishan has the third.
On the other end of the spectrum, Tampines residents enjoy the smoothest journey to Raffles Place. The second-easiest neighbourhood to travel to town from is Ang Mo Kio; and the third, Yishun. Interestingly, while the Eastern neighbourhood of Tampines has the smoothest commute towards the city, it also has the roughest commute back. It takes residents an average of 25 minutes to travel to Raffles Place MRT station in the morning (a mere two minutes more than when roads are clear) and 37 minutes to travel back home in the evening (almost twice the amount of time required for off-peak hours).
Valerie Cross, TomTom’s public relations manager for the Asia-Pacific, provided a possible explanation for the strange finding, “It is possible that Tampines residents spread out their morning work commute but everyone still goes home at the same time, contributing to congestion on the way home.” Cross also mentioned that the firm was looking into conducting the survey on an annual basis to unearth any changes in travelling patterns.
The relationship between housing prices and distance from the city centre has generally been negatively correlated. As such, despite having the smoothest commute, Tampines HDB units still record transaction prices that are just below that of the average HDB unit, while Clementi public homes cost much more than the national average.
As the first-time subscription rate plummets to 1.4, it appears that National Development Minister Khaw Boon Wan has kept his promise of putting first-time applicants first. Does the dip now mean that the minister will concentrate on dispersing the accumulating number of second-time applicants?
(The application rate for first-time home buyers as of November 30, 5pm is 1.4. Image courtesy of Thinkstock.)
The recently revealed 1.4 application rate means the latest batch of 4,200 built-to-order (BTO) flats that received an average of 1.4 applications for every first-timer unit offered. Currently, 95% of units in the projects—situated in Bedok, Bukit Panjang, Hougang, Punggol and Yishun—are reserved for first-time applicants. The rest are for second-timers.
Three-room flats in Bukit Panjang and five-room units in Punggol and Hougang prove the most popular among first-timers, being oversubscribed by four or more times.
The 1.4 figure would surely come as a reward to Khaw, who has been consistently pushing out BTOs this past year. As a result, a record-setting 25,200 BTO flats have been offered in 2011. He recently wrote on his blog of his goal for the first-timer rate to fall below two, saying, “it would mean that almost all first-timers will get a chance to select a new flat… [and] that our ramped-up BTO programme in recent months would have largely cleared the backlog of first-timer applicants.”
Khaw also reiterated that once the first-timer queue has been cleared, he could to shift his focus to second-timers next year.
True enough, the second-timer rate of 23.8 at the latest BTO launch suggests the sector is in dire need of the minister’s attention. The significant difference between the two rates for five-room units at Punggol Waterway Ridges, for instance, is evidence enough. As of the last day of November, the overall application rate was 5.1, with a first-timer rate of 2.9 and a second-timer rate of 48.
For the first time, such figures can be found on HDB’s website, which is updated four times daily and displays the first- and second-time subscription rates at BTO exercises for each flat type, in each project.
Home seekers The Straits Times spoke to found the figures useful despite the rude awakening. “I’d wanted to go for the bigger units, but seeing how they have attracted quite a lot of bids, I decided to go for a three-room unit. At least there's a higher chance and it allows me to ballot smart,” said Kenny Cheng, 26, a bank officer.
Lamented retail assistant Mohammad Firdaus, 33, “The information is good to have, but quite depressing. Subscription rates for second-timers are all sky-high. The best I can do is aim for the less attractive ones; even then, there's no guarantee.”
Indeed, judging by the statistics, industry watchers find it a good time for Minister Khaw to tweak regulations again—this time to benefit second-timers. Dennis Wee Group director Chris Koh said, “The number of first-timers… is a healthy number as, given dropout rates, first-timers now have a very good chance. So it may be time to open more units to second-timers.”
Koh added that the sky-high figure for second-timers might also indicate that resale prices are too high. Second-time buyers do not usually turn to BTO flats because of the resale levy on the sale of their first subsidised HDB unit. “Now [that] they are opting for BTOs, it may be a sign they would rather pay the resale levy for a brand-new flat than high premiums for a resale unit,” he said, adding that resale sellers should take this trend as a signal to price their flats more attractively.
Amidst much buyer dissatisfaction with the Singapore housing market, the Urban Redevelopment Authority (URA) is working on a raft of new rules to make developers’ actions more transparent and protect homebuyers.
(One of the property marketing tactics that the URA will clamp down on is false or misleading website advertisements. Image courtesy of Thinkstock.)
The proposed changes will lead to an overhaul in the way developers conduct business, targeting specific methods such as misleading advertisements, pressure selling, and adjustments done to showflats. In particular, the tweaking of showflat dimensions is one area that sees little transparency. Some developers have been known to make use of misleading marketing gimmicks, for instance removing partitions and raising ceilings to create the illusion of wider spaces.
With its proposed changes, the authority hopes to reinstate buyers’ confidence in the market by making sure consumers are more aware of such marketing tactics. In terms of dimension adjustments, developers will be required to accurately depict the actual unit in their showflats. The showflats will need to have the same floor area as well as floor-to-ceiling height as the units they promote.
Additionally, where there are removed partitions in the showflats, signs have to be put in place to mark the positions that doors or walls should be. The floor area of each room has to be explicitly stated, so buyers get a clear idea of what they are really paying for.
Furthermore, the URA will also require a price list from developers for private units launched at least two days before the first option to purchase is issued. Other changes hopefully taking place include putting controls in place to ensure website advertisements do not contain false or misleading information. Developers also have to provide their track records.
As for errant developers, URA aims to deal with them severely: the authority plans to blow the whistle on those who violate these or other regulations, and post a list of such developers on its website for private home buyers’ perusal. Should a developer continue flouting the rules, it may also receive the maximum penalty—a suspension of its license.
The date for these changes will be announced at a later stage, as URA is currently refining details of some of the proposals and making consultations with players in the industry.
The question now is: will these changes positively impact the way buyers view the private homes market?
It is certainly hoped so, as the authorities begin various methods to knock down the barriers that make information inaccessible to consumers. With the government now making its stance on unethical marketing tactics in the private housing market clear, buyer doubts and hesitance will inevitably wane over time.
