Friday, November 21, 2008

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Developers want govt to turn back clock on several policies

Wish-list includes reinstatement of deferred payment, old formula for DC

Some property industry players are yearning for the good old days, hoping the government will reverse some of the changes in property policies made in the past two years and thus go beyond the usual exemptions and rebates on property taxes with its off-Budget/Budget packages.

Such a strategy may be timely in helping to stimulate currently flagging property demand given that the measures were rolled out when the market was sparkling.

Deferment of stamp duty until TOP

Developers are hoping the government will reinstate the deferment of stamp duty on property purchases where the property is under development (this was removed in December 2006) and revert to the old formula for computing development charge (DC) rates, based on 50 per cent of the appreciation in land value arising from changing the use of a site or building a bigger project on it. This was raised to 70 per cent in July last year.

Following the December 2006 rule change on stamp duty, property buyers are now required to pay stamp duty within 14 days from the date that the option to purchase is accepted.

The previous concession, introduced in June 1998, had allowed stamp duty payment to be deferred to the date of issuance of Temporary Occupation Permit for a project or date of sale of interest in the property, whichever was earlier, for properties under development.

Deferring payment of stamp duty for projects under development once more would lower upfront cash commitment for home buyers, some of whom may be stretched, especially since it could take a few years for the new homes they've bought to be completed, says Knight Frank managing director Tan Tiong Cheng.

Most developers are hoping the government will reinstate the DPS. They say DPS helped genuine home buyers, especially upgraders who may be able to sell their existing homes only when their new private home has been built.

Revival of the deferred payment scheme

Also high on the developers' wish-list is a revival of the deferred payment scheme (DPS) - which was scrapped in October last year - to boost home purchases, with a qualifier that safeguards be introduced to address concerns that such schemes had spurred speculation.

Old formula for DC

Although developers are currently not in a race to redevelop their sites given the property slump, many argue that going back to the pre-July 2007 formula for computing DC rates - which creamed off a smaller portion of the enhancement in land value - 'would provide greater incentive for land owners to explore more productive use for their properties and could spur some activity', the head of a listed property group said.

Economic Development Board's Global Investor Programme to allow a higher quantum for property purchase

A major property developer also suggested a demand-boosting measure in the form of changing the investment criteria for Economic Development Board's Global Investor Programme to allow a higher quantum for property purchase or even lowering the total threshold value.

Under a new option to the Programme announced in July 2005, a foreigner can be considered for permanent resident status if he invests at least $2 million in business set-ups, other investment vehicles, and/or private residential properties, with up to half of the investment allowed in private residential properties.

'More people taking up permanent residence or citizenship and landing on our shores will help the property market,' said the developer.

Exemptions or rebates on property taxes for completed commercial and industrial buildings

KPMG Tax Services executive director Leonard Ong said that granting exemptions or rebates on property taxes for completed commercial and industrial buildings will help landlords and hopefully they will pass on some of the savings to their tenants.

'Earlier this year, when property prices were on the rise, the government also raised Annual Values of properties. So based on this, owners would be paying more property taxes than last year. This makes it all the more important to introduce exemptions or rebates for property taxes,' he added. Property tax is calculated as a percentage of a property's annual value.

Property tax exemption for vacant land and land under development

Developers are also hoping for property tax exemption for vacant land and land under development to reduce costs.

'During this period, the market is so quiet we cannot launch projects,' notes Ho Bee Investment chairman and CEO Chua Thian Poh.

Require the buyer to secure a housing loan

Ho Bee's Mr Chua suggests modifications be made to DPS to allay concerns that it also facilitated speculation in the past.

'The most important thing is to require the buyer to secure a housing loan even if he does not need to draw down the loan immediately, to ensure a credit assessment of the buyer is done by the banks,' he said.

However, Ho Bee's Mr Chua disagreed with the suggestion by some analysts that the initial payment by the buyer - before the deferred payment kicks in - be raised from 10-20 per cent previously to 30 per cent, as that 'would not help home buyers much'.

Developers are also concerned about banks tightening financing to home buyers and to businesses in general, and hope the Monetary Authority of Singapore will use 'moral suasion' to send the right signal to banks.

Source: B.T. Published November 19, 2008

May also want to read:
Fire Sale: Owners Dump Condos
The days of Cheap, Easy Credits chasing after property is OVER!
When the bubble of greed and fear burst, guess who suffer?
Property Investment Tip: Don't put all your eggs in one basket
HDB Resales: West Sees Highest Price Increase


Anonymous said...

any such measures will be the fastest way to have a subprime crisis at our own doorstep .. as it is now, many property buyers are already stuck with huge mortgages .. with more jobs cut, defaults and foreclosure will rise .. do we need the situation to get worse just so that developers will benefit?

Anonymous said...

Throughout the boom years, developers were quite happy to raise prices some 50% according to URA index. And they sold so much that they still boast they have enough reserves to deliberately hold-off launches in a weak market.
(that's cutting off your nose to spite your face in my opinion)

Anyway, you can't have it both ways. You've fleeced the population on capitalism, now do the right thing and suck it up during lean times.

danny said...

I agree with both anonymous posters. Now is not the time to make arguments for loosening regulations and oversight.

A price correction will hurt, but any ill conceived policies to artificially inflate prices (or retard their decline) will result in even more pain later. The Paulson Plan should NOT be adopted in Singapore.

Red said...

As much I like the suggestion from developers to encourage buying market, the developers needed to cut their prices. The current prices of 2-3k psf is just way too high. It is like a daylight robbery.

The only way, I guess is go thru the pain. The current US has damned themselves and along with it, dragging all of us. We don't need another SG subprime in our back alley.

Smart Pro. Buyer,
Do you reckon that Gomen/HDB would come out and help push the market by offer significant cuts on stamp duties especially on HDB? I think this is a good move, it would encourage more purchases on HDB and ensuring that it sustains.

Anonymous said...

What are developers grumbling about? The reason sales are poor NOW is not because of (the lack of) DPS, or on-time stamp duty payment, or what not....

Real reason: fear of losing >> greed, and rightly so! Entering the market to speculate now (for that is what DPS facilitates) is just suicide.
So 'turning back the clock' on those policy changes won't help increase sales.

If developers want sales, the solution is very simple... LOWER PRICES!

Until you do, no amount of DPS or stamp duty deferment will increase sales in this recessionary environment.

Homes were never really worth 2007 prices in the first place. The sooner they accept the reality, the sooner they can get sales going again.

Anonymous said...

You can be sure that the Government would back the developers otherwise why do you think these powerful developers dare to make a WISHLIST so openly without shame. These developers are giving notice openly knowing that the Government has seldom fail them. Dont be surprise to see news of government announcing measures to stimulate property demand. it can take many forms as the developers will jump in at any opportunity to discuss with government officials and justify it citing national issues and danger to let it to market forces, stakes too high, banks suffering because drop in valuations and large exposure to property (usually loans to property projects, loans to speculators and rich owners who own many units) and all that in the name of speeding up economic recovery.

Why not understand their agenda before granting them the wish list?

Anonymous said...

Singaporean private property buyers will always be the LOSERS or suckers of overpriced or speculative properties (good or bad times) The rich speculators, foreigners and developers will always WIN as it is a predictable game to their advantage, especially now that they can hold and hold off launches sitting on pile of profits and cash and unrealised capital gains.

As a true Singaporean, it is heartening to see that the government is channelling public funds and resources to help the retrenched, sick and poor, retraining and address the looming and very serious problems of the aged and handicaps of Singaporean origins. Singaporeans have really contributed all in their lives in this country and many have served national service,risk their lives and some injured during training . Help these Singaoreans and Singaporean couples to owning more affordable HDBs by shortening the wating period and build more flats so that all Singaporeans will have a sense of pride and identity. Why waste so much time, precious resources and efforts protecting the developers and speculators?

We should challenge them openly to declare their vested or personal interest and dare them to say that they have not benefitted significantly in the boom times as some readers said and ask them how much unrealised capital gains on the properties they own. WHY protect them? WHY enrich them?

Or do we need to sigh again by adapting to this current state of affair in Singapore?

danny said...

As per Anonymous(s), the headlines would be:

"Gahmen grants Big Evil Powerful Developers Regulatory Wishlist"

Singapore - In a bid to fatten the margins of Big Evil Powerful Private Property Developers (BEPD), the Gahmen has approved the DEPD's coveted "Wishlist".

Of equal importance to the Gahmen are the profit margins of rich foreign investors who come to Singapore only to exploit the poor natives, namely, the true Singaporeans, not some 'less true' ones like Gong Li or Tao Li or Li Jaiwei. (Some Singaporeans are truer than others)

It is outrageous that the HDB has ceased to overbuild flats.(Although there are still flats in Jurong West empty since 2000). It is absurd that Gahmen learn lessons from the last property boom when there was a huge glut in HDBs (since when are governments suppose to learn from their mistakes!?). Instead they dare to adopt a more cautious BTO and DBSS. Singaporeans will not have a sense of pride and identity, until they get their own HDB flat and become "True" Singaporeans.
My tongue in cheek response is to highlight the absurdity of Anonymous' statements

The HDBs provides a housing market that is more affordable to Singaporean households (vs. private). (Min. of 1 Singaporean and 1 PR) About 70-80% can afford to buy a HDB directly from the Gahmen or qualify for the grant.

To suggest that the gahmen corrupt, subject to the whims of the BEPD's is as responsible as claiming that South Koreans have a special gene that makes them prone to MCD, even from non-infected beef.

Anonymous said...

Yeah, I'm waiting for developers to 'turn back the clock' on prices too!

That will get sales going. I wonder why the developers conveniently forgot their own part to play.

spore slave said...

gahmen like us to be asset rich, cash poor so we cannot migrate mah ... stay here and slave .. pay and pay..

Anonymous said...

The government has already halt land sales and withdrawing more URA land sites to back the developers on the supply side as a first step. The developers respond with jubilations and sang praises. Now, they are asking more government measures to protect their profits from shrinking under a free market. Dont underestimate these powerful developers and some rich speculators/investors. They are serving notice publicly. Before dare making such a wish list, may be they have discussed with the government/officials informally or formally. some green light on it may be given? Increasingly,looks like there a special bonding amongst the players in influencing demand and supply? Already i heard in the property market "Sure the government will do something to support the property market" There is an air of confidence and arrogance amongst the developers otherwise, why do you expect them to confidently postpone new launches and not dropping prices? (except a few of the smaller developers who want to cash in quick). It looks well co-ordinated and timed. Looks also like a powerful cartel has been formed using the various means of communications and justifications. Observe and watch.

Anonymous said...

Look like these "powerful people" will stop at nothing to get the property price up .. read this article below from CNA:

Experts hope for stimulus package for property market in Budget
By Ng Baoying, Channel NewsAsia | Posted: 20 November 2008 2046 hrs

Property watchers and players in Singapore are increasingly hoping for some help from the government to boost the sluggish residential sector.

New private home sales this year look set to hit their lowest levels since the 1997 Asian financial cisis. And the outlook is weak, amid the global downturn.

Only 3,900 new private homes have been sold year to date. Property watchers said this could be the first time in 11 years that sales for the year totalled below 5,000.

Consultants from Chesterton Suntec International pointed out that property advertisements have come down to a trickle, a signal that developers recognise that buyers will not be easily persuaded. This situation is unlikely to change before the year runs out.

Property agentssaid they are hoping for some market stimulus in the upcoming Budget announcement, while developers said they want some help in cushioning the impact of a poor market.

"We're looking forward to the government's proposed Budget in January for stimulus package, a package that could revive the activity in the residential property market," said Donald Han, managing director of Cushman & Wakefield.

This could be in the form of reviving schemes that have helped the market in the past.

Han said: "One of them obviously is for the return of deferred payment. We're also looking to any reduction in rental levels. Property tax rebates could come from landlords to tenants to reduce occupancy costs.

"You'll see some measures in the past which address downturn period, a cycle like what we're experiencing right now."

Developers are also hoping for a reversion on new rules like earlier stamp duty payments, and the way the development charge is calculated. They said property tax concessions for vacant land as well as rebates for office buildings would also help.

Colin Tan, the head of Research and Consultancy from Chesterton Suntec International said deferred payment is already available on most projects currently on sale, and without it, projects coming on in 2009 and 2010 may see even weaker sale conditions.

However, some analysts said the government may have other priorities on its plate.

"We saw about 3 or 4 years of very active transactions and price action in the property market, so some degree of consolidation is healthy. In that sense, maybe we should be looking for stabilisation instead of further stimulation," said Tai Hui, regional economic research head of Southeast Asia at Standard Chartered Bank.

Some argued that for now, the bigger picture may be more important.

David Cohen, director of Asian Economic Forecasting at Action Economics said: "More important than any fine-tuning in the tax system will be the timing of turnaround in global activity which Singapore doesn't really have a control over."

The Budget will be announced in January next year. - CNA /ls

Poor Ppl said...

If the govt wants ppl to buy at these high prices, they must give ppl the money or else who can afford?

Anonymous said...

Property developers have hundred of millions and billions of cash from gains by selling properties to Singaporean buyers/suckers of inflated priced properties. They are clearly delaying now or hold back launches due to weak sentiment and proceed with construction of unlaunched projects for sale only after completions or until the government officials announce measures to back them. They dare to boast about its ability of holding, constructing and choosing their own timing to sell. One estimate that these large private and listed developers own nearly 70% of residential projects in pipeline. Sure they will lobby behind the scene, meeting with government officials for favour to fulfil their WISH LIST. Something is real cooking. A powerful and influential cartel have emerged behind the scene. We hope government officials dont succumb to such pressure or worst entertain them. By giving in to them it show how weak or irresponsible a government is.

Anonymous said...

Some local Banks n finance companies or some related shareholders and wealthy groups are in property development business in Singapore, Look at their annual reports. They are very strong and can weather this difficult period easily but bad as they have an unfair advantage. So why should the govt support them? Bec they are big employers generating jobs for many property agents (many are rich property speculators) and foreign construction workers? Credit must be given to Govt in prioritizing help to the retrenched and the poor or small struggling Singapore companies so far.

Anonymous said...

As the financial and economic crisis beginning to mutate in Singapore, the developers are now panicking to preserve their capital gains and profits. The flight to safety from stocks (even highly liquid) to cash have resulted in heavy losses to investors BUT property is highly illiquid and big S$items, so let the market forces works and dont artifically prod the market unfairly. The developers MUST pay a price for their greed and by postponing launches, the bubble can get only bigger and delay with a disastrous results. Buyers are not interested to bite unless prices have fallen to drastically affordable level and quality design in place (not taking advantage of unwary buyers with hidden costs on bay windows/planter boxes). There is no signs of cash rich or strong developers in Singaproe collapsing. Property prices have not collapsed like in any countries where they are now cheaper and much competitive than Singapore. There are other more urgent priorities than helping the developers to fulfil their Wish List.All class of assets in Singapore has corrected and why so special about property. It is inevitable and one has to be transparent for the good of the NATION>. Why is the gahmen pay so much attention to such unproductive and speculative property activities?

hjll[s said...

agree that gahmen should not "pay so much attention to such unproductive and speculative activities" .. but is that the way the gahmen look at it?

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