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Saturday, December 31, 2011

Singapore stamp duty a blessing?

Malaysian properties like the Sky Garden Residences project Setia Tropika in Johor Baru are more attractive because of the stamp duty imposed by the city state on investors.

Malaysian properties appear to be even cheaper for investors compared with those in the republic

Singapore's decision to impose additional taxes on private property purchases may be a blessing in disguise for other property markets in the region.

CB Richard Ellis (CBRE) Malaysia executive director Paul Khong says move will have a positive impact on Malaysian properties especially those in Johor.

Malaysian properties appear to be even cheaper as a result of the stamp duty by the Singapore government which translates into a further 10% discount compared with properties in Singapore.

“Many other countries including Australia and Britain will benefit as their investment climate is improving due to the lower interest rates and poor market conditions which will make their propertiesattractive to buyers. They are the favourite investment destinations too,” he tells StarBizWeek.

Singapore has announced an additional buyer's stamp duty (ABSD) of between 3% and 10% from Dec 8 on private property purchases, and it is applicable to all Singaporeans, permanent residents and foreigners. The move is aimed at “moderating demand and promoting a more stable and sustainable market.”

The ABSD is in addition to the buyer's stamp duty of 3%.

Khong says the imposition of an additional stamp duty on residential properties will have substantial impact on the Singaporean market.

“Many foreign investors will stay away from the market for a while and the tax will curb speculation on the market,” he says.

Observers are of the opinion that the Malaysian government is unlikely to impose more taxes to “ease” the property bubbles in some key locations.

“The Malaysian government is unlikely to take such an action even though the property prices in some areas especially in the Klang Valley are going up unreasonably,” said a local research house analyst. He says such a move could deter growth in the property market and even suppress demand.

According to Maybank Investment Research, prices of private residential properties have continued to rise, albeit more slowly in the last two quarters. It says prices are now 13% above the peak in second quarter of 1996, and 16% above the peak in second quarter 2008.

“Even with the current global economic uncertainty, the demand for private residential property remains firm largely driven by the volatility in the equity markets and with interest rates remaining low, private property in Singapore continues to attract local and foreign investors,” it says.

Khong: ‘Many foreign investors will stay awa y from the market for a while.’

The introduction of guidelines on responsible finance by Bank Negara last month has helped to clear some concerns about possible lending measures to curb property demand.

“However, the new guidelines are unlikely to lead to a significant drop in the prices of the property market. We think there is still a possibility for further property cooling measures if housing demand remains strong,” it says.

Meanwhile, Khong says the Singapore property market may take quite a while to adjust to the new move as the duty imposed this round is a hefty 10%.

Currently, the real property gains tax (RPGT) for properties held and disposed of within two years from the date of purchase stands at 10% (up from the current RPGT of 5% for properties sold within five years of the date of purchase).

On Wednesday, the Real Estate Developers' Association of Singapore (REDAS) said the latest move by the Singapore government to cool the residential property market might cause the economy to slip into a recession.

REDAS president Wong Heang Fine was quoted by Reuters as saying that industry players were of the consensus view that the measures would, at least in the short term, negatively impact property sales volume and price.

Local players vs new ruling

It is still too early to know the impact on the Malaysian developers who are making a foray into Singapore although there would be an unavoidable slowdown in Singapore property sales, according to Maybank Investment Research.

“This new ruling will not bode well for Malaysian developers which have projects in Singapore. Unlike Malaysia a buy and hold strategy is less applicable in Singapore due to relatively higher land costs of 40% to 60% of gross development value GDV compared with 15% to 20% in Malaysia's,” it says.

Sunway Bhd and SP Setia Bhd have property projects in Singapore while UEM Land Bhd has an indirect involvement via project fees from overseeing and marketing of Khazanah-Temasek's SG$11bil joint venture projects in Marina South and Ophir-Rochor.

Sunway has four ongoing projects with a total GDV of SG$1.7bil under its 30:70 joint venture with the Ho Hup Group and a small wholly owned projects with a GDV of SG$32.8mil.

SP Setia just started to make inroads with its first project known as the 18 Woodsville under a private development scheme expected to be launched in a few months.

“We believe the impact on Malaysian property players will be rather minimal as their exposure to the Singaporean market is relatively small.

“With the ABSD, we think there is possibility of some property investors turning their attention to the Malaysian market, especially in Johor given its proximity to Singapore,” OSK Research says.

By The Star

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