Redas calls for review of property tax policies

Redas’ recommendation for a property tax exemption on land under development could help to lower holding costs, especially for developers of large projects that take a long time to finish. This could bring some relief to builders during the current downturn.
PHOTO: The Straits Times

The Real Estate Developers' Association of Singapore (Redas) has called for a review of property tax policies, among other suggestions for the upcoming Budget.

Redas is also asking the Government to improve transparency in the property valuation process, as well as reduce business costs and regulatory fees, its president Augustine Tan said yesterday.

These proposals - coming amid concerns that geopolitical and economic uncertainties could hurt the economy - are aimed at helping firms contain costs and ensuring business sustainability.

What type of property in Singapore should you buy

  • Buying property is a long term investment. When you're thinking of diving into real estate investment, it's better gather as much information on it as possible.
  • Just like in any part of the world, having a private property is a good decision as there are many benefits. For instance, the property cycle in Singapore over the last years indicates that there is a steady rise in real estate's value.
  • Alternatively, real estate investment can be a source of passive income. You can purchase a property and rent it out.
  • Hougang Capeview BTO flats

    BTO comes under the Housing and Development Board (HDB), Singapore. It's a responsive system, which allows Singaporean citizens to apply for flats at a location of their choice.

  • BTO flats at Sky Terrace@Dawson

    Once 65-70 per cent of the flats are booked, the construction work begins.

  • Tampines GreenLace BTO flats

    After the construction is completed, you will have to wait for some time before you can move in.

  • Pasir Ris One DBSS project

    Design, Build, and Sell Scheme (DBSS) is an incentive of the HDB system. DBSS is public housing scheme developed by private developers.

  • City View @ Boon Keng DBSS project

    The DBSS scheme offers more comfortable designs and better locations.

  • Executive Condominium

    Executive Condos (ECs) caters to young graduates and professionals who wants a property in between public and private housing.

  • Executive Condominium

    ECs are comparable in design and facilities to private condominiums as they are developed and sold by the private developers.

  • When it comes to investing in real estate, you should ask whether there is easy access to MRT stations, schools, and other essential facilities; the property can be easily resold; and affordability.
  • What are the costs involved in buying a property in Singapore? First, you have to check your stamp duty rate. Based on the market value of the property, you can compute for your Buyer's Stamp Duty (BSD).

"Negative sentiments can weigh heavily on the property market should there be a confluence of recessionary factors and destabilising events. This will, in turn, adversely affect Singapore's economy," Mr Tan said at the association's Chinese New Year luncheon.

Redas did not lobby for the lifting of property cooling measures in its wish list for the Feb 20 Budget, but instead focused on property tax issues.

Among them, a call for a reduction in property tax for vacant private land, tax exemption on land under development and buildings undergoing renovations, and tax concessions for vacant properties. Market watchers say the property tax exemption on land slated for, or under, development could help to reduce costs and risks for developers.

Chesterton Singapore managing director Donald Han said: "Some developers may be unable to launch their project right away due to uncompetitive price points. The tax exemption will help them to lower holding costs."

Dentons Rodyk & Davidson senior partner Lee Liat Yeang does not think that the Government will agree to the tax exemption at this point as "we are not in a severe downturn or economic crisis".

"That said, for some large projects - perhaps those over $1 billion in value, which will take a longer time to plan and develop - tax exemption for the development period will provide some form of reasonable relief for the developer," Mr Lee said.

Redas is also pushing for special training grants to enhance maintenance skills and technical expertise among engineers and technicians.

The association looks forward to contributing to key areas drawn up by the Committee on the Future Economy, including developing digital capabilities for the real estate industry and tapping opportunities in urban solutions.

Future prospects aside, Mr Tan said that challenges loom for the real estate sector, as all segments of the market continue to reel from the "persistent oversupply situation, rising vacancy rates and weak demand".

Although new private home sales have improved slightly last year, Mr Tan cautioned that it is still too early to conclude that a market recovery is in sight.

"With the weakened labour market, slower growth in employment and earnings, declining population growth, coupled with the prospect of rising interest rates, the current slowdown is expected to continue into 2017," he added.

Risks of buying property in Singapore

  • Investing in real estate can be very profitable. However, like every other profitable endeavor it comes with several risks.
  • Here are the things you need to consider while investing in real estate in Singapore.
  • 1. Fluctuating prices

    In Singapore, the market was previously saturated with people wanting to buy property due to the stable environment. Demand was higher than supply, which led to higher property prices.

  • 1. Fluctuating prices

    The high demand and low competition trend in real estate is however reversing. Many developers are releasing new projects and supply has outstripped demand. Property prices has been slowly declining.

  • 2. Tedious bureaucratic processes

    Singapore has strict bureaucratic processes for real estate projects. These processes are necessary in order to obtain approval for projects and fulfilling the pre-requisites before the property can be sold.

  • 2. Tedious bureaucratic processes

    Some developers tend to overlook these processes. 7 such projects with a total of 574 homes have recently been identified, including City Development's and IOI's South Beach project.

  • 3. Turnaround time

    There was a time when developers took about 43 months to complete a project due to the uncertainty in the real estate market. Now, you can now expect a project to be completed within five months.

  • 4. Legal risks

    Legal work is yet another factor you need to keep in mind. You need to follow the rules and regulations to stay clear of charges and penalties. Make sure you know the rules of property transfer and purchase.

  • 5. Mortgage eligibility and suitability

    HDB provides housing loans at concessionary interest rates to flat buyers. However, to prove your eligibility, you need to go through a credit assessment and mortgage loan eligibility process.

  • 5. Mortgage eligibility and suitability

    If you don't meet the criteria set by the HDB, you can always take the loan from private banks and other financial institutions.

  • 6. Illiquidity in the real estate market

    The price of real estate in Singapore is rising due to its high demand. So, illiquidity is only a minor risk. But it's always a good idea to be careful and do your research before you invest in a particular property.

In addition, developers continue to shoulder the financial burden for failing to sell all units at their residential projects within a stipulated timeframe.

Mr Tan said that about 730 units remain unsold in projects affected by qualifying certificate charges, while another 3,500 units in nearly 40 projects will be hit by the Additional Buyer's Stamp Duty remission clawback during this year and the next.

wongsy@sph.com.sg

Read also: Property agent industry shrinks further in tepid market
Budget Watch: Government likely to focus on upgrading businesses, workforce
Singapore central bank chief: City-state's property market stabilizing
JLL argues for new property tax in place of ABSD


This article was first published on Feb 11, 2017.
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