Cooling measures to stay in place for now
Property developers and consultants didn't get the rolling back or tweaking of property cooling measures they were hoping for but took things in their stride, after Finance Minister Tharman Shanmugaratnam declared: "Given the run-up in prices in the last four years, it is too early to start relaxing our measures. The government will continue to monitor the property market in the coming quarters and adjust our measures when necessary.
"We are not engineering a hard landing. But neither are we able to eliminate cycles in the property market, with upswings in prices in some years followed by corrections."
Property industry players had called for a scaleback of the seven rounds of property cooling since 2009, which rolled out measures such as the seller's stamp duty (to discourage short-term trading in property), additional buyer's stamp duty (targeting property investors and foreign buyers) and lower loan-to-value limits for those taking their second or subsequent home mortgages.
Frasers Centrepoint Homes CEO Cheang Kok Kheong said last night: "I guess they will let the measures run for a couple more quarters before deciding what to do. Right now, the market still has depth. People are still investing. The economy's doing well and there's liquidity."
The group has collected 585 cheques for its 495-unit Rivertrees Residences condo in Sengkang, where sales begin today. The average price is $1,050 psf, compared with slightly over $1,000 psf for the next-door Riverbank@Fernvale released last week.
The Real Estate Developers' Association of Singapore said it "noted that the government is not engineering a hard landing and will continue to monitor the property market and adjust the cooling measures when necessary".
Addressing the issue of rising rentals for businesses, Mr Tharman noted that "a very large quantity of industrial and shop space is entering the market, and should have a moderating influence over the next few years".
New industrial spaces clustering companies within the same industry will also help SMEs reduce costs through consolidating operations, pooling resources and aggregating demand for delivery and other services.
"For instance, JTC's Food Hub concept will feature an integrated cold room-warehouse shared facility operated by a third party provider who will also provide logistics services. This will not only lower the capital investments needed by SMEs - as they no longer need to invest in their own cold rooms - but also enable them to benefit from more efficient supply chains," said Mr Tharman.
Singapore Chinese Chamber of Commerce & Industry said: "We are glad that government agencies like JTC and HDB are taking steps to create a pipeline of industrial/commercial space for business. We would hope that some of this space could be extended to SMEs at an affordable rate."
To encourage businesses to maximise land use, the Land Intensification Allowance (LIA), due to expire next year, will be renewed for five years to June 30, 2020. The scheme will also be extended to the logistics sector and businesses carrying out qualifying activities on airport and port land. "When you look at these three new areas joining the LIA scheme, you can see the government's ambition to enhance Singapore's competitiveness as a regional transportation hub," said KPMG tax partner Gan Kwee Lian.
Introduced in Budget 2010 to promote industrial land productivity and higher value-added activities, it allows companies to claim for capital expenditure incurred to construct a qualifying building or structure over 15 years.
From today, the government is streamlining the stamp duty rate structure. Tang Woon Ee, partner, Rodyk & Davidson, said this has only a marginal impact on the amount of stamp duty payable for property purchases, share transfers and mortgage instruments.
As for property leases, there are stamp duty savings for short-term leases of under a year. However, for leases that are over two years but not exceeding three years, there is a significant increase in stamp duty payable. For instance, a three-year lease for an apartment at $3,000 monthly rent attracts $432 stamp duty - 50 per cent more than the $288 under the old system. "Leases beyond three years do not seem to have much difference in stamp duty payable," she added.
The Ministry of Finance noted that currently the stamp duty on a property lease is assessed on the annualised rental amount, regardless of the actual lease period. This means that a one-month lease will bear the same stamp duty amount as a one-year lease, where the monthly rent is the same for both leases. "To ensure consistency in stamp duty treatment across leases of varying tenures", leases up to four years will attract stamp duty of 0.4 per cent of the total rent for the entire lease period. For leases exceeding four years or for any indefinite term, the stamp duty rate is 0.4 per cent of four times the average annual rent for the entire lease period.
Leung Yew Kwong, principal tax consultant at KMPG, said: "The new system uses a percentage of the consideration eg rent or purchase price, which simplifies the computation, whereas the old system was a more complicated way of counting. In fact, many people were already using a decimal system for ease of calculation."
For the Approved Building Project Scheme, a review date, March 31, 2017, has been set. The scheme accords exemption from property tax on land under development, for up to three years, to big industrial building projects supported by the EDB. Typically such projects involve spending of at least $500 million (excluding land costs).
Source: Business Times – 22 February 2014