Singapore stocks started declining on February 20th after taxes were raised on home purchases over $1 million. This was just after the housing market began to recover from a 4-year low.
During early trading, the City Developments and the UOL Group fell more than 2%. They were the largest declines on the Straits Times Index. CapitaLand, the largest developer in Singapore, dropped for the first time in one week.
The government said that buyer’s stamp duty on properties costing over $1 million will cause an immediate rise from 3% to 4%. The move came about after housing prices rose over the past 2 quarters which ended a 4-year decline.
The increase in taxes is not believed to affect the home price recovery but it could have an effect on developer stocks in the very near future.
The director of research at Cushman & Wakefield believes the increase was well-timed. With prices and transaction volumes rising, this could cause an effect after the Chinese New Year. The increase in tax revenue is actually quite low but this increase will have an effect on luxury properties. The stamp duty on a $10 million property will see an increase of approximately 0.9% to 3.8%.
In the meantime, developers constant bidding on land has increased apartment sales and prices which indicates the economic slowdown is coming to an end. That said, the central bank is warning that the rise in vacancies and the slowdown of population growth could harm the residential property recovery.
Even though there is no concern with the recovery in home prices, enthusiasm in the en-block market for development might not be justified
Apartment sales for redevelopment during the first two months of this year totaled more than $3.1 billion. This is double the amount seen during this same time during the last en-block market peak in 2007. It is believed that developers could easily decline purchases as the price tags will be pretty significant for most sale deals, running in the hundreds of millions. In the end, home prices could rise to as much as 10% this year.
Something to take note:
- for new launch condo / resale Singapore condo /Executive Condo(EC) / HDB that is below S$1million, the BSD remains unchanged. For every S$100,000 above S$1,000,000, the differences in tax is S$1000. Meaning to say that, if a property with a purchase price of S$1.1million is bought before 20th Feb 2018, the BSD is $27,600. And if it is bought on 20th Feb 2018 and later, the BSD payable will be $28,600.