According to the director of the Institute of Real Estate Studies at the NUS, the stamp duty for property buyer is getting higher and this will end up affecting property prices. Recently, there was an announcement of around 1% price hike for the BSD at the budget 2018 meeting. This was something that surprised a lot of people, even those that are vetted with the industry as a whole.
There was an immediate effect and this came in the form of a 1.7% drop at the FTSE straits. This is a very important benchmark indicator for property developers. And it does show that the market does have some issues right now, issues that could potentially be solved if everything is handled correctly and with great results.
Moreover, some property shares for the Wing Tai, UOL Group and CDL are down with 1.9-3.3%. however, experts state that the extra BSD may not dampen the buying momentum for customers. So, if they want to spend more, they will most likely do that in no time. But the projects of higher value in Singapore may end up with a price hike, so that’s one of the things that you may need to take into consideration at this time. The mid tier projects may also be the target here, so hopefully there will be no issues in the end.
There’s no expectancy to have any short term impact, at least for the time being. But it will definitely bring in higher prices in the long run, and that’s one of the things you want to focus on.
The incremental tax will mostly be felt by the private housing market
Yes, this is where most of the impact will be felt. And if anything, this will mostly affect the mid and high end customers that already pay a lot of money for this. A minority of HDB flats buyers will be affected too, if they are getting a HDB that is above 1 million dollars. It’s also important to note that executive condominiums will also be affected, however in general, as the pricing for ECs are lower than new launch condos and resale condo, hence it is not that massive of an impact. The major problem will be for those outside the executive realm, especially Singapore Condo that are way above $1million.
It’s quite similar to a wealth tax. You can see this higher stamp duty as some sort of a wealth tax. The difference In the stamp duty can still be considered negligible if the property price is just slightly above 1 million. For the rich buyers who are getting a multi-million dollars residential property, the differences will be great.
This may lead to a housing price cooling
Most people don’t really see this as a cooling measure for the house market. But this will end up bringing in some friction. It can end up increasing the acquisition costs especially for some of the residential lands. The private housing prices tend to be inelastic, but there will be some increase due to the BSD tax. But the market has a great supply that outstrips demand, so it’s hard for the developers to absorb the BSD tax increase. This ends up being a problem since the prices can get higher.
Some developers will actually absorb the tax costs, so there may actually be a downward spiral in this situation. It’s quite interesting to see this effect, and the return on investment may be huge for people. Sellers may end up selling houses under the valuation price in order to offset the transaction costs for the buyer. This is obviously not something that happens right now, so it can go either way. but sellers will end up offsetting the BSD costs with lower prices.
So yes, in the current market this may actively bring in a cooldown. That’s a great thing, as it does bring in front some amazing possibilities to the table. Results can actually be quite amazing, and it all comes down to identifying the way the market will behave after the BSD tax. Even if this seems like a great way to generate tax revenue, the reality is that housing policymakers will retain it for quite some time. Yet when that happens, sellers will still find a way to get around it, so there may be a bounceback effect!
Refer to link below for more info,