Developments involving the tax office and residents of Tampines Court in September of this year (2017), appeared to give home owners facing en bloc sales encouragement, but if anything, it highlights the potential problems facing such people.
It is far too easy to think of an en bloc sale for your private condo as a good thing. A sudden (often unexpected) windfall that lands in your lap and bank account. That is not always the whole story however. As well as the issue of severing your emotional ties with your home and neighbourhood, the financial side of things is not always as clear cut as people think. The overriding reason for that is seller stamp duty (SSD).
SSD was introduced by the government back in 2010 to put the brakes on the property market after the global financial crisis. The rules governing it have just been relaxed slightly, but anyone who has bought a property within 3 years (down from 4 years) of it then being sold, is liable to pay it. And that is all sales, en bloc included. What makes it more difficult for those affected in an en bloc situation is that though the money owed for SSD is payable at the time of the sale (14 days after the contract sale), the money from the sale initially goes to the developer, and it can take several months for the former owners to get the cash. It is that period that could – and is, causing people concern and genuine problems.
Take the aforementioned case at Tampines Court for instance. The property, a 560 unit development on Tampines Street, was sold in August this year for $970 million – the second biggest en bloc sale for a decade. Many of the residents – it is thought almost 50, are struggling to come up with the money they owe for precisely that reason. The amount owed in some cases is as high as $277,000. Few people will have access to that amount of money, particularly those who had the sale thrust upon them, and may not have wanted to move in the first place. Though they will get the money in due course from the developer, the several week delay can cause distress – and late payment fines.
In this case, the Inland Revenue Authority of Singapore (IRAS) ruled that fines would be waived, and payments could be deferred. The issue of SSD has always been there, but this is the first time it has been such a problem for so many residents due to the financial situation of those who own property at Tampines Court compared to those in more affluent areas, where several similar sales have taken place.
All this adds up to the fact that when looking to purchase property that has the potential for en bloc, you should always consider just exactly that means for your future financial position. The shorter the length of time you have been in the property before the sale, the more SSD you will liable to pay. It is just one more thing that you need to weigh up, when doing your due diligence on your future property.
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