Property curbs ‘likely to remain for a while yet’
PROPERTY prices and sales volumes have been in slow decline for six months but cooling measures, especially loan curbs, will be here for a while yet, experts say.
Hope that the measures would be scaled down in next month’s Budget look to be dashed given that household debt is still high and prices remain elevated in some segments, they note.
A slight easing of stamp duties might be the only concession although some observers believe selected property cooling measures should be rolled back.
Bank of America Merrill Lynch economist Chua Hak Bin noted: “Transactions have collapsed and property developers are stuck. Smaller developers of higher-end homes may even go bust if some of these measures are prolonged.
“Reducing buyer stamp duties or exempting duties for prices above certain thresholds, say $1 million, may help ease the pressure.”
Sales of new private homes plunged last month with only 259 units shifted in December – the lowest level since January 2009. Private home prices have fallen in tandem – down 0.9 per cent in the last three months of last year, while the HDB resale price index slipped by 0.6 per cent.
But economists believe the correction has still some way to go before they have adverse effects on the broader economy.
“Previous comments from various ministers have indicated that the Government may not be averse to seeing prices fall,” said Barclays economist Joey Chew.
“The question is by how much. We think a 5 per cent correction can be easily absorbed by the developers and the market and will not cause undue concern.”
Some experts feel there could be some steps to ease the pain of property owners going through the market correction without interrupting the cooling process.
Chesterton Singapore managing director Donald Han suggests replacing the seller’s stamp duty (SSD) with a capital gains tax.
The SSD was introduced in February 2010 to curb property flipping by imposing a tax on a home owner who sells up within four years of purchasing, whether a profit is made or not.
Replacing the SSD with a capital gains tax – on profits made from a sale of assets – would be more equitable, Mr Han said, and “can send the appropriate signal out to foreign investors that they are welcome but Singapore wants a stable, long-term and productive investment market”.
Mr Colin Tan, Suntec Real Estate Consultants’ head of research and consultancy, added: “My wish for the Budget is maybe for the authorities to grant genuine upgraders a grace period – without the administrative hassle to pay first and claim back later – with regard to ABSD (additional buyer’s stamp duty).”
But experts say it is unlikely, and maybe even dangerous, for the Government to make any big moves towards repealing cooling measures now, given that they have only just started showing their effects.
Standard Chartered economist Edward Lee said: “While I think it is in no one’s interest to see a sharp property correction, it is also dangerous to foster a mindset that the Government is supportive of price increases and very sensitive to price correction.”
Furthermore, he noted, household debt remains high, with mortgage growth rates still outstripping nominal economic growth.
KPMG Singapore principal tax consultant Leung Yew Kwong said that barring any “unsettling” market corrections over the next two years, there is unlikely to be a major unravelling of the cooling measures.
“Home prices are still a sensitive topic and will continue to remain so in the immediate future, with the price of property still considered high by many Singaporeans despite showing signs of stabilising.”