It is not likely for new property curbs to be implemented in the upcoming Budget, as the additional buyer’s stamp duty (ABSD) introduced in December last is still making a strong impact on foreign buyers.
( Analysts do not agree if the ABSD will stay. However they do not think new curbs will follow. Image courtesy of Thinkstock.)
According to participants of the Business Times’ pre-Budget roundtable, the ABSD could possibly be tweaked by as early as the end of this year. And the only property-related measures they expect to be dished out on Budget Day are the extensions of conservancy charges and property tax rebates.
One participant is PropNex CEO Mohamed Ismail, who suspects that the ABSD—an extra 10% charge that foreign buyers have to pay for a residential property purchase—is a temporary measure. He said, “I don’t think this is a policy for the long-term, I think it’s for a time.”
Contradicting his view is Citigroup economist Kit Wei Zheng, who commented that the ABSD is a structural measure, not a cyclical one. He said, “It’s a tax on the capital transaction, a form of capital control even.
“It sends a potentially negative message to foreign property investors, but from the government’s perspective, given the scale of gross, not net, capital inflows, the policymakers think it’s justified.”
Kit added that the rate may be tweaked to respond to market cycles—even zero-rated—but its impact is here to stay.
Ismail, meanwhile, thinks that changes might only be made by the year’s end and not at the Budget. He said, “The high-end market will be affected and the signalling needs to be considered.
“Foreigners who buy Singapore property are not really looking for rental yield—Singapore has never been a good market to buy for rental yields. Foreigners like Singapore for its capital gains—stability, land-scarce. But if on the capital gains end it loses its shine, the high-end segment will be hit.”
Separately, Ismail suspects that it is unlikely for other major changes to take place. “If any other new measure comes out, people are going to totally lose confidence,” he pointed out. This includes rebates to curb rising office and shop rentals, he noted, despite the numerous calls from small businesses for such action.
What will remain, said Ismail, is the ‘Singaporeans first’ mindset that arose post-General elections last year. As such, policies that continue are the property tax rebate, as well as rebates on service and conservancy charges. He said, “With the economy not so certain, tax rebates for anything five-room and below may help.”
Kit added, “The other incentive to do that, is that it will bring down the consumer price index automatically, and the government is still concerned about inflation.”