Real Estate News                

February 2013   News and Views from ERA Research & Training Division

Buyers home in on larger flat in mature towns.

Larger flats in mature estates have once again drawn the most interest in the latest Build-To-Order (BTO) exercise, a trend that is likely to continue along with the promise of rising resale values.

When the most recent exercise closed last night, there were 12 applicants for every five-room flat on offer in Ang Mo Kio and six for every four-room unit there.

In Tampines, each four-room flat drew about seven bids.

With the Government's promise to keep prices of new flats affordable, bigger units offer top prospects for price appreciation amid rising resale prices, analysts noted.

Last week, National Development Minister Khaw Boon Wan made it clear that he had delinked prices of new flats from that of resale units to keep them affordable for first-time buyers.

He had implemented the change since taking over the housing portfolio 18 months ago, and would continue to do so, so long as "property remains hot".

For instance, prices of four-room units in Tampines start from $293,000 in the latest exercise, similar to last September's BTO rollout where prices started from $305,000. Prices for resale counterparts in the area range from $440,000 to $481,000, according to the Housing Board's website.

HDB resale flat prices have been climbing steadily after a slight dip in 2009 due to the financial crisis.

The overall application rate for the first exercise of the year, which offered 3,346 flats in six towns, is 3.5. The overall rates for the past three years, from 2010 to last year, had been 5.7, 3.8 and 2.9 respectively.

One reason could be the implementation of a priority scheme for married couples with children younger than 16, although the application rate for this group was not made known.

Now, 30 per cent of the BTO-flat supply is reserved for them.

In the past, they had to vie with other first-timers, including engaged couples.

Among the non-mature towns, Choa Chu Kang emerged as the poorest performer due to its location, while Hougang attracted the most bids as it was considered developed by many buyers.

Those who have yet to apply for a flat said they are assured that there is a strong supply in the pipeline.

HDB has promised to launch at least 23,000 flats this year.

Source: The Straits Times –5 February 2013                                                                             

More home owners 'decoupling' property to avoid hefty duty.

Home owners are finding ways to reduce the amount they have to pay after hefty stamp duty increases were introduced two weeks ago.

One way is for families - say a husband and wife, or a parent and child - who bought a house together to transfer one partner's share to the other person.

This creates a sole owner and leaves the other half of the pair free to buy another home without having to pay the additional buyer's stamp duty (ABSD), as that purchase will be seen as his first.

The saving can be substantial. A Singaporean buying a second home will have to pay a 7 per cent ABSD, while permanent residents (PRs) pay 10 per cent.

KhattarWong managing partner Gurbachan Singh told The Straits Times that he has seen more cases where couples "decouple" their property.

The firm has fielded about 10 queries over the past fortnight, and is already acting in two or three decoupling cases.

"It's no longer co-ownership or part ownership. They want to transfer everything to one party so that the other party can buy without the burden of the ABSD.

"Although the Government says this is temporary, we don't know when it's going to be lifted, therefore given that uncertainty... people are taking pre-emptive action," he added.

But the transferring of a half share to one of the co-owners is still subject to the standard stamp duty rate of 3 per cent, as it is considered a transaction, Mr Singh noted.

KhattarWong is also taking more appeals to the taxman over the revised ABSD rates.

One aspect has to do with a will that bequeaths a property with apparent instruction for sale, so that the beneficiary receives the sale proceeds of a property rather than the property itself.

This could entail the executor of the will selling the property and distributing the proceeds to those named in the will. No tax is payable on the distribution of sale proceeds to the beneficiary.

If, however, instead of selling the property, the executor transfers the property to the beneficiary, the Inland Revenue Authority of Singapore's (Iras) position is that stamp duty - and in turn ABSD, if applicable - should be paid, Mr Singh said.

Take a Singaporean who owns a private home, and is then left the proceeds of a property by his deceased parent.

If he opts to keep this property instead of allowing it to be sold as stated in the will, he will have to stump up 10 per cent in stamp duty based on a market valuation. This includes the standard 3 per cent and the additional 7 per cent, as it is a second home.

A PR in the same position has to pay the standard 3 per cent plus the additional 10 per cent.

If the son then sells the inherited apartment within four years, he will also be subject to the seller's stamp duty (SSD) of up to 16 per cent.

"We don't think (having ABSD or SSD levied on such inheritances) is correct, we presently have two instructions to object and to appeal against (Iras') position," Mr Singh said. "If the response from Iras is not satisfactory, we may take a court ruling for it."

Lawyers note that if the will had instructed for the physical property be handed down to the son, no stamp duty applies, thus this same rule should be applied even in these alternative cases.

Mr Singh said the new stamp duty laws are the "most radical" since 1973, when the Residential Property Act was introduced, which prevented foreigners from buying landed homes. "If you look at the ABSD, we seem to give regard to your citizenship status, and I suppose the message is that the Government's interest is to look after Singaporeans first."

Source: The Straits Times –2 February 2013                                                                            

Singapore offers a glimpse of its future.

 A couple of days after projecting that the population could rise to upto 6.9 million by 2030, the government yesterday revealed how they might be accommodated without Singapore feeling the squeeze.

Source: Business Times –1 February 2013