Property cooling steps net $500m for taxman

The taxman has collected more than half a billion dollars from additional stamp duties imposed as part of property cooling measures. -- ST PHOTO: AZIZ HUSSIN

By Esther Teo, Property Reporter

THE taxman has collected more than half a billion dollars from additional stamp duties imposed as part of property cooling measures.

The additional buyer's stamp duty (ABSD) has contributed the bulk of that - $450million between its inception on Dec8 last year and the end of last month.

A further $51million has come from the seller's stamp duty since it was implemented in February 2010, the Inland Revenue Authority of Singapore (Iras) said.

According to Iras' annual report, it collected $2.5 billion in stamp duty from sale and purchase agreements in its financial year ended March 31, 2011.

The ABSD take includes about $261million collected from foreigners who are not permanent residents (PRs), who bought about 1,400 homes in the nine months to the end of last month, Iras told The Straits Times. These foreigners comprised about one in four of the buyers who have paid the additional tax.

The figures seem to suggest that foreign buying interest has picked up again after the market initially cooled in response to the measures. In the first four months after the tax was introduced, foreigners paid $66.2million in ABSD on the purchase of 369 private homes.

Afterwards, the tax take - and transactions - shot up, with about $200million collected in the subsequent five months on more than 1,000 homes bought.

Experts said this trend is also borne out on the ground.

The Urban Redevelopment Authority's Realis website shows that non-PR foreigners bought 358 homes in the first three months of the year - or 5.4per cent of private home purchases. In the second quarter, they snapped up 637 homes - 6.7per cent of private home sales - led largely by renewed interest in city centre and city fringe homes.

These numbers are still well below the quarterly sales average of 1,369 foreign-bought units seen last year.

International Property Advisor chief executive Ku Swee Yong said that while foreign buyers held back from purchases when the additional buyer's stamp duty was first announced, continued uncertainty in the global economy has led them to reconsider Singapore. "Singapore is still a safe haven, and for high-net-worth individuals, their goal of wealth preservation might have overridden their concerns of the ABSD," he said.

Mr Colin Tan, research head at Chesterton Suntec International, said foreigners are typically long-term investors and not speculators.

In that respect, Singapore remains attractive, due to the strength of its currency and economy, and foreigners have streamed back into the market after the initial "psychological impact" of the ABSD, he said.

The tough cooling measures last December slapped a 10 per cent ABSD on all home purchases by foreigners. PRs had to fork out only an extra 3per cent on their second and subsequent home purchases, while Singaporeans had to do so only for their third home onwards.

esthert@sph.com.sg

Two tips from S'pore story

Former prime minister Lee Kuan Yew addressing 600 guests alongside moderator Michael Tay at a dialogue yesterday during the 7th Russia-Singapore Business Forum. Mr Lee was asked for his views on a broad range of issues in the 40-minute session. -- ST PHOTO: DESMOND WEE

Mr Lee's advice to Russian governor: Ensure investor security and cut red tape

By Goh Chin Lian

A RUSSIAN governor on the brink of launching economic reforms yesterday sought the advice of former prime minister Lee Kuan Yew, who gave him two tips from Singapore's story on attracting investors.

First, ensure security for investors and their property. Second, remove bureaucratic hurdles that prevent them from carrying on their business.

While there were countries in the region that take investors "hostage", Singapore had made efforts to help the latter succeed, said Mr Lee.

"We take the opposite line. An investor who comes in, it is our duty to help him succeed, and when he succeeds, his friends will know about it and they will also come in," he told Mr Andrey Turchak, governor of the north-western Pskov region, which is engaging Jurong Consultants to help set up a special economic zone.

"If you do the same in Russia, you will succeed."

Mr Lee was addressing 600 guests at the 7th Russia-Singapore Business Forum organised by the Singapore Business Federation at the Marina Bay Sands. The four-day event, which started on Monday, gathered businessmen from Russia, Singapore and the region.

At the 40-minute dialogue, Mr Lee was asked for his views on a broad range of issues, from the territorial dispute in the South China Sea to how the young should prepare themselves for the future.

Replying, Mr Lee noted that the dispute boiled down to two alternatives.

"The safest way and also the least confrontational way is to go by the United Nations Convention on the Law of the Sea," he said. The other way, he noted, is to have it worked out between China and the individual claimants, as sought by China.

Mr Lee added: "The disparity, size and strength will decide in whose favour it will be."

When a young man from Kazakhstan asked for advice for his generation, Mr Lee said: "Well, I can't give advice to young people in Kazakhstan and Russia because I don't know their condition and how fast it's changing. But for Singapore, we tell them: Expect change and expect rapid change."

One finance entrepreneur wanted to know Mr Lee's vision of the world in 50 years, but the former prime minister said: "I can't tell you what the world will look like in 10 years, let alone 50 years."

But he did note that technology was changing the way people communicate, making it a truly globalised world.

One participant appeared to be worried about recent moves by Singapore to cut the inflow of foreigners. Mr Lee assured them that the Republic was still taking in foreign workers, but also highlighted Singaporeans' concerns over being squeezed out of their own country. "We will continue taking in foreigners at a pace which the rest of the population, Singapore citizens, will find comfortable," he said.

"We are short of workers. Today, we have 5.2 million people, of whom 1.5 million are foreign workers, and we need more. And although they are coming in at a slower pace, they are coming in."

One question, however, was a bit more personal. Entrepreneur Sergei Beloussov asked when Mr Lee's books will be available electronically on Apple iBook or on Kindle, so more people could know the Singapore story.

Mr Lee laughed, saying he would ask his publisher to consider, prompting moderator Michael Tay to ask: "Maybe we give ourselves a one-year deadline - by next year we hope to get your book online in e-books and Kindle?"

"Okay," replied Mr Lee with a laugh.

chinlian@sph.com.sg

CM5 7 Dec 2011 Additional Buyer’s Stamp Duty (ABSD)

7 Dec 2011

The Government announced today an Additional Buyer’s Stamp Duty (ABSD) to be imposed on certain categories of residential property purchases. The ABSD will be imposed over and above the current Buyer’s Stamp Duty, and will apply to the purchase price or market value of the property (whichever is higher) for the following purchases:

a)    Foreigners and non-individuals^[1] (corporate entities) buying any residential property will pay an ABSD of 10%;

b)    Permanent Residents (PRs) owning one^[2] and buying the second and subsequent residential property will pay an ABSD of 3%; and

c)    Singapore Citizens (Singaporeans) owning two^[2] and buying the third and subsequent residential property will pay an ABSD of 3%.

The ABSD will take effect on 8 Dec 2011^[3]. Remission of ABSD will be given for options granted on or before 7 Dec 2011 and exercised within 3 weeks (i.e. on or before 28 Dec 2011) or the option validity period, whichever is the earlier.

The Government's objective is to promote a sustainable residential property market where prices move in line with economic fundamentals. Prices of private residential properties have continued to rise, albeit more slowly in the last two quarters. Prices are now 13% above the peak in 2Q1996 and 16% above the more recent peak in 2Q2008.

Even with the current economic uncertainties, the demand for private residential property remains firm. Given the uncertainty in stock markets and with interest rates remaining low, private property in Singapore continues to attract investors, local and foreign. Excessive investment demand will however make the property cycle more volatile, and thus increase the risks to our economy and banking system. 

The Government has therefore decided to impose the ABSD to moderate investment demand for private residential property and promote a more stable and sustainable market. A higher ABSD rate for foreign buyers in particular is necessary, in view of the large pool of external liquidity and strong buying interest from abroad, and the relatively small size of the Singapore market. Foreign purchases account for 19% of all private residential property purchases in 2H2011, up from 7% in 1H2009.

The ABSD will apply in addition to the existing Buyer’s Stamp Duty on property purchases, which are applied at following rates: 1% on first $180,000 of purchase consideration or market value of the property (whichever is higher), 2% on the next $180,000 and 3% for the remainder.

For purchases made jointly by two or more parties (e.g. a Singaporean with a PR, or a PR with a foreigner), the higher applicable ABSD rate will be imposed. For example, if a citizen purchases a property with a foreigner, the ABSD of 10% will apply. In the case of a joint purchase by Singaporeans, who each already owns properties, the ABSD of 3% will apply as long as one of the purchasers already owns two properties.

Singaporean first time buyers and upgraders, and buyers of HDB flats^[4] will not be affected by the new measure. Certain reliefs will be provided so that the measure will not impact home occupation demand by residents. For example, relief will be provided for Singaporean-foreigner/PR married couples buying their homes. Reliefs will also be provided for qualifying developers and for purchases falling within the scope of Singapore’s international trade agreements. More details will be provided on the IRAS website.

[1] This includes corporate, trusts and collective investment schemes amongst others.

[2] A person is regarded as owning a property for the purpose of ABSD as long as he owns part of that property. Overseas properties will be excluded from the count of properties owned.

[3] The measure will apply to a property purchase if the option for purchase is exercised or the agreement for transfer is executed, whichever is earlier, on or after 8 Dec 2011. Where no option for purchase is granted and only an agreement for transfer is executed, then the measure will apply to the agreement for transfer if it is executed on or after 8 Dec 2011.

[4] The purchase of HDB properties will not be affected by this measure. Only Singaporeans and Permanent Residents are eligible to be HDB flat lessees (i.e. own a flat). Existing residential property owners who buy an HDB flat or a new unit under the Design, Build and Sell Scheme (DBSS) or the Executive Condominium (EC) Housing Scheme will not be subject to the ABSD, since the existing flat/property will have to be disposed of as part of the conditions for the purchase of the HDB/DBSS flat or EC unit.

Additional Buyer Stamp Duty (ABSD)

MAS have implement additional measures to cool the property prices in Singapore. The changes are

• Foreigners and company buying residential property will be paying 13% stamp duty instead of 3%
• Permanent residents (PR) buying a 2^nd property will be paying 6% stamp duty instead of 3%
• Singaporean buying a 3^rd property will also be paying 6% stamp duty instead of 3%

Stamp Duty remains the same (3%) for PR buying 1st property and Singaporean buying 1st and 2nd property.

Additional Buyer Stamp Duty (ABSD) will take effect from 8^th Dec 2011.

Formula to calculate stamp duty:

3% or 6% or 13% (depending on your situation stated above) x Property Purchase Price – $5400

http://www.iras.gov.sg/irasHome/page_ektid12832.aspx