Singapore’s property game changes

KUALA LUMPUR: Malaysian developers that enthusiastically expanded across the Causeway could hit a bump in their plans, following the latest move by Singapore to further cool its property market by making buyers, particularly foreigners, pay more in taxes.

Singapore’s government had on Wednesday announced that foreigners buying private homes will have to fork out an additional stamp duty amounting to 10% of the property’s value.

Singapore permanent residents meanwhile will be subject to an additional stamp duty of 3% for second and subsequent properties while citizens purchasing their third and subsequent homes will similarly have to pay an extra 3% on the property’s value.

Explaining its rationale, the government said in a press release that demand for private residential properties in Singapore remained firm and prices have continued to rise, albeit more slowly in the last two quarters.

It can’t help that the new measures, which came into effect yesterday, raised concerns that property developers will be hit in the immediate term.

Malaysian property players that have expanded to Singapore include S P Setia Bhd, Selangor Dredging Bhd, IOI Corp Bhd, YTL Land and Development Bhd and sovereign wealth fund Khazanah Nasional Bhd.

“The effect is expected to be most felt by developers with projects in the pipeline as well as those that sell substantially to non-Singaporean customers,” said a local property analyst.

Singapore has had one of the most exciting real estate markets in the region as investors from China, Indonesia and Malaysia snapped up private residential properties in the island state.

According to Singapore government data, foreign buyers accounted for 19% of all private residential property purchases in 2HFY11, a substantial increase from 7% in 1HFY09.

However, S P Setia president and CEO Tan Sri Liew Kee Sin seemed unfazed by the new measures to curb real estate speculation in Singapore.

Liew said S P Setia’s Singapore projects are mainly targeted at Singaporeans wanting to upgrade their dwellings. He expects to sell about 70% of the group’s real estate units there to Singaporeans.

Additionally, Liew does not expect its non-Singaporean customers to be frightened off by the additional stamp duty charges. “The remaining 30% would be foreigners who want to buy anyway, regardless of the stamp duty and additional 10% charge,” a confident Liew said after announcing the group’s latest financial results.

Liew also pointed out that S P Setia’s maiden project in Melbourne had seen fast take up from Malaysians despite the strong Australian dollar against the ringgit.

S P Setia made its maiden foray to Singapore in April after acquiring a freehold development along Woodsville Close for redevelopment. It plans to redevelop the 0.68-acre land into a multi-storey residential apartment building with an estimated gross development value (GDV) of S$130 million (RM316.3 million). The project is expected to be launched in the coming months.

Just last week, S P Setia announced that its subsidiary had won a tender for a 4.62-acre parcel at Singapore’s Chestnut Avenue for S$180 million.

The eco-themed development comprises residential apartments with an estimated GDV of S$465 million. The project is scheduled for launched in 4Q12.

Selangor Dredging Bhd (SDB), another Malaysian property developer with ongoing projects in the island republic, believes that Singapore remains a viable investment destination despite the new measures.

SDB communications and corporate affairs manager Yeoh Guan Jin said although the impact of the new measures will likely be felt quickly, the market will adapt to the new regime.

“Speculation will likely be curbed for now. But in the longer term, demand for property will return to normal. We are confident that the market will ride this out. A more stable and less speculative property sector would be a positive development,” Yeoh told The Edge Financial Daily in an email response.

Yeoh added that SDB has no plans of delaying the launch of its fifth Singapore project in Pasir Panjang, which is currently scheduled for 2H12. In Singapore, SDB has completed and sold out its low-density apartment called Jia on Wilkie Road.

The other three projects that are close to selling out are its mixed development Okio Residences, Gilstead Two apartments and 41-units of luxury apartments called Hijauan on Cavenagh.

Among the Malaysian players, IOI Corp and Khazanah (via listed property arm UEM Land) may be more affected as they have a large landbank there with yet-to-be launched projects. The latter recently gained control of two plots of land in the Marina area in exchange for the surrender of the KTM railway land.

Analysts say that a positive spin-off effect of Singapore’s move could be a diversion of property investors to Malaysia, particularly Iskandar Malaysia in Johor and even Penang.

“The changes in Singapore may affect its attractiveness. It was previously seen as having quite a liberal environment for real estate ownership by foreigners. Foreigners do not like changes that affect their investments. The Malaysian government has been relatively liberal when it comes to property ownership by non-citizens,” said one property analyst.

Foreigners in Malaysia are allowed to buy properties priced at above RM500,000 and own landed homes, the analyst pointed out. He also claimed that the Malaysia My Second Home programme was “the cheapest long-term residency programme” in the world.

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