Singapore Property Stocks Fall on Higher Tax for Home Purchases
By Pooja Thakur
Singapore’s property stocks fell, leading declines on the benchmark Straits Times Index as the government raised taxes on home purchases that are worth more than S$1 million ($761,600) after housing prices rebounded from a four-year slump.
UOL Group Ltd. and City Developments Ltd. slumped more than 1.7 percent as of 9:04 a.m. in Singapore trading, making them the biggest decliners on the benchmark index. CapitaLand Ltd., the city-state’s largest developer, dropped 1.1 percent, the first decrease in more than a week.
The tax increase isn’t “enough to derail an ongoing home price recovery,” Morgan Stanley said in a note to clients on Monday, “but this could weigh on sentiment on Singapore developer stocks in the near term.”
The government will raise taxes on home buyers to 4 percent from 3 percent for purchases in excess of S$1 million, Finance Minister Heng Swee Keat said in his budget speech in Parliament Monday. The changes – introduced to make the tax system “more progressive, fair and resilient” – will apply to all residential properties acquired from Feb. 20, he said.
“Given the heightened interest in the residential market, the government has timed the increase well as prices and transaction volumes could return with a vengeance after Chinese New Year,” Christine Li, a director of research at Cushman & Wakefield Inc. “The effective increase in the tax revenue is quite minimal, hence this measure acts more as a deterrent to the red-hot property market.”
The increase will have more of an effect on ultra-luxurious properties, Li said. The stamp duty on a S$10 million property will increase by about 0.9 percentage point to 3.8 percent, she estimates.
Singapore developers have been aggressively bidding for land as rising apartment sales and prices signaled an end to a four-year downturn. Private residential prices rose for a second straight quarter in the three months ended Dec. 31. Still, the country’s central bank has warned that rising vacancies and slowing population growth may undermine a residential property recovery.
While a recovery in home prices is not a cause for concern, “exuberance” in the so-called en-bloc market for redevelopments may not be warranted, Ravi Menon, the managing director of the Monetary Authority of Singapore, said at a conference last month.
Collective apartment sales for redevelopment in the first two months of 2018 totaled over S$3.1 billion, almost twice the S$1.66 billion seen in the last peak of the en-bloc market in 2007, Nomura analyst Min Chow Sai wrote in a note dated Monday.
Li said developers may pull back from these purchases “as the price tag can be hefty for most collective sale deals which easily run into hundreds of millions of dollars.”
Home prices may rise as much as 10 percent this year, CapitaLand CEO Lim Ming Yan said in an interview last week.
– With assistance from Abhishek Vishnoi.
To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net.
To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net; Linus Chua, Sebastian Tong.
© 2018 Bloomberg L.P
