PropertyGuru calls for the reduction of the 15-month waiting time for ‘downgraders’ and the tweaking of ABSD.
Reduce the 15 month wait for downgraders in private property, withhold any stamp duty due to Singaporean households buying a new home, and reinstate estate tax. PropertyGuru Singapore published these three suggestions ahead of the Budget 2024 presentation on Friday, February 16, to help alleviate the challenges faced by home owners and buyers.
He said that with the rise of geopolitical conflict, the economic environment has become more unpredictable. External factors can also cause sharp market corrections. It is important that we encourage the households to make a wise decision if they are looking to downsize to HDB units.
He acknowledged that it was necessary to restrict the demand for large flats. However, he noted that in 2023 the number of flat deals worth a million dollars had increased, which indicates the strong demand by other prospective buyers.
Reintroduce estate tax
PropertyGuru wants the estate tax, or inheritance duty to be reinstated in the Budget.
Since 2008 when the government abolished property tax, there has increased polarisation in wealth and opinion (which) is a threat to society’s cohesion.
The government of Singapore has proposed reintroducing inheritance tax to Singapore in 2021. This is in response to the growing wealth inequality.
There are concerns that reintroducing the estate duty will force wealthy individuals who have assets to relocate them, preventing family offices from establishing in Singapore. It could also undermine Singapore’s status as Asia’s financial hub.
To reduce these risks and balance them, you could make provisions for individuals to receive lower rates if they invest in environmentally friendly projects, like green mark buildings. Or, for those to allocate an annual sum for vulnerable societal segments or cross-subsidise workers who are on a low income or have been retrenched.
It is possible to apply estate duty to all individuals.
The majority of buyers are upgraders, who wish to buy a larger home priced above the average private residential segment.
The waitout period does NOT apply to seniors age 55 and over who are moving into a smaller, four-roomed resale property.
HDB can grant waivers for private homeowners who are in an extenuating circumstance. However, only 25 percent of such requests have been approved, or 850 out 3470 since the rule came into effect from September 2022.
Remove the obstacles to HDB flat ownership and you could see a dramatic price increase. They could however be addressed by raising the occupation period for HDB flats or imposing an adapted capital gains rate to discourage private home-owners from manipulating the market.
Don’t allow ABSD to be paid for Singaporeans purchasing a second property
PropertyGuru suggests that Singaporeans can buy a property to rent and pay no additional stamp duty.
Singaporeans buying second properties now pay an ABSD of 20 percent, up from 17 percent. For third and further property purchases they pay 30 percent as opposed to 25 per cent.
Singapore permanent resident ABSD increased from 25 to 30 percent on second and subsequent properties.
Residential property has proven to be an asset that can provide reliable income and preserve its value. In order to avoid the ABSD, couples are decoupling their home ownership.
When couples purchase a second house, they often experience increased financial stress because they cannot pool their funds or diversify risk.
This could lead to an overcrowded rental market in future. This scarcity of homes could result in a volatile market for rental rates, which would have negative effects over time.
While the government may have introduced long-stay services apartments to balance out fluctuations in short-term rentals, its effect could be limited if few market participants participate.
To prevent speculative behaviour the ABSD can be withheld on the second residence. Owners are required to repay the ABSD amount with interest if a purchase of a 3rd home is made.
He said this rule would not be applicable to homes held for longer than 10 years.
The imposition of capital gain tax is another countermeasure if you sell your property within five to ten year.
Reduced wait of 15 months for ‘downgraders in private homes’
In September 2022, government extended the waiting period of private residential property sellers selling their homes from six months up to fifteen months. This was to allow them to purchase public flats for resale.
Policy change has moderated the price and demand increase of HDB flats. HDB resale pricing rose by only 4.9 percent in 2023. The 10.4 percent increase from 2022 was much slower. Meanwhile, the volume of HDB transactions dropped by 4.2 percent to 26,735 in 2023.
But we are at a different stage in the market, and so it is time to re-evaluate some of our assumptions. Resale prices and supply-demand have moderated. Additionally, the increased production of Build-ToOrder is relieving pent up demand.
He proposed to adjust rates according to property value and type.
This would lead to a distribution of taxes that is more fair across all segments of society.
