SINGAPORE: Singapore’s recent unwinding of some property curbs, which initially appeared to boost prospects for developers, may instead be creating new problems.
After regulators closed a tax loophole that allowed developers to offload apartments in bulk to institutional investors and wealthy Singaporeans, many of the city’s builders now face an unpalatable choice: discount unsold luxury homes or pay stiff penalties for missing government-mandated sales deadlines.
Opting for discounts could push home prices even lower, prolonging a three-year slide in property values. The alternative could be even more costly. About 2,098 homes remain unsold in 57 projects and penalties on these could total about S$647mil this year, according to industry estimates based on official data.
“This could incentivise them to give greater discounts to buyers who have been waiting on the sidelines for further price corrections,” said Christine Li, director of research at Cushman & Wakefield Inc in Singapore.
“Paying the penalties will still be the last resort,” she said, adding that weaker developers might give steeper discounts while major ones hold out.
Singapore home prices fell 0.5% in the first three months of the year, extending the drop in property values to a record 14th quarter, according to preliminary data from the Urban Redevelopment Authority released yesterday. Home values have dropped 11.7% from their 2013 peak.
The country, which has one of the highest rates of home ownership in the world, also has among the most stringent regulations.
Under rules aimed at preventing land hoarding, all developers with non-Singaporean shareholders or directors are required to complete construction of projects and obtain a Temporary Occupation Permit within five years of acquiring land.
They have another two years to sell the apartments or face fines.
Since December 2011, developers have been given a five-year deadline to sell all units in a development or pay at least 10% of the land price as a penalty.
One way around that was the bulk sale of apartments via a share transfer to big investors, who pay lower a stamp duty than individual buyers. With the latest rule changes last month, that loophole has been shut by equalising the tax rates.
The tax advantage, and a 20% decline in luxury home prices since the start of 2013, helped buyers such as Blackstone Group LP and wealth investors cherry-pick prime properties.
Blackstone has bought a 10-story apartment block and 18 units in Singapore’s prime residential district since 2014. — Bloomberg
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