Ravi Chandran
Property cooling measures review is needed urged the Real Estate Developers’ Association of Singapore (Redas yesterday (Feb 19). It warned that the higher stamp duties on developers could lead to “a repeat of the 2017-2018 ‘land grab’ situation in four to five years’ time”.
Redas president Chia Ngiang Hong who urged the property cooling measures review at the group’s Spring Festival lunch, pointing out that Additional Buyer’s Stamp Duty (ABSD) for land stands at a total of 30 per cent and limits the timeframe for all residential sites, regardless of size, to be sold out within five years.
The need for developers to sell their units within five years to avoid hefty ABSD rates has also pushed “all developers to exhaust their inventory at around the same time”, he said. Adding, this could partly account for the land price escalation in 2017 and 2018 because “everyone basically ran out of inventory at the same time.”
Property cooling measures review is needed as the hefty ABSD rates developers would have to pay if they failed to sell their units within five years, may have pushed “all developers to exhaust their inventory at around the same time”, he said.
This policy meant that “everyone basically ran out of inventory at the same time”, partly accounting for land price escalation in 2017 and 2018, he added.
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In urging the property cooling measures review, Mr Chia said the Government should allow “room for the private sector to respond to market conditions.”
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He added that that the Government should have “open communication and constructive and meaningful feedback” with stakeholders to allow for a more robust policy-making process.
Mr Chia said that it may be timely to review and tweak other existing policies and measures to help Singaporeans, particularly first-time buyers, by re-evaluating the loan-to-value limit for their first property purchase. And that “the Government can also make it easier for HDB upgraders to own private homes by reviewing the timing of upfront payment of ABSD so as to ease their cash flow planning.”
Referring to Redas chief’s call for property cooling measures review, Finance Minister Heng Swee Keat who was chief guest at the group’s lunch, said the developers’ association should accept bitter medicine to make it strong again.
“You were officially founded in 1959, so that makes you part of the Merdeka Generation. Prime Minister Lee Hsien Loong has characterised the Generation as one that “faced the problems resolutely, worked with the Government, and when necessary, accepted the bitter medicine that made us strong again”. I think this applies to the real estate sector.
“From time to time, there have been bitter medicine, but we face the problem resolutely because we work together and we can really continue the progress. I would fully endorse Mr Chia Ngiang Hong’s statement: let’s strengthen the partnership between the Government and our business leaders and our workers.”
Mr Heng said REDAS has played a very important role in Singapore’s nation building journey.
“In fact, many of you here are responsible for making Singapore what it is today – all the nice buildings that we have today. Urban development would not have been possible without the support, capital, and expertise of private developers and companies. For example, many of our private housing, office towers, hotels, and retail developments are built by the private sector. Indeed, the shape of Singapore is really shaped by all of you.”
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Mr Heng asked those that urged for property cooling measures review to think long term.
“All of you are very familiar about how property values are calculated. In fact, property, like all other long term capital assets, is essentially a discounted cashflow from a future stream of earnings over the lifetime of the capital. Whether it is a machine in a factory or real estate, it is the same principle of our capital raising model of discounted future cashflow. We have not been able to prevent economic cycles in the world. But I hope that we can do our best to prevent economic crises.”
Mr Heng pointed out that it was especially critical for the property sector to think long term as they position themselves for longer term developments.
“Even as we go through the economic cycles, it is very helpful for us to keep our view on the long term and how we project ourselves, how do we position ourselves for this longer term developments. There will be various key changes. These changes will go even deeper and faster. So what it means is that we will have to run a little faster.”
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