SINGAPORE: Property-related stocks saw a decline on Tuesday (Feb 20), a day after the Government announced in the Budget speech that the Buyer’s Stamp Duty (BSD) would be raised.
UOL Group fell by 3.25 per cent and City Developments by 3.02 per cent at market close, while CapitaLand declined by 1.93 per cent and Bukit Sembawang by 1.78 per cent. The developers were some of the biggest decliners on the benchmark Straits Times Index, with City Developments taking the lead.
But analysts Channel NewsAsia spoke to said the tax hike will have a limited impact on the mass property market, which remains buoyant in the long term.
Terence Wong, CEO of Azure Capital, called the dip in share prices a knee-jerk reaction: "People would want to see how things pan out. But if they were to sit back and think about it, there’s still going to be a lot of liquidity in the market. The impact of it, particularly for the mass market where most of the homes volume are being pushed up, that will be very minimal."
On the other hand, Mr Wong said that the BSD increase would be most clearly felt in luxury and high-end projects.
Ku Swee Yong, CEO of International Property Advisor agreed: “If there are buyers, especially foreign buyers, who are in the market for a S$5 million property, this additional 1 per cent is quite a bit.
"Added to the Additional Buyer’s Stamp Duty of 15 per cent, they would see a 19 per cent stamp duty on S$5 million. That might also cause a deterrent to them."
Developers buying en bloc properties would also be impacted by the revised tax rates, said Mr Ku. "Especially with the mega en blocs that are worth over a billion dollars, this 1 per cent may count for a little bit more because at S$1 billion, the 1 per cent is S$10 million in costs."
The dip in share prices comes a day after Finance Minister Heng Swee Keat’s Budget speech, where he announced that the top marginal BSD rate would be raised from 3 to 4 per cent for residential properties.
The new rate applies to all residential properties acquired from Feb 20, for properties worth more than S$1 million. Previously, the duty rates ranged between 1 and 3 per cent, and were last revised in 1996.
Mr Ku said the increased rate might also have the unintended effect of encouraging developers to build more shoebox units selling at under a million dollars.
"We already have a sufficient number of shoebox units across Singapore, and in fact rentals of shoebox units are competing with bedroom rentals and the situation doesn’t look good if we continue to supply a lot of small-sized units in the market," said Mr Ku.
According to the Finance Ministry, provision has been made for when an Option To Purchase (OTP) has been granted to potential buyers on or before Feb 19. For these cases, the previous buyer's stamp duty rates will apply if the option to purchase is exercised within three weeks from the Budget announcement, or the OTP validity period, whichever is earlier.