Finance Ministry says it is not tightening tax policy on properties

Finance Ministry says it is not tightening tax policy on properties

By Ng Baoying

SINGAPORE: The Singapore government says a proposed change to the tax policy on property transactions is not aimed at curbing speculation. It will instead give property owners some certainty.

That is because property owners who do not sell properties frequently will have the assurance that they will not be taxed on the profits made from such sales.

All properties, from public flats to industrial buildings, will be affected by the proposed tax change.

Under the proposal, the law will be changed to make it clear that profits made from selling properties will not be taxed if the property owner has not sold any property within a four-year period.

There have been concerns that this means anyone who sells more than one property within a four-year period will have to pay taxes on their profits.

In its statement on Thursday, the Finance Ministry said the proposed change is not an anti-speculation measure.

As it is, whether individuals who sell properties more frequently are subject to income tax depends on the circumstances of each case, such as how long the owner has been holding on to the property.

But with the change, property owners will know that if they have not sold any property during the preceding four years, profits made from the sale of a property will not be taxed.

It is understood that every year, about 100 individuals are taxed on their income from frequent property transactions.

Analyst Nicholas Mak said: “In May 1996, when anti-speculation measures were announced, it was a whole series of measures. It took the market by surprise. Today, it is nothing in comparison with what happened in 1996. This is more of a consultative paper for an amendment to a law, and the government is seeking feedback.”

Still, analysts said the move will have an impact on the property market.

Donald Han, managing director of Cushman & Wakefield, said: “In view of this forthcoming implementation for 1 January next year, it might curtail some reactive buying, might take some hot air away from current market activity. It might make buyers think twice in terms of buying more than what they require.

“It does take speculative activity out of market. At the end of the day, it’s good, because we’re looking at nursing the current recovery of the marketplace and we don’t want prices to run out of the current economic recovery in that sense. So it should be in sync with market conditions.”

Mr Mak said: “The dust will settle and I think people will probably go back to the way how things were. Properties will still be launched and investors will still come into the market.

“But some may see today’s announcement has a bit of a warning shot. The government could, in effect, come in to assess any individual who has sold more than one property in the four-year period. Speculators thinking of flipping a number of properties in a 4-year period have to do it with a certain amount of caution.”

For investors, the proposed four-year period could pose a disadvantage, especially since property boom-bust cycles are now shorter than before - at about two to three years instead of six to seven.

Mr Han said: “What used to be a 6- to 7-year (property boom-bust) period now probably would last 2, 3.5 years, in that sense. If you hold for a period, it might last you over a whole property cycle and it might eventually wipe off any gains.

“But the bottom line is that in any investment, the government is saying that if you buy properties and make money, then pay your taxes within the 4-year period. I think that’s fair.”

The government said it is proposing the tax change as part of its regular review of the Income Tax Act, and that Singapore’s tax rules are aimed at taxing people who make an income out of their property transactions.

Singapore does not have a capital gains tax, unlike many countries.

- CNA/ir

Source : Channel NewsAsia - 10 July 2009

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40,000 private homes to come onboard in next 3-4 years

40,000 private homes to come onboard in next 3-4 years

By Joanne Chan, 938LIVE

SINGAPORE: 40,000 new private homes will enter the property market in the next three to four years, according to the National Development Minister, Mah Bow Tan.

He said on Thursday that more property information, such as transaction prices, would be published to keep the market efficient and ensure that home prices are based on fundamentals.

Mr Mah said: “What we will do is put out complete information on how much property is coming into the market. We will give out information on what are the actual transacted prices, rather than to have reports of high prices alone. I think we should give a good idea of what is the spread of prices.”

Mr Mah was speaking to reporters on the sidelines of a community event.

When asked to comment on the current buying momentum in the private property market, Mr Mah said it is difficult to tell if such demand will hold up.

He said: “One is the sentiment - how people perceive the economy is going to be, what the world economy is going to be like, what Singapore’s world economy is going to be like?

“Number 2 is also depending on fundamentals. By that, I mean: what is the supply of private properties, what’s the take-up rate, what are the prices, what are the transacted prices.”

Mr Mah said the government will monitor both demand and supply and make adjustments as needed.

He also noted that the buying momentum was unlikely to be driven by speculators. “So far, I think anecdotally we don’t see any. But if there is, then we will take the appropriate action,” said Mr Mah.

- 983LIVE/ir

Source : Channel NewsAsia - 10 July 2009

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Hong Leong to launch The Gale preview on Friday

Hong Leong to launch The Gale preview on Friday

By Yasmine Yahya,

SINGAPORE: Hong Leong Holdings has said it will hold a preview of its latest development, The Gale, on Friday.

It will also start taking bookings for up to 80 units during the preview.

The freehold condominium in Changi has 329 units in all. At the preview, the available units will be priced from S$600 to S$700 per square foot.

Buyers will also have the option to take up the Interest Absorption Scheme, under which they would only have to pay 20 per cent of the price of the unit upfront.

The remaining 80 per cent will have to be paid only when the development is completed.

The Gale is expected to be completed in September 2014.

The condominium is a project by Hong Leong’s Tripartite Developers, a joint venture company by Hong Leong Holdings, City Developments and TID.

- CNA/ir

Source : Channel NewsAsia - 10 July 2009

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Marina Bay IR delay ‘no surprise’

Marina Bay IR delay ‘no surprise’
By Lim Wei Chean

A view of the Singapore skyline from the 50th floor of the Marina Bay Sands’ hotel towers. The IR’s opening has been delayed, but tourism players say the signs were obvious.

TOURISM players say the signs that there would be a delay in the opening of the Marina Bay Sands integrated resort (IR) were visible: Construction at the site was proceeding slower than it should have been.

They said the fact that work had not started on its 1.2ha rooftop garden - which has to be lifted 200m into place - with less than half a year left to the opening was a massive hurdle to overcome.

Said CIMB-GK economist Song Seng Wun: ‘Anyone who has driven by could have seen it’s impossible.’

Mr Song and others, however, said the delayed opening would not have much of an impact, given the sorry state of the industry right now.

This year has been a write-off as far as tourism arrivals are concerned, they said, and whatever boost a year-end opening of the IR would have given would have been minimal.

Las Vegas Sands’ chairman and chief executive officer Sheldon Adelson said on Wednesday that the IR’s opening would be pushed back to January or February.

The admission came after months of assurances by Marina Bay Sands’ other executives that the 2,600-room casino-resort would open by the year end, as scheduled.

But while industry observers and agents contacted by The Straits Times say they saw a delay coming, they said the explanation given for it - that there was a shortage of materials and labour - was puzzling.

The Building and Construction Authority, for example, said it had not received any feedback from the industry about a shortage of raw materials.

Whatever the reasons for the delay, experts said there were several reasons why it mattered little.

Singapore Management University’s adjunct lecturer for world travel and tourism, Mr Aaron Hung, said the state of the world economy meant few people were ready to travel anyway.

Others said the year-end period was a slow one for business travellers - Marina Bay Sands’ target group - so the IR would not lose out either.

CTC Holidays spokesman Alicia Seah said that most travellers at the end of the year are leisure tourists who are less interested in the facilities for meetings, incentives, conventions and exhibitions that the resort would offer.

CIMB-GK’s Mr Song went a little further and suggested that the delay might be a blessing in disguise.

By next year, he said, things will pick up in the industry, and back-to-back openings by the Sands resort and the other IR, Resorts World at Sentosa, would create a ‘Big Bang’ effect.

He added that a delay of a few months ‘does not really mean much in terms of the long-term strategy of developing the meetings and conventions market or providing Singapore economic growth’.

Asked about the impact of the delay yesterday, Senior Minister of State for Trade and Industry S.Iswaran would only say that tourism has been hit by the slump like other industries, and that the spread of H1N1 flu ’sort of exacerbated that some’.

He added that the Singapore Tourism Board (STB) and other government agencies were in talks with the IR over the matter and ‘we expect to have a good outcome’.

Neither he nor STB would be drawn into details of the discussions, such as whether a penalty will be imposed for the delay.

STB spokesman Muhammad Rostam Umar said: ‘For Singapore, it is important that the developers maintain the integrity of the concept of an integrated resort as envisaged, to fulfil the objective of enhancing Singapore’s tourism appeal.’

However, not everyone agreed that the postponement means little.

Gaming analyst Jonathan Galaviz, for instance, felt that the impact would be keenly felt. Having a mega-attraction open during the downturn, he said, would be a shot in the arm for the country, and would send an important signal that plans are going ahead despite the stormy weather.

He added: ‘Every day that one of the IRs is not fully open is another day that the country is not receiving sorely needed tourism revenue and visitation.’

Source : Straits Times - 10 July 2009

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URA launches hotel site at New Bridge Road

URA launches hotel site at New Bridge Road

THE Urban Redevelopment Authority (URA) yesterday launched a public tender for a hotel site in New Bridge Road.

The 0.45 ha site, which went on the reserve list in April 2007, was made available after a developer triggered its release with a $43.9 million bid last month.

The site has a maximum permissible gross floor area of 168,853 sq ft, which means the trigger price equates to $260 per sq ft. But analysts say it could fetch more than $300 psf as interest seems to be returning to small development sites with good attributes.

Last month, a government tender for a small hotel site on Short Street closed with 14 valid bids received. The number of bids - 15, including one judged invalid because it was below the minimum bid price - is among the highest in a government land sale tender.

‘Small sites have been quite well-received recently,’ said Cushman & Wakefield managing director Donald Han, citing the Short Street tender as an example.

The New Bridge Road site is in the Chinatown historic district, a popular tourist area with many historic, cultural and architectural attractions.

Source : Business Times - 10 July 2009

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Making sense of the property gains tax amendment

Making sense of the property gains tax amendment

More clarity needed on proposed refinement and about the tax itself

By VIKRAM KHANNA

THE Ministry of Finance (MOF) has sought public feedback on certain proposed amendments to the Income Tax Act. One of these, which has received much publicity over the last few days, relates to a proposed ‘refinement’ to the policy on taxation of gains and losses from property sales.

Under the current tax regime, gains from property sales ‘may’ be taxed, either as trading gains or as ‘gains or profits of an income nature’.

The proposed amendment seeks to add some clarity to this. Under the current regime, it is not clear who will be taxable or when. But under the amendment, anyone who sells only one property within any four-year period will not be taxable. However, if the person sells another property within four years of the first sale, the gains from the second sale ‘may’ be taxable. If passed, the amendment will take effect from next year.

News of the proposed amendment has set off jitters among people in the property business and the investment community.

A common (mis)interpretation is that a form of capital gains tax on property transactions is about to be introduced, and rigorously enforced.

Thus, after the news of the proposed amendment was publicised, one broking house put out a report which said: ‘We find this news adversely affecting sentiment, especially in the upper-mid to high-end . . . We see developers with large unsold inventory in the high-end as potential losers from this news.’

The MOF subsequently clarified that the proposed amendment ‘involves no tightening of the current income tax policy for individuals who sell their properties’. It is only aimed at ‘giving certainty of non-taxation to individuals who do not sell properties frequently’.

But the heart of the matter is that even under the amendment, the provision for a property gains tax remains on the books.

The fact that it was already there is news to some people, especially as it has apparently been very sparingly enforced: over the years, hundreds of speculators have flipped properties for a profit, and then done it again within days of the first flip, without being hit by the taxman. Investors everywhere have come to presume that Singapore has no property gains tax.

But it is there, on the books. And now, there is a proposal for it to be ‘refined’. What should one make of this?

What’s the rationale?

The first question is, what is the rationale for having such a tax? One possible rationale is to curb speculation, which is fair enough.

But the government maintains that the proposed change is not an anti-speculation measure. Another rationale is to prevent people from passing off income gains as property gains. This could well be the reason why the provision to tax property gains exists. But if so, it needs to be clarified that the tax would only be enforced when this happens and at no other time.

But then, why the proposed four-year interval before property transactions are deemed to be free of tax? What happens to those who dress up income as property gains every five years?

The rationale apart, another problem with the tax is its apparent lack of fairness. It might be levied on some people, but not on others who do the same thing, and nobody except the taxman knows why.

A third problem is unpredictability - despite the greater element of certainty that the proposed amendment seeks to introduce. You definitely won’t be taxed if you sell two properties more than four years apart. But if you do so within four years, you might be taxed. Or you might not.

At a minimum, we need a lot more clarity, not just about the proposed amendment to the property gains tax, but also about the tax itself.

The fact that some other countries have it too is not an adequate reason for keeping it, or for assuming that it is flawless. And if it isn’t, then the government should consider another option: sometimes, the best way to refine a flawed policy is to abolish it.

Source : Business Times - 10 July 2009

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Govt clears air over tax on property gains

Govt clears air over tax on property gains

Ministry says proposed change aimed at giving certainty and is not a move against property speculation

By EMILYN YAP

(SINGAPORE) Has the market worked up a storm in a teacup over a suggested change to income tax laws on gains from property sales? Keen to quell rumours about an anti-speculation drive, the Ministry of Finance (MOF) clarified yesterday that the proposal is unlikely to lead to more individuals being taxed.

Still, some industry watchers believe that the potential change is enough to worry property investors - many of whom have returned to the market only recently.

Currently, property sellers do not pay tax on gains unless the Inland Revenue Authority of Singapore (IRAS) sees them as traders and treats the gains as income. The IRAS makes its decision on a case-by-case basis, considering factors such as why the properties were sold, how long the sellers owned them and how frequently the sellers transacted properties in the past.

These factors are derived from case law and are not clear-cut. According to MOF’s statement, just ‘a small number of individuals’ have been taxed on gains from property sales in the past.

There are individuals who want greater clarity on whether their gains will be taxed, MOF said. Responding to feedback, it proposed last month a condition that would guarantee no tax: An individual who sells a property on or after Jan 1, 2010 will not be taxed on the gains if he has not sold any other property in the previous four years.

This is actually ‘a relaxation of income tax treatment aimed at giving certainty of non-taxation to individuals who do not sell properties frequently’, MOF explained.

The proposal does not mean that those who sold more than one property within a four-year period will definitely be taxed on the gains. In line with existing arrangements, IRAS will still assess these cases individually. ‘There is no change to the current and long-standing income tax treatment in this regard,’ MOF pointed out.

MOF did not reveal the exact number of individuals who have been taxed on gains from property sales. But it said in an email to BT: ‘If the proposed change is implemented, MOF does not expect the number of cases to increase. This is because the change does not involve a tightening of the rules.’

In fact, ‘the number of cases may fall if all things remain constant’ after the change, it says.

Rumours that the government was trying to curb speculation in the property market gained ground after news of the potential change got round. Property sales have been buoyant since February this year, and selling prices in some projects are said to have risen by a few per cent. Some market watchers attributed the improvement in part to the return of speculators.

In its statement, MOF emphasised that the proposed change is not an anti-speculation measure. It also reiterated that Singapore does not have a capital gains tax.

MOF’s clarification has soothed the market somewhat. On Wednesday, fear that investors could exit the property market and perhaps confusion over the proposal had pushed prices of several property counters down. The selling pressure eased notably yesterday. City Developments, for instance, gained 43 cents to close at $8.31, while CapitaLand rose 12 cents to $3.50.

Despite the official reassurance, there are still nagging worries that the potential change to income tax laws could hurt investor sentiment, particularly in the prime property sectors.

‘Demand for mass-market homes should hold, backed by HDB upgraders, while mid to high-end segments may experience slower take-ups from reduced speculative interest,’ said AmFraser Securities analyst Lau Wei Chong in a note yesterday.

There are also industry watchers who stand by the anti-speculation theory. ‘We remain believers of the idea that the government may be sending out a signal through this proposal to cool property transactions, especially in the high-end,’ said CIMB analyst Donald Chua in a note.

To curb speculation in the property market in 1996, the government had imposed income tax on gains which individuals made from selling properties within three years of purchase. It lifted the rule in 2001.

Source : Business Times - 10 July 2009

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