Keppel Land to delist Evergro from Singapore Exchange

Keppel Land to delist Evergro from Singapore Exchange

By Nicholas Fang,

SINGAPORE: Property developer Keppel Land (KepLand) and its subsidiary Evergro Properties have announced the proposed voluntary delisting of Evergro from the Singapore Exchange.

KepLand said on Sunday the move would allow it to combine the operational expertise, industry knowledge and extensive networks of both companies. This would then allow KepLand to be in a stronger position to capture opportunities and grow in the China market.

KepLand group chief executive officer Kevin Wong said in a statement: “It provides us with a stronger platform to maximise the potential of our existing portfolio and collective strengths as we continue to grow Keppel Land as the choice developer of homes in China.”

Under the delisting proposal, Evergro shareholders can choose to receive 1,000 new ordinary KepLand shares for every 7,000 Evergro shares. This represents a premium of approximately 21.1 per cent to Evergro’s last transacted price on July 10, 2009, of S$0.25 per share.

Alternatively, they could opt to accept S$290 in cash for every 1,000 Evergro shares, a premium of 16 per cent to the last transacted price.

KepLand has a direct interest of approximately 85.38 per cent in Evergro. The proposed delisting will cost it up to S$54 million in cash if all accepting Evergro shareholders elect to receive cash for their shares.

KepLand said this would be financed from internal resources.

Merrill Lynch has been appointed as financial adviser to KepLand. Full details of the delisting proposal will be sent in a circular to Evergro shareholders in due course.

In light of the latest proposal, Evergro said it would delay the release and issue of its second quarter results, originally slated for July 16, 2009. It will now release the results no later than August 14, 2009.

- CNA/so

Source : Channel NewsAsia - 13 July 2009

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No fear of property gains tax on show

No fear of property gains tax on show

Investors, home seekers throng property launches over weekend

By EMILYN YAP

FEAR and uncertainty over how gains from property sales would be taxed vanished as quickly as they came last week.

Home seekers still thronged showflats over the weekend and smaller apartments remained popular picks.

Turnout at property launches was healthy, observed DMG & Partners Securities analyst Brandon Lee, who visited a handful of showflats in the last few days.

News that the government could change income tax laws on profits from property sales did not seem to have an adverse impact, he said.

Word got round last Wednesday of a proposal to make current laws clearer - by guaranteeing that anyone who sells only one property in any four-year period will not be taxed on the gains.

This left many industry players wondering if sellers who failed to meet the criterion would automatically be taxed. Their fears were eased when the government said that this was not the case.

Given how much property prices have fallen, there is still a chance to profit - with or without taxes - said Mr Lee in a note last Thursday. ‘Even if a maximum 20 per cent personal income tax rate is levied on profits, the seller should still reap healthy income.’

Investors seemed to recognise this and joined genuine homeseekers at showflats for new projects, such as Parc Imperial at Pasir Panjang, Ascentia Sky along Alexandra Road and Sophia Residence at Mount Sophia.

According to agents, buyers had taken up around 80 per cent of Parc Imperial’s 138 units by yesterday afternoon.

Studio and two-bedroom apartments at the freehold project were the most popular, with prices starting from $1,200 psf.

At Luxus Hills, a recently-launched 999-year leasehold landed development at Ang Mio Kio, 63 of 78 units have been sold. Prices ranged from about $1.75 million for intermediate terrace homes to $2.05 million for corner terraces.

Existing properties also found buyers. In four days, The Straits Trading Company sold 10 units at Gallop Green, a freehold estate near Farrer Road which received Temporary Occupation Permit in 2002.

Prices averaged $1,400-$1,435 psf and buyers comprised owner-occupiers and investors, said the company’s executive vice-president Eric Teng.

Source : Business Times - 13 July 2009

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Green homes are catching on

Green homes are catching on

More home buyers now recognise the benefits of an eco-friendly home and are willing to pay a premium

By Jessica Cheam

Green projects like City Developments’ Savannah CondoPark have features such as solar panels on the rooftop of the clubhouse (left), which provide part of the power needed.

When the Government launched Singapore’s first green building rating system - the Green Mark - five years ago, sustainability and climate change were unfamiliar terms to the public.

Today, on the back of growing awareness of environmental issues, property developers are recognising the rising demand for eco-friendly spaces and are constructing ‘greener’ buildings.

The Green Mark scheme took some time to get off the ground, with only 17 buildings securing the stamp of approval in the first year it was established.

But now, the number of green offices, factories and homes has hit 300 and counting - and the authorities are aiming higher.

The Inter-Ministerial Committee on Sustainable Development has set ambitious targets such as the greening of 80 per cent of all buildings in Singapore by 2030.

Although green home is a term that trips easily off the tongue, what gives a home its green credentials?

The Building and Construction Authority’s (BCA’s) website www.greenmark.sg offers this definition:

The term green home refers to a home that is built-in with technologies and sustainable practices that improve the energy efficiency, water efficiency and indoor environment quality.

BCA says that the building process is another important consideration: A green construction practice would consider resource management, durability and general environmental appropriateness of a structure.

A green home is typically designed with better ventilation systems, built with low-toxic materials and recycled components and designed to have a long and efficient life-cycle.

International surveys have found that home buyers are willing to pay a premium for green homes - firstly, because they save money on lower energy bills, and secondly, because of the intangible benefits such as a healthier, cleaner environment and higher indoor air quality.

So how does one go about getting a green home?

An easy way to go about it would be to buy into homes that have been certified Green Mark.

Property developers such as City Developments and CapitaLand have built some residential projects that have achieved such a rating.

These projects typically use some form of renewable energy such as solar power, have energy-efficient fittings and utilise innovative solutions such as recycling rainwater.

New HDB flats are also now mandated to achieve the basic Green Mark rating, and some projects such as TreeLodge@ Punggol have higher environmental standards and performance.

But even if your current home is not Green Mark certified, there are many things you can do to raise your green quotient.

Tips on the BCA’s website include:

Home orientation. Having a well-positioned home improves comfort and also reduces energy bills. Avoid homes with a full height glazing facing west. Heat gained from solar radiation by east/west facades is much higher than that gained from north/south facades.

Natural ventilation. Having good natural ventilation is the least expensive way to cool a home. The layout of one’s home should be designed to take advantage of Singapore’s prevailing north-south wind conditions, achieving adequate cross-ventilation within the home.

Sun-shading. Having proper sun-shading improves comfort. Sun-shading should be provided for facades facing east and west to shield the home from direct sunlight, minimising solar heat gain. Balconies, planters and bay windows may act as sun-shades.

Energy. Having electrical appliances, such as air-conditioners and refrigerators, bearing the ‘Energy Label’ can help to save electricity. For example, you can expect $960 in annual savings if your air-conditioner has four ticks instead of a conventional one.

Choose energy-saving lamps that convert energy into usable light and emit less heat.

Water-efficient fittings. Having water fittings, such as flushing cisterns, showers and taps, bearing the ‘Water Efficiency Label’ can help to cut costs and save water.

Maximise daylight. Having ceilings and walls with highly reflective white surfaces helps to diffuse daylight into the space within the home.

Source : Straits Times - 12 July 2009

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Don’t let your home loan haunt you

Don’t let your home loan haunt you

In picking a mortgage package, factors such as interest rates and lock-in period matter

By Francis Chan

Nothing beats having your own pad - especially the very first home you own.

For me, it was a 732 sq ft studio in Siglap that I bought in 2005.

When I paid the 1per cent deposit for the place, everything about it was perfect. It had an unblocked view of the East Coast, nice Italian marble flooring, a spacious kitchen (yes, single men do cook) and a huge balcony.

It had all the ingredients of a picture-perfect yuppie life.

I saw myself chilling out on lazy Saturday afternoons on the balcony, whipping up al dente pasta in the kitchen and taking cool evening walks by the beach, which was just around the corner.

So, like most Singaporeans, I emptied my CPF account, signed up for a home loan and, three months later, became the proud owner of my very own bachelor pad.

Buying my first home was a relatively painless and seamless process at the time.

All I did was put my John Hancock down on some papers - actually legal documents which I did not even bother reading - and there I was: a 20-something, first-time homeowner with a $250,000 mortgage.

Everything was cool until I received a letter from my bank just a couple of weeks before my first instalment payment was due.

It was my first mail at my new address and naturally I was ecstatic about opening it, but my fervour died when I read its contents.

The letter said something to the effect that because of fluctuations in the interest rate environment, my monthly instalments would have to be increased. In other words, I needed to pay more each month to service my home loan.

I was shocked. I had not even started unpacking my cartons of belongings and here was the bank telling me my monthly instalments had been raised.

That, however, is the reality that many often face when taking a home loan with variable interest rates, as I would later learn.

Buying a home is arguably one of the biggest financial commitments people will have in their lifetime, and a home loan is the heaviest debt they will have to pay if they take up a mortgage.

It baffles me now that I had actually signed up for a quarter-of-a-million dollar loan without carefully considering the conditions that were tied to it.

As the saying goes, the devil is in the details, and my sin was complacency. But what was an even bigger surprise was that many first-time homeowners were just like me.

I polled my peers and found that most of them also could not recall details like what interest rates their loans were on, how much their monthly instalments were, or even when their loan tenures would end.

Maybe we were just so preoccupied with the excitement of getting that dream home that we ignored the due diligence that should have gone into our hunt for the loan.

For me, the sheer number of banks that offered home loans and the various options available certainly added to the confusion. But I recently found out - when I was buying my second home - that a little research can go a long way in avoiding nasty surprises.

So if interest rates are what really matters to homeowners, then it will probably be a relief for you to know that there are really only two main types of home loan in the market: loans with fixed interest rates, and loans with variable or floating interest rates.

With a fixed rate loan, you are somewhat protected from the fluctuations of interest rates, and typically you can expect to pay the same monthly instalment for at least the first few years of the loan tenure.

So if you want some sense of certainty that your monthly payments will always remain the same, go for a loan with fixed rates. But it is only really any good if you sign up for the loan when interest rates are low.

However, if you do sign up for a fixed rate loan, bear in mind that the annual fixed rate - which these days could go as low as 1.5per cent per year - usually ends after the initial one to three years, depending on your bank. After that, you will be charged the bank’s prevailing variable or floating rate, which for many is where the confusion and worries start.

Loans with variable or floating rates are of course the other alternative you could choose right from the start.

The interest rates of these loans are benchmarked against references like the Singapore Interbank Offered Rate or Sibor.

Sibor is the average interest rate at which banks borrow from one another. The key determinant of this is the United States Federal Reserve rate and overall liquidity, or availability of funds, in the banking sector.

Since the economic crisis broke, the Fed has so far managed to keep interest rates at 0.25per cent, a historical low. At the same time, Sibor has hovered at just around 0.7per cent in the last half year.

Industry observers say that because banks here are highly capitalised - meaning they have ample supplies of cold-hard cash - Sibor will likely remain low for now, unless the Fed rate suddenly spikes.

There is also another type of variable loan, one where interest rates are pegged to the Swap Offer Rate or SOR.

SOR essentially comprises Sibor plus the lending costs incurred by the banks, and is calculated over a period of time: usually three or six months.

For example, if your loan is based on a three-month SOR, your interest rate will be the three-month SOR plus a small margin for the bank, and that rate will be revised every three months.

Like Sibor, SOR is available to the public in newspapers and on the Internet. But SOR is also affected by the exchange rates of the US dollar versus the Singapore dollar, so it tends to be a little more volatile than Sibor.

Of course there are other factors to consider when signing up for a home loan. They include making sure you have the capacity to service the monthly payments, and are comfortable with the interest rates and lock-in period that come with the loan package.

Lock-in periods determine how long you are tied to the bank and allow it to penalise you if you decide to redeem your loan early.

So do not just get excited over what are now staple freebies such as legal fee subsidies, property insurance or even the free shopping vouchers that come with some home loan packages.

Getting the right home loan can mean more peace of mind and maybe even some savings in the long term.

Shop around for a loan that fits your needs instead and keep an eye on the details that really matter when signing up for one - whether it is a fixed or floating rate loan.

You really do not want to match your dream home with a nightmare of a home loan.

Source : Straits Times - 12 July 2009

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Love affair with property pays off

Love affair with property pays off
Senior bank officer’s early land purchases helped to build financial muscle for bigger investments
By Lorna Tan, Senior Correspondent

Stanchart Private Bank global market leader Alice Waller (right), 53, seen here with her daughter Claire and Claire’s fiance Andrew Wynne, was born in South Korea. She studied in the US and has lived and worked in Australia, South Korea and Singapore. She owns two condo units and a farm in Australia. — ST PHOTO: SAMUEL HE

Korean-born Alice Waller has lived and worked outside South Korea, especially in Australia.

It is no wonder her love affair with properties is played out largely in Australia instead of her home country.

Her family moved to Australia when she was 10. She later studied in the United States and worked in South Korea for a few years before a 10-year stint in Singapore running a manpower services business.

She then spent 15 years at the National Australia Bank, based in Australia and New Zealand, till early last year. That was when she returned to Singapore to join Standard Chartered Private Bank as its senior director and global market leader. Her primary role is to reach out to the high net-worth Korean community worldwide.

Mrs Waller, 53, said her property investments have paid off handsomely.

She made her first property investment when she obtained her MBA from the University of California, Los Angeles, in 1982. She invested her savings of A$34,000 in two pieces of neighbouring land, each at 7,000 sq ft, in Adelaide, Australia. She sold them four years later when land prices doubled.

Armed with the sales proceeds and her savings, she bought another two pieces of land, this time costing her A$60,000. It helped that there was no capital gains tax in Australia then. Before long, her wealth had grown.

Now that she is more financially sound, she prefers to go for ‘blue chip’ property in prime locations because she believes that their values would go down last in a crisis but would go up first during good times.

Currently, she has two condo units in Melbourne and a farm in Victoria, Australia.

She is married to an Australian banker and has two children, Claire, 26, and Simon, 23, from a previous marriage. Mr Waller and her two children are based in Melbourne.

Q: Are you a spender or saver?

I am a saver. I spend 30 per cent and save 70 per cent of my income.

Q: How much do you charge to your credit cards every month?

I have three cards and I charge almost all my expenses, about $2,000, to them. I pay off the full amount so that I do not have to pay any interest. I withdraw $500 a month from the ATM.

Q: What financial planning have you done for yourself?

While I spend 30 per cent of my income, the balance is being invested in this manner - 20 per cent is channelled to pay off my mortgages, 30 per cent is invested in short-term products such as term deposits, and 20 per cent is parked in mid- to long-term investments such as unit trusts and capital guaranteed products. Of this 20 per cent, 15 per cent is invested in riskier products like derivatives while 5 per cent is invested in fixed-income products like capital guaranteed bonds.

I like to have more cash holdings now as I’m looking out for more opportunities to invest.

My target return is about 10 per cent per annum on my investments and 5 per cent per annum on property.

Q: Moneywise, what were your growing-up years like?

I come from a large family of seven kids. I am the fifth child. My dad was a businessman who manufactured safes and re-modelled antique cars. Because of his business ventures in Australia, my family lived in Adelaide between 1966 and 1970. They were in Brunei from 1970 to 1988. My mother was a teacher but she became a housewife when we left Seoul. I went for further studies in the United States when I was 18, so I learnt the importance of being financially independent from a young age. It was my father’s belief in owning land that inspired my interest in real estate.

Q: How did you get interested in investing?

After my graduation, I took my father’s advice and started to invest in property. Later, I diversified my investment into other financial instruments.

Q: What property do you own?

I own two properties which come with 24-hour concierge services in St Kilda Road, Melbourne.

I bought a three-bedroom unit at the Melbournian Apartment for A$1.9 million in 2004. Its annual rental yield is about 5.6 per cent. In January this year, I bought a 1,300 sq ft unit at the Metropolitan Apartment, also in St Kilda Road, for A$850,000 (S$970,000). My son is currently living there.

Back in 2000, I bought a 250ha cattle farm in Victoria for under A$500,000. The rental yield is about 4 per cent per annum. The returns are not high but we bought it for sentimental reasons because the farm used to belong to my husband’s family.

Q: What’s the most extravagant thing you have bought?

A fur coat which I bought in South Korea in the early 1980s that cost US$3,000. It was very expensive and it seemed like a good idea then. But my career has since taken me to Asia where I have little or no opportunity to wear it. I’ve worn it only twice. I regret buying it as I could have made better use of my money.

Q: What’s your retirement plan?

I am hoping to have my own home without any loan or repayment to worry about. I would like to have an income of S$10,000 a month after tax when I retire. I intend to stop work at 60 if my health permits and I hope I will be financially independent at 57.

When I do retire, I want to do charity work, just like my mum. My dream is to set up a home for the aged outside Seoul. It will be a small house with 20 rooms and a nurse. It will be free for the residents.

Q: Home is now…

A rented apartment at the Caribbean at Keppel Bay.

Q: I drive…

A silver Lexus IS250.

WORST AND BEST BETS
Q: What has been your worst investment to date?

In 1982, I bought a small house sitting on a big plot of land in Adelaide for A$500,000 (S$575,000). I tore down the house and built eight bungalows on the same plot. It was named Claire Court, after my daughter, who was born in 1983.

However, it was a nightmare when the interest rate for the bank loan spiralled to 22.5 per cent from 14 per cent in 1983 due to the worldwide recession. I subdivided the land and sold the bungalows after five years, and managed to break even.

Q: And your best investment?

I invested a six-figure sum in an Australian commercial real estate investment trust fund in the late 1990s. It achieved 15 per cent returns every year so my capital sum doubled. I cashed out of the fund in 2004.

Source : Straits Times - 12 July 2009

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The invest guide to the current property run

The invest guide to the current property run
Recession? What recession? The residential property market is on a roll with owner-occupiers, speculators and investors rushing in to buy during what they see as the bottom of the market. Demand has shot through the roof and prices are rising. But is it a boom or just a blip? Property Correspondent Joyce Teo considers key aspects of this most unlikely boom to see if there is an answer to the puzzle.

Projects with smaller units did well, like the freehold 2930-unit Alexis @ Alexandra, which was an instant hit and sold out after its February launch. Alexis was ample proof that affordability was more important than size.

Unlike the 2007 boom, which was in high-end and prime homes, this buying rush began with the pick-up in demand for mass-market homes.

HDB upgraders are leading the way. They may have missed out on the previous bull run and now want in.

It all started with the Caspian, a large 99-year leasehold project in Jurong West that attracted hordes of visitors. The ‘Caspian effect’, as one industry source calls it.

The 712-unit project sold 300 units at between $340,000 and $990,000 - an average of $580 per sq ft (psf) - over three days in early February.

New mass-market projects such as Double Bay Residences in Simei and Mi Casa in Choa Chu Kang followed.

Developers also re-launched older projects at lower prices, such as The Quartz in Buangkok.

Jones Lang LaSalle’s head of South-east Asia research Chua Yang Liang said people are significantly better off than in 2000 and since mass-market property prices have moved down from the peak, the units remain very attractive.

After the flurry of mass-market launches in the first quarter, buying spilled over into the mid-tier and upper end segments, said property consultants DTZ.

New private home sales are estimated at up to 6,900 units in the first half of the year, surpassing the 4,268 sold in the whole of last year, it said.

But with HDB upgrader demand still going strong, developers continue to target this group.

New releases of mass-market projects include Oasis @ Elias in Pasir Ris and The Gale in Flora Road, where units were offered for preview sale at $600 to $700 psf on Friday.

2 Interest absorption

Just how buyers pay for their new homes has changed since the last big buying rush.

The era of the deferred payment scheme may be over, but not the concept.

The interest absorption scheme (IAS) offers a similar arresting proposition - pay 20 per cent of the property upfront and become an owner.

The rest of the payments will be deferred until the project’s temporary occupation permit period.

Unlike the deferred payment scheme, IAS requires you to take up a bank loan at the time of purchase but the developer absorbs the interest payments until the project has been finished.

Dr Chua said stable HDB prices and the availability of credit in the form of IAS have helped spur demand.

IAS became very popular earlier this year and helped drive sales at mass- to mid-market developments, particularly if the scheme was offered at no additional cost.

Some have argued that the popularity of the IAS shows that this boom has plenty of staying power as buyers using the scheme would have met the banks’ credit assessment criteria.

But some cash-rich buyers may opt out of the scheme if it is offered at an additional cost of 2 per cent to 5 per cent above the property price, experts said.

Experts warn euphoria may not last long

At The Wharf Residence, IAS take-up was very low as the scheme was offered at a 5 per cent premium.

Although the deferred payment scheme is now defunct, developers who obtained approval before it was halted in late 2007 can still offer it.

The 152-unit One Devonshire in Devonshire Road is one such project. It offered IAS at a 2 per cent price premium and deferred payment at a 3 per cent premium.

While some did go for either of the two schemes, many opted for the normal progress payment, even though they had to pay for 30 per cent of the project upfront as construction has started.

3 Small is beautiful

When demand nearly evaporated last year, some developers went back to the drawing board to reconfigure projects to offer smaller, more affordable units.

The freehold 293-unit Alexis @ Alexandra, near Queenstown MRT station, was an instant hit, selling out after its February launch.

Most of the flats were small - it has 114 one-bedroom units of just 366 sq ft to 527 sq ft and costing around $450,000 each - and 77 one-plus-one bedroom units at around $550,000 each.

Alexis was ample proof that size matters little as affordability is key. Small is beautiful, in other words.

Launches of more projects with small units followed.

Once termed ‘Mickey Mouse’ units as they seemed rather unreal, tiny apartments of 400 sq ft to 500 sq ft have become common enough to be simply referred to as the typical studio units or one-bedders.

Because they are unlikely to appeal to owner-occupiers with families, buyers tend to be speculators or investors looking to flip or rent them out to singles or couples.

4 VIP previews

The VIP preview is clearly for very important persons but at some developments these days, you become truly important the minute you show keen interest. Entry to a special preview is instant when you call to register interest.

The advantage of attending a condo preview is getting the first bite of the cherry.

You are among the first to buy and can take your pick and often, preview prices are lower than launch ones.

That said, different developers have different strategies. Some may launch just the low floors or the less appealing units at attractive levels during the preview.

‘Soft launches are one of the ways to test the market. If the market is good, they will probably push up the prices at the official launch,’ said Credo Real Estate executive director Tan Hong Boon.

Projects holding previews at the moment include the 34-unit Ferrell Residences in Bukit Timah Road. It is going for $1,550 psf to $2,000 psf, or from $3 million.

5 Where are prices now?

Early estimates of the official property index show that the fall in private home prices has slowed. But experts said caveats lodged indicate that prices have actually risen recently on strong demand.

DTZ said price recovery has been happening across the board since May.

CB Richard Ellis analysed caveats lodged in the top five districts. It found that the median prices of new 99-year leasehold apartments rose to $655 psf in the second quarter, up 7 per cent from the first quarter.

In the resale and sub-sale market, prices climbed from $600 psf to $628 psf.

In the freehold and 999-year leasehold segment, median prices of new homes have dropped nearly 13 per cent to $951 psf.

But resale and sub-sale prices have climbed by 12.7 per cent in the same period to $850 psf.

The euphoria may continue for just a few more months, experts said.

‘People are getting ahead of themselves a little bit,’ said IP Global managing director and founder Tim Murphy, who is keen on Singapore over a five- to 10-year period.

‘There seems to be a lot of activity and we are not sure how much of that is underpinned by fundamentals.

‘Some of these properties have gone up 10 per cent to 15 per cent in the last quarter. We think it’s a little bit frothy for us.’

Jones Lang LaSalle’s Dr Chua said a pullback in the market is ‘not unimaginable’ should the larger economy not show any positive growth.

Small sells
Once termed ‘Mickey Mouse’ units as they seemed rather unreal, tiny apartments of 400 sq ft to 500 sq ft have become common enough to be simply referred to as the typical studio units or one-bedders.

Things looking up?

Early estimates of the official property index shows that the fall in private home prices has slowed. But experts said caveats lodged indicate that prices have actually risen recently on strong demand.

Source : Straits Times - 12 July 2009

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MINDY YONG

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Property investors still jittery about tax policy

Property investors still jittery about tax policy 
Iras does not have cut-and-dried definition of ‘trader’ 
By Fiona Chan 

In the recent property boom that ended last year, MrLee (not his real name), a vice-president in a company here, sold three properties within a year.

One was a home he had lived in for many years, while the other two were investment properties whose prices were too good to pass up.

Just before he sold the third property, Mr Lee’s lawyer warned him that all this buying and selling might get him into trouble with the Inland Revenue Authority of Singapore (Iras).

Specifically, Iras could deem him a property ‘trader’, which means that he relies on property transactions for income. If this happened, the profits he had earned on the three properties would have been added to his income that year, significantly increasing his tax burden.

With the property market in hyperdrive, however, Mr Lee, who is in his 30s, decided to take the risk and sell the third property. ‘If you’re going to get whacked, you’re going to get whacked,’ he said.

Fortunately for him, Iras left him alone. But the period of indecision he suffered over whether he would be taxed on the sale is not uncommon for property investors and genuine owners, even if they space out their property sales over a number of years.

To this end, the Ministry of Finance (MOF) is proposing to clarify the law on taxing profits from property sales. If it succeeds, property sellers will not have to worry about being taxed on their profits - as long as they let at least four years pass between each sale.

Even if they sell more than one property within a four-year period, it does not mean they will automatically be taxed.

Iras has no cut-and-dried definition for what makes someone a ‘trader’, but looks at factors including the reasons for the sale, how long the individual has held the property, and how frequently he has sold properties in the past.

In effect, Iras has not changed its rules on this matter - the danger of a property seller being categorised as a trader has always been there. Iras has also not tightened its standards, nor will it enforce them more strictly.

But last week’s clarification of the four-year period - which the MOF says is meant to provide reassurance to property owners - has sent a wave of jitters through the property market just as it is starting to pick up.

Property stocks dived after news broke of the clarification, which is among the changes listed in a draft amendment to the Income Tax Bill put up for public feedback last month.

If the change goes through, the relevant new section will apply to properties sold from Jan 1 next year. A property owner selling his property on Jan 1 will definitely be safe if he has not sold any other property since Jan 1, 2006.

Stocks rallied a bit after the MOF stressed that the clarification is not meant as an anti-speculation measure, is not a disguised capital gains tax, and is not aimed at penalising property investors.

But some property agents told The Sunday Times that a few of their clients who had bought new properties recently backed out of their options last week after reading about the clarification.

Given that most property owners who leave a gap of four years between selling their properties are unlikely to worry about being taken as traders, some have questioned the need for this clarification.

‘It provides clarity for people who sell only one property in four years. But it has made things even more uncertain for those who sell one property and then want to sell another two years later,’ said a 34-year-old property investor who wanted to be known only as Ms Lim.

For some seasoned investors such as Mr Chen, who is in his 30s, the ‘clarification’ makes no difference.

‘I’m a bit more obvious to Iras. I’ve bought and sold more than 10 properties in the last several years,’ he said. ‘I argued to Iras that some of the properties were bought under my company. But it’s up to their discretion to decide what makes a property trader, and this clarification doesn’t make it any clearer.’

The four property investors who were interviewed for this article declined to give their real names in case Iras decides to keep a closer watch on them.

One of their main gripes is that the four-year period seems arbitrary.

‘For new HDB flats, you can’t sell until five years later. For resale, it’s one year. So how did they come up with four years for this rule?’ said Mr Lee.

It is believed that Iras decided on the timeframe based on legal precedents.

One court case that made headlines in 2007 was that of a couple who bought eight properties and sold seven between June 1988 and March 1996.

In 1999 and 2000 - the taxman can retroactively ‘catch’ you for up to eight years after you sell your property - Iras charged the couple $250,000 in tax on the $1 million profit they had made from four of those properties.

The couple appealed on three properties, but only one was allowed. They then took their case to the High Court and managed to get another property off the hook - after pleading that they had sold the apartment because of its bad fengshui.

The case was hailed not only as a landmark decision based on fengshui, but also as a timely reminder of the existence of Iras’ laws on taxing property gains.

This time, however, the reminder may not be so timely. Property agents are concerned about the timing of MOF’s clarification, saying it would derail the fledgling rally in the property market, which in turn could contribute to a delay in any economic recovery.

‘There aren’t any new measures introduced, everything remains status quo, so why create unnecessary excitement or concern in a market that’s just finding its footing now?’ said Mr Mohamed Ismail, chief executive officer of real estate agency PropNex.

Still, some would-be investors are not deterred.

Mr Tan, who runs his own company and is in his 50s, is on the verge of buying a new investment property. He already owns ‘a few’, which he rents out.

‘I don’t see myself as a trader,’ he said. ‘I don’t intend to buy and speculate. I buy to hold, but even if I sell it in two years, I will put forward the case to Iras that I’m not a trader.’

If the worst happens and he gets taxed, he will just ‘factor the extra tax into the cost of my investment’.

‘This policy will not derail me from trying to make money from property,’ he said.

Not every investor is so sanguine, however.

Mr Lee, for one, is casting his eye on overseas properties. ‘I would head to London or Australia or the United States. Some of these places have capital gains tax, but at least property prices there are much lower now, so they may be more worth it.’
Tax on property gains: Up to Iras to decide
Whether or not a property seller is taxed on his profits is ultimately up to Iras.

The tax agency does not require individuals to alert it when they sell their properties. Iras has always conducted its own audits of property transactions for possible cases of assessable income.

It will use yardsticks such as the circumstances leading to the sale, how long the investor has held the disposed property and how frequently he has been selling properties in the past.

Let’s assume that a certain investor is among those audited for income, and that after taking all these factors into consideration, Iras decides that he should be taxed.

If he earns an annual income of $100,000, and he has made a gain of $300,000 on selling his properties, his total assessable income for the year will now jump to $400,000.

A back-of-the-envelope calculation shows that his income tax will also soar by $51,600 - from $7,100 to $58,700.

This is largely because the surge in his income has pushed him into a higher tax bracket: his top tax bracket has gone from 14 per cent to 20 per cent.

In Singapore, individuals do not pay tax on their first $20,000 of annual income.

They will pay 3.5 per cent tax on the next $10,000 they earn and 5.5 per cent on the following $10,000.

Income above $40,000 will be taxed at 8.5 per cent, and for amounts more than $80,000, the rate goes up to 14 per cent.

The maximum rate is 20 per cent, which is applied to whatever income an individual earns over his first $320,000.
Source : Straits Times - 12 July 2009

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MINDY YONG

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mindy@mindyyong.com