ADevelopers want govt to turn back clock on several policies

Source : Business Times - 19 Nov 2008

Wish-list includes reinstatement of deferred payment, old formula for DC

Some property industry players are yearning for the good old days, hoping the government will reverse some of the changes in property policies made in the past two years and thus go beyond the usual exemptions and rebates on property taxes with its off-Budget/Budget packages.

Such a strategy may be timely in helping to stimulate currently flagging property demand given that the measures were rolled out when the market was sparkling.

Developers are hoping the government will reinstate the deferment of stamp duty on property purchases where the property is under development (this was removed in December 2006) and revert to the old formula for computing development charge (DC) rates, based on 50 per cent of the appreciation in land value arising from changing the use of a site or building a bigger project on it. This was raised to 70 per cent in July last year.

Also high on the developers’ wish-list is a revival of the deferred payment scheme (DPS) - which was scrapped in October last year - to boost home purchases, with a qualifier that safeguards be introduced to address concerns that such schemes had spurred speculation.

A major property developer also suggested a demand-boosting measure in the form of changing the investment criteria for Economic Development Board’s Global Investor Programme to allow a higher quantum for property purchase or even lowering the total threshold value.

Under a new option to the Programme announced in July 2005, a foreigner can be considered for permanent resident status if he invests at least $2 million in business set-ups, other investment vehicles, and/or private residential properties, with up to half of the investment allowed in private residential properties.

‘More people taking up permanent residence or citizenship and landing on our shores will help the property market,’ said the developer.

KPMG Tax Services executive director Leonard Ong said that granting exemptions or rebates on property taxes for completed commercial and industrial buildings will help landlords and hopefully they will pass on some of the savings to their tenants.

‘Earlier this year, when property prices were on the rise, the government also raised Annual Values of properties. So based on this, owners would be paying more property taxes than last year. This makes it all the more important to introduce exemptions or rebates for property taxes,’ he added. Property tax is calculated as a percentage of a property’s annual value.

Developers are also hoping for property tax exemption for vacant land and land under development to reduce costs.

‘During this period, the market is so quiet we cannot launch projects,’ notes Ho Bee Investment chairman and CEO Chua Thian Poh.

Following the December 2006 rule change on stamp duty, property buyers are now required to pay stamp duty within 14 days from the date that the option to purchase is accepted.

The previous concession, introduced in June 1998, had allowed stamp duty payment to be deferred to the date of issuance of Temporary Occupation Permit for a project or date of sale of interest in the property, whichever was earlier, for properties under development.

Deferring payment of stamp duty for projects under development once more would lower upfront cash commitment for home buyers, some of whom may be stretched, especially since it could take a few years for the new homes they’ve bought to be completed, says Knight Frank managing director Tan Tiong Cheng.

Most developers are hoping the government will reinstate the DPS. They say DPS helped genuine home buyers, especially upgraders who may be able to sell their existing homes only when their new private home has been built.

Ho Bee’s Mr Chua suggests modifications be made to DPS to allay concerns that it also facilitated speculation in the past.

‘The most important thing is to require the buyer to secure a housing loan even if he does not need to draw down the loan immediately, to ensure a credit assessment of the buyer is done by the banks,’ he said.

However, Ho Bee’s Mr Chua disagreed with the suggestion by some analysts that the initial payment by the buyer - before the deferred payment kicks in - be raised from 10-20 per cent previously to 30 per cent, as that ‘would not help home buyers much’.

Although developers are currently not in a race to redevelop their sites given the property slump, many argue that going back to the pre-July 2007 formula for computing DC rates - which creamed off a smaller portion of the enhancement in land value - ‘would provide greater incentive for land owners to explore more productive use for their properties and could spur some activity’, the head of a listed property group said.

Developers are also concerned about banks tightening financing to home buyers and to businesses in general, and hope the Monetary Authority of Singapore will use ‘moral suasion’ to send the right signal to banks.