Developers want measures in Budget to boost market

Source : Business Times - 20 Jan 2009

Property players have suggested many measures to support the market as Budget 2009 has drawn closer. But it’s anyone’s guess as to what the government will announce come Thursday.

‘The government has so far remained silent on specific measures,’ says Leonard Ong, executive director at KPMG Tax Services.

Developers want a property tax rebate on all residential, commercial and industrial projects, including those under construction. They are also asking for deferral of stamp duty payment for projects under construction until temporary occupation permit (TOP) is obtained.

Tenants have their own requests. The Association of Small and Medium Enterprises (ASME) hopes for rebates and rent reductions on commercial properties owned by JTC Corp and HDB. The Singapore Retailers Association is also looking for cheaper rents.

Some of these wishes may be granted, analysts say. A property tax rebate is seen as one of the more likely measures as it would have an immediate effect by reducing property companies’ cash costs, says Mr Ong.

The government could also take this a step further and introduce tax exemption for projects under development to ease the cash burden on developers, many of whom may want to defer construction, he says. But this is seen as less likely.

Analysts also say that if measures are introduced to ease developers’ cash flows, the savings should be passed on to tenants in the form of rent rebates to benefit more businesses.

Some type of concession allowing the deferral of stamp duty payment for projects under construction - similar to one introduced in 1998 and removed in 2006 - is a possibility, consultants reckon.

And analysts believe JTC and HDB rent cuts are likely. ‘On the part of these government agencies, we expect tiered cuts in rents for factories and warehouses, as well as reductions in utility, property taxes,’ said OCBC economist Selena Ling.

But market observers point out that with the government having privatised much of its property in the past few years, rent cuts for state-owned property are not likely to have much of an impact. In 1998 when the Asian financial crisis broke, the government froze rents for land and factories owned by JTC and HDB and gave a 15 per cent tax rebate on commercial and industrial properties. But as one industry player said: ‘Tenants need more this time round.’ He suggested that any property tax rebates given to landlords come with the condition that these landlords cut rents for tenants.

Taking a longer-term view, some analysts say the government should take a measured approach to aid stakeholders in the property industry.

‘It is best not to interfere too much with the market as policy measures to alleviate or cool it could have the inadvertent effect of exacerbating swings when the cycle changes and cause a different set of problems later,’ said DTZ’s senior director for research Chua Chor Hoon.

‘If policy measures are implemented, they should be given a definite expiry date and extended only if necessary. There has to be a balance between tactical measures to bring us through this unprecedented period and strategic long-term goals.’