Rebates, flexibility to ease property pains

Source : Business Times - 23 Jan 2009

THE government yesterday announced a 40 per cent property tax rebate for industrial and commercial properties as well as owner-occupied residential properties, but not for rented residential properties.

It also promised an earlier assessment of Annual Values of properties this year.

KPMG executive director (tax services) Leonard Ong said: ‘Hopefully, they will reduce Annual Values to reflect the current weaker rental market.’

Property tax is calculated as a percentage of the Annual Value of a property.

Finance Minister Tharman Shanmugaratnam in his Budget statement also announced several other property market measures aimed at providing greater flexibility for developers to stage the construction and sale of their projects, particularly residential, in accordance with market conditions and to ease their cashflow situations.

‘This will also help ease current supply-demand imbalance in the market,’ says DTZ executive director Ong Choon Fah.

Colliers International director Tay Huey Ying noted that the property sector measures are ‘aimed more at keeping supply at bay rather than boosting demand’.

The measures include allowing a one-year extension of the project completion period (PCP) for private residential projects on sites sold by the government (without developers having to pay an extension premium) as well as for private residential projects undertaken by foreign housing developers with Qualifying Certificates (QCs), a category that covers effectively all listed developers.

In both instances, if any units have been sold in the project, the PCP extension is only up to the date of delivery of vacant possession for sold units as stipulated in the sale & purchase agreement signed between the developer and buyers.

In addition, the government is extending the period for developers with QCs to dispose of all residential units in their projects, from two years currently to four years from the date that the project is issued with Temporary Occupation Permit. This is in view of the weak residential market and will allow developers more time to sell their housing projects.

In addition, the same developers will be allowed to rent out unsold private homes for a maximum of four years (from the date of TOP or date of application, whichever is later).

This is aimed at giving developers greater flexibility in managing the unsold units in their projects and to minimise their cost of holding on to these units.

Mr Tharman also announced a property tax deferral of up to two years for all land (not just residential) approved for development. However, this is not an exemption as developers will have to pay back the deferred tax later.

KPMG’s Mr Ong said that the deferral that developers will enjoy effectively works out to 0.5 per cent of the estimated freehold market value of the land.

Colliers’ Ms Tay lamented that the latest measure is viewed as less desirable compared with previous downturn budgets, where property tax exemptions were granted for land under development.

The government is also allowing a reassignment of government sale sites and private residential land owned by QC holders.

Applications must be made by Jan 21, 2010.

Only one reassignment will be allowed for each site and the transaction must not be of a speculative nature, that is, the seller is not supposed to profit from the transaction.

In granting the 40 per cent property tax rebate for industrial and commercial properties this year - which will cost the government $800 million - the government strongly urged landlords to pass on the benefits to their tenants.

‘Landlords should also consider further adjustments of rentals and more flexible leasing arrangements and payment terms, in light of the severe downturn in demand faced by their tenants,’ Mr Tharman added.

JTC Corp, the Housing & Development Board and Singapore Land Authority will provide a 15 per cent rental rebate to their tenants and land lessees, exceeding the savings from the property tax rebate.

The rent rebate will also be extended to stallholders paying market rents in markets and food centres managed by National Environment Agency.

Another piece of good news from the Minister is that the Inland Revenue Authority of Singapore will bring forward its property tax assessments for 2009, in view of the change in market conditions.

‘The assessed Annual Values of properties went up last year, in line with actual market rentals. Most property owners have therefore seen increased tax bills. IRAS’s move to accelerate assessments for this year will help property owners in addition to the savings they will be getting from the property tax rebate,’ Mr Tharman said.