Restructure the property market before it is too late
May 22, 2007
Restructure the property market before it is too late
THE Singapore property market has witnessed a strong recovery recently and indicators have shown that the effect is flowing from the high-end residential segment to the mass market.
In some new condo launches, prices have escalated by more than 20 per cent. It is time structural changes be made to ensure no hard landing occurs when economic conditions change.
Like any other goods, property price is determined by forces of market demand and supply, under perfect market conditions. Prices go up when demand exceeds supply.
To attain price equilibrium, either demand must be curtailed or supply increase to the level where a right price is reached.
In property, land and space resources are the components of supply, and wealth and value expectations form the components of the demand.
Both can be managed to attain an optimal match such that we do not continue with the current upward spiral increase in property prices before it put many homes out of reach of ordinary Singaporeans who just want a roof over their head.
On the supply side, the Government should adopt a variation of its effective car COE system into land management.
A sufficient amount of land gazetted for residential development should be released to the market regularly so that the recent pent-up demand for housing does not translate into a sharp appreciation of prices in double quick time.
Over the past years, certain real estate companies have acquired a vast land bank but if they do not start putting it to use by building more homes, then releasing state land would allow other real estate developers to capitalise on the opportunity and support price stability for housing.
Another phenomenon is the unique HDB housing market with its wholesome set of rules governing ownership and transferability.
The Government should consider relaxing all unnecessary rules and allow HDB flats to fully mesh into the mass market segment for properties completely.
Such rules and restrictions include eligibility to purchase, transferability conditions, subsidy and resale levy, financing guidelines, et cetera.
The unsold units of past years was a big wake-up call to HDB and this is the best time for HDB to 're-invent' itself and 'liberate' all HDB flats completely into the property market.
Except for the requirement for communal representation in each estate/block, HDB should abolish all rules and regulations on purchase and sale of new and resale HDB flats. Eligibility to purchase should be abolished so that all HDB new and resale flats are available to all.
Demand can also be regulated in a market-oriented way to achieve optimal price equilibrium. This is through charging tax on gain of disposal of property.
The Government should consider introducing a simple disposal gain tax which not only deters excessive speculation but also regulate consumer behaviour in the housing market. Unlike consumer durables and consumable services, property involves long term commitment and constitutes a substantial part of any resident's net worth.
The tax can be structured in a progressive manner such that the higher the appreciation in value, the higher the tax rates.
For example, disposal gain up to $500,000 is exempt from tax, and 20 per cent tax rate applies for gains between $500,000 and $1,000,000 and 30 per cent for gain between $1,000,000 and $5,000,000 and 50 per cent for gains above $5,000,000.
The tax is payable when the property is sold, regardless of holding period. For the majority of Singaporeans who own property for domicile purpose, the tax does not affect them significantly. So it is not a pain tax.
I believe the above pre-emptive measures, among others, would fine-tune the domestic property market in a better way structurally than reflexive knee-jerk reactions introduced when property market crashes, like what we witnessed in early 2000.
Ee Teck Siew
Re: Restructure the property market before it is too late
"For example, disposal gain up to $500,000 is exempt from tax, and 20 per cent tax rate applies for gains between $500,000 and $1,000,000 and 30 per cent for gain between $1,000,000 and $5,000,000 and 50 per cent for gains above $5,000,000."
Ee Teck Siew is a fool.
Thats really a stupid Idea. People will stamp singapore govt as a daylight robbery. Fools. If they did that, The whole singapore economy will turn upside down instantly. Foreign investors will flee out.
Developers will look at ather places for their project because they find market not attractive anymore. Remember the property crash in 2000??
Want to stop speculation just simply stop the deffered payment.
Re: Restructure the property market before it is too late
Quote:
Originally Posted by Unregistered
"For example, disposal gain up to $500,000 is exempt from tax, and 20 per cent tax rate applies for gains between $500,000 and $1,000,000 and 30 per cent for gain between $1,000,000 and $5,000,000 and 50 per cent for gains above $5,000,000."
Ee Teck Siew is a fool.
Thats really a stupid Idea. People will stamp singapore govt as a daylight robbery. Fools. If they did that, The whole singapore economy will turn upside down instantly. Foreign investors will flee out.
Developers will look at ather places for their project because they find market not attractive anymore. Remember the property crash in 2000??
Want to stop speculation just simply stop the deffered payment.
Agree.
However, I believe it is still too early for the authority to do anything to the market.
