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Published January 7, 2012
New stamp duty seen depressing bungalow sales
Prices of Sentosa Cove units will moderate, causing GCBs on the mainland to ease as well
By KALPANA RASHIWALA
THE 10 per cent additional buyer's stamp duty on foreigners buying private homes in Singapore will lead to a fall in their bungalow purchases on Sentosa Cove in coming months.
As a result, prices of Sentosa Cove bungalows will moderate, which, in turn, will cause prices of Good Class Bungalows (GCBs) on mainland Singapore to ease, says CBRE.
But any price fall will be measured due to the limited supply of bungalows - in both GCB areas and Sentosa Cove - as well as the holding power of existing owners, says CBRE director of luxury homes Douglas Wong, who specialises in GCB deals.
He predicts that GCB prices may ease about 3-5 per cent this year. For Sentosa Cove bungalows, the price decline is expected to be closer to 5 per cent.
The number of GCB transactions is likely to slip by 20-30 per cent from 56 deals last year to 40-45 deals in 2012, with the value of transactions too set to ease from last year's $1.15 billion to $800-900 million in 2012, added Mr Wong.
RealStar Premier Group managing director William Wong said: 'I foresee a slight drop of about 5 per cent in GCB prices but a much bigger fall of about 20 per cent in GCB transactions for 2012.
'Buyers are expecting prices to decline but most GCB sellers have strong holding power and are not prepared to adjust their prices downwards. Hence, we're faced again with a buyer-seller stalemate, where buyers' offers - if any - are way below sellers' expectations.
'Transactions are likely to start picking up only from the second quarter of 2012 as it will take a few months for buyers and sellers to monitor the market to see what actions to take in view of the introduction of the additional buyer's stamp duty (ABSD) effective Dec 8.'
Singaporeans who are buying their third and subsequent residential properties pay a 3 per cent ABSD.
'This is a further dampener to an already soft GCB market. We expect that GCB buyers will be largely confined to end-users and long-term investors,' said CBRE's Mr Wong.
Giving his take on the GCB market this year, Newsman Realty managing director KH Tan said: 'Q1 will be quiet and prices may fall about 2 per cent. We should see more transactions in Q2 and Q3. There are a lot of potential buyers keen to make a purchase but they hope to get a good deal. We could end the year with prices up 2-5 per cent from last year.'
On Sentosa Cove, where foreigners are allowed to buy landed homes subject to government approval, Mr Tan reckons that the imposition of the 10 per cent ABSD on non-PR foreigners buying private homes from Dec 8 will lead to a slowdown in bungalow purchases in the upscale waterfront housing district for the first two quarters of 2012.
'Prices may drop a minimum 10 per cent in the first two quarters of 2012. But transactions may slowly come back in Q4 as people get used to the new rules and sellers adjust their prices. A lot of HNWIs want to come to Singapore, become PRs. By Q4 2012, prices may start to recover by 2-3 per cent, leading to an overall full-year price drop of about 10 per cent.'
CBRE's data shows that the average price achieved for GCB transactions last year was $1,272 per square foot (psf) on land area, up 17 per cent from the preceding year. The average price of bungalow deals on Sentosa Cove rose at a slower clip of 12.4 per cent, from $1,910 psf in 2010 to $2,146 psf in 2011.
However, on a longer timeframe, between 2006 and 2011, the average psf price for bungalow deals on Sentosa Cove has risen 161.9 per cent, ahead of a 153.9 per cent increase for GCB deals over the same period. Sentosa Cove bungalows posted stronger price growth than bungalows in GCB areas in 2007 and 2008, when there was much buzz in foreign buying of luxury homes, although there was just one bungalow deal in Sentosa Cove in 2008.
Foreign buying in Singapore's luxury housing market evaporated when Lehman Brothers collapsed in late 2008. This sent the average psf price for Sentosa Cove bungalow deals in 2009 down by 21.9 per cent. In the same year, the average psf transacted price for GCBs inched up 1.3 per cent. Post-global financial crisis, in 2010 and 2011, the annual psf price growth has been stronger for bungalows in GCB areas than on Sentosa Cove.
Sentosa Cove is the only place in Singapore where non-PR foreigners may purchase landed homes, subject to consent from Land Dealings (Approval) Unit or LDAU.
On mainland Singapore, LDAU is much more strict in granting approval to foreigners seeking its permission to buy landed homes including bungalows in GCB areas of up to 15,000 sq ft. Among other conditions, they have to be PRs and must demonstrate they are making a very significant economic contribution to Singapore. The already strict approval criteria were further tightened last year, which will translate to a more than 50 per cent fall in the number of PRs being granted approval to buy landed homes on mainland Singapore.
'It's getting tougher for PRs to get approval to buy GCBs,' acknowledges RealStar's Mr Wong.
The number of GCB deals fell from 121 in 2010 to 56 last year. The value of GCB transactions also eased from $2.27 billion to $1.15 billion, while the average psf price rose from $1,087 psf to $1,272 psf.
CBRE blames last year's fall in GCB deals on the January 2011 cooling measures which levied seller's stamp duty (SSD) rates of 16, 12, 8 and 4 per cent on those who buy a private home from Jan 14, 2011 and sell it within the first, second, third and fourth year of purchase respectively. The goal is to deter short-term property trading.
At the same time, the government lowered the loan-to-value limit for borrowers with one or more existing housing loans to 60 per cent.
The same reasons probably also led to slower sales of bungalows in Sentosa Cove. CBRE figures show the number of deals fell from 54 in 2010 to 22 last year, with value of transactions sliding from $921 million to $411 million.
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