Stamp duty for industrial property sold within 3 years

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http://www.businesstimes.com.sg/arch...years-20130112

Published January 12, 2013

Stamp duty for industrial property sold within 3 years

Expected measure to check speculation reasonable: analysts

By Mindy Tan


A SELLER's stamp duty (SSD) is being introduced on industrial properties for the first time, as the government tries to rein in market speculation that has caused a doubling in prices over the past three years, outpacing rental increases.

Specifically, a respective SSD of 15 per cent, 10 per cent, and 5 per cent will be imposed on industrial properties sold within the first, second, and third year of purchase.

The SSD will apply for industrial properties and land bought on or after Jan 12, 2013.

Ong Kah Seng, director of R'ST Research, felt the measure was expected and perhaps long overdue given the substantial run-up in strata factory prices.

"Ongoing interest for industrial properties will be by investors who have significant liquidity, who see industrial properties as still being the most affordable investments and who are really keen in longer-term holding, leading still to an overall, albeit realistic marginal price increase for strata properties in 2013," he said.

Speculation was cited as the key reason for the introduction of the cooling measure.

In 2011 and the first 11 months of 2012, about 15 per cent and 18 per cent respectively of all transactions of multiple-user factory space were resale transactions carried out within three years of purchase. This compares with the average of about 10 per cent from 2006 to 2010.

The spillover of speculative demand has largely been from the residential market, which saw a range of cooling measures including SSD, more stringent loan-to-value ratios, and an additional buyers stamp duty.

This resulted in more investors buying strata industrial properties despite yields being compressed, with a significant increase in buyers flipping their properties before completion, some within a few months of buying, said Lee Sze Teck, senior manager, training, research and consultancy, at DWG.

A significant supply of industrial space being completed this year and next, coupled with anaemic growth in the manufacturing sector, may result in space not being fully absorbed.

"If the industrial space cannot be absorbed, it means that investors will have to bear the mortgage instalments for at least one year. Investors are likely to reassess their options and decide whether they have the finances to invest," said Mr Lee.

Tan Boon Leong, executive director of industrial services at Colliers International, reckoned the measure was "reasonable", since it was aimed at speculators and not investors.

"This effectively removes the element of speculators. So when developers bid for land, they will know the element of speculation is no longer there and this will translate to lower prices," he said.

"If you are an end-user or an investor looking to invest over the mid-term (between one and two years), this is a non-issue, and you have nothing to fear . . . but for people thinking they want to flip in the near future and make a happy gain, think again."

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http://www.straitstimes.com/archive/...perty-20130112

New seller's stamp duty to curb speculation in industrial property

Published on Jan 12, 2013

By Melissa Tan


STAMP duty will now be levied on sales of industrial property - a first in Singapore as the Government moves to clamp down on short-term speculation.

The measure was welcomed by industrialists, who said the sky-high prices and rents of recent years have sent business costs soaring.

The seller's stamp duty takes effect todayand applies to industrial property and plots that are sold within three years of the date of purchase.

Property sold within the first year will be levied 15 per cent; 10 per cent if sold in the second year and 5 per cent in the third year.

The aim is to discourage short-term speculation which could distort property prices and raise business costs, the Government said yesterday.

"Traditionally we have not wanted to intervene in this fashion in the industrial segment. But ... the evidence of flipping is very clear," Deputy Prime Minister Tharman Shanmugaratnam told a briefing. "We are doing this to help genuine industrialists and also to prevent a rise in industrial property prices feeding through to consumer prices."

Industrial property prices have doubled over the last three years, outpacing rent increases.

Speculative activity has also shot up. About 15 per cent of all transactions of multiple-user factory space in 2011 were resales carried out within three years of purchase. This percentage rose to 18 per cent over the first 11 months of last year - nearly twice the average of about 10 per cent from 2006 to 2010.

Bosses welcomed the stamp duty, saying they hoped it would lower costs for industrialists.

"This measure will bring some sanity to the whole industrial market," said Mr Douglas Foo, chief executive of Sakae Sushi, which bought its own 200,000 sq ft industrial building in Paya Lebar iPark in the mid-2000s.

Mr Foo said that though firms need their own premises to operate, it has been hard for many genuine industrialists to afford space as their bottom lines have not grown in tandem with the astronomical rise in industrial prices.

DWG analyst Lee Sze Teck said the seller's stamp duty will make people think twice about investing in industrial property.

Anaemic growth in the manufacturing sector means bosses are already unlikely to expand operations, which will reduce rental demand this year.

More than 10 million sq ft of multi-user industrial space is also expected to go on the market in the next few years.

"If the industrial space cannot be absorbed, it means that investors will have to bear the mortgage instalments for at least one year. Investors are likely to reassess their options," Mr Lee said.

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