http://www.businesstimes.com.sg/arch...wanes-20140111

Published January 11, 2014

Call to relax some rules as property market wanes

Govt should remove Seller Stamp Duty, says Business Outlook forum speaker

By malminderjit singh [email protected]


THE government should relax some of its property-cooling measures as demand for real estate wanes.

This was the view of Getty Goh, director at Ascendant Assets, who felt this was necessary given "the lacklustre property market" and the likelihood that interest rates will rise this year and the next.

Speaking at the 12th Singapore Chinese Chamber of Commerce and Industry-Business Times (SCCCI-BT) Business Outlook Forum yesterday, Mr Goh said the government should consider repealing the Seller Stamp Duty (SSD) for residential properties introduced in January 2011, because sellers who are keen to dispose their properties may find themselves tied down by it.

At the same time, the Total Debt Servicing Ratio framework, in place since last June, deters buyers from coming into the market by making it harder to financing new property purchases.

Specifically, property owners may have bought their assets in the past two years at low interest rates of between one and 1.5 per cent, with a contractual clause that the rate may be increased to about 3 per cent beyond the third or fourth year, he explained.

"Before TDSR came in, all of these owners could simply refinance with another bank, but now because of TDSR, all of them are now stuck as they cannot go to another bank right now and refinance in the event that they own two or three properties," he said.

Given rising interest rates, sellers may be compelled to slash their prices to offload their property. This could snowball into a longer-term problem when sellers flood the market after the Seller Stamp Duty expires in four years' time, precipitating a crash in prices, Mr Goh warned.

Participants at the annual outlook forum were advised to be more liquid and reduce their exposure to the property in anticipation of higher financing costs and lower rental yields.

Pu Yonghao, regional chief investment officer (APAC) at UBS Wealth Management, reckoned that while property has been the best asset class over the past few years, "that game is now changing".

With interest rates gradually rising and low rental yields across Asia (those in Singapore, Taipei and Hong Kong are hovering around 2 per cent), a point may be reached in the near future when rental yields are lower than interest rates. In light of this, Mr Pu feels it is wise to cap the allocation of property in portfolios at not more than 30 per cent.

Being liquid would come in handy as stock markets improve, panelists at the forum said.

Roger Tan, CEO of Voyage Research, said there are many undervalued Asian stocks which present an opportunity to make significant returns. Singapore and Hong Kong, in particular, will benefit as foreign funds turn their focus to Asian stocks.

Furthermore, equities are favoured as other asset classes, such as property, bonds and gold, face dimmer prospects, Mr Tan noted.

Singling out local small and medium-sized enterprises as good buys, Mr Tan said his stock picks include First Reit, Cordlife, Ley Choon and W Corp because they are undervalued, have good business models and strong dividend yields.