Budgeting for changes in the property market

Tue, Feb 21, 2023

UPDATED Tue, May 30, 2023

Michelle Low

SOFT landing, hard landing? How about no landing?

The term newly in vogue on Wall Street refers to the scenario where inflation stays hot, but the economy continues to trundle along, apparently resilient. It might equally apply to the Singapore property market.

Whether the market would continue to defy gravity and where opportunities now lie was the subject of discussion at a seminar hosted by The Business Times over the weekend. Panellists did not see prices headed for a correction just yet, even with higher interest rates, higher transaction costs and wider economic factors acting as dampeners.

Developers’ sales of new units showed unexpected strength in January, though volume is still 43 per cent down year-on-year. The number of units launched last month is also the highest in four months since September’s further loan limit measures and 130 per cent more than January 2022, the month after higher additional buyer’s stamp duty (ABSD) rates and tighter lending limits came into effect. Developers are returning to the scene after sitting out the market.

Amid higher benchmark pricing in suburban residential launches, Leslie Yee ponders if there is relative value in suburban landed homes. A big pricing gap exists between landed homes in the prime and suburban areas. High-income buyers with a budget to suit may find prices attractive.

The Singapore Budget’s latest fine-tuning of taxation met with some nonchalance. The changes are expected to affect 15 per cent of residential properties, and 60 per cent of non-residential transactions.

Homebuyers would not be deterred by an increase in transaction cost of “a few thousand dollars”, analysts said, nor would the wealthy feel the pinch, even if it were significantly more than a few thousand dollars. Which goes to show that the move, seen as a wealth tax and designed to collect revenue in a more progressive way, will work as it should, observers said.

Where the higher Buyer’s Stamp Duty (BSD) might bite is in big-ticket deals such as en bloc sales and asset acquisitions. S-Reit prices took a hit the day after the Budget was delivered.

While a 1-2 per cent increase in cost might not sound like much for the average transaction, it will eat into yield and may lead investors to rethink their sums.

In public housing, the government’s “we hear you” answer to young households’ grievances on long BTO waits and rising public housing prices was to dish out more in CPF housing grants for first-timer families contemplating pricey resale flats. This, analysts reasoned, might actually shift demand away from BTO and into the resale market, thereby keeping the resale market propped up when the objective was to improve access and affordability.

In response, the government emphasised in a statement that it is “mindful of the potential impact of increasing housing grants”, and pointed out that about 10,000 first-timers could benefit from the higher grants. This works out to roughly a third of resale flat buyers, the same proportion as in the last two years. Expect more details on HDB policy to emerge in the coming Committee of Supply debates in Parliament next week.

An attempt to sell Orchard Towers, in the works for over a year now, failed to get off the ground. Hiap Hoe, which owns 59 of the strata-titled units in the mixed development, disclosed on Monday night (Feb 20) that the collective sales committee was not able to reach the 80 per cent agreement threshold for the sale to go ahead.

Orchard Towers comprises two buildings with retail and office space, 58 residential units, and 361 car park lots. Of these, Hiap Hoe owns 21 shops and 38 offices. That the en bloc bid was unable to move ahead reflects the difficulties in getting disparate owners of different types of real estate to agree on price and apportionment of sales proceeds.

Meanwhile, the owners of Horizon Towers are taking another shot at their S$1.1 billion collective sale. The District 9 condo came close to a sale in 2009 at S$500 million to a consortium led by Hotel Properties Ltd. The sale was disputed by a group of minority owners, and overturned in court on findings that the sales process was improperly handled. It has subsequently been put on the market again a few times since 2018, with the latest tender closing in October 2022.

Other mega deals are still on the table: the S$890 million Chuan Park sale now in limbo, and the S$1.28 billion Kensington Park that is also back on the market.

It’s no secret that proximity to a good school adds value to a residential property. This builds into a rush to buy - or rent - a home near enough to ensure entry to the school. Leslie Yee has a radical idea: why not open up the circle of access, and widen up the priority radius from 1-2 km to up to 4 km? This could temper the frenzy and would give many, many more people a shot at a place in a school rather than limiting the lottery to a small group who are able to afford a home near the school. Why not?

https://www.businesstimes.com.sg/pro...roperty-market