An en bloc success, higher taxes and a new home launch

Jan 17, 2023

Property Insights

Leslie Yee

THERE is life in the en bloc sales market here. Located at Upper East Coast Road, freehold condominium Bagnall Court has been sold to a consortium for S$115.3 million, albeit for below its guide price of S$125 million.

Meanwhile, strata owners of leasehold commercial development Golden Mile Tower have entered a private treaty negotiation period with interested parties after its en bloc sale tender closed on Jan 9 with a few expressions of interest. Could Golden Mile Tower at Beach Road, which has been valued at S$598 million and was put for sale at an indicative price of S$650 million, be successfully sold?

Exciting developments are coming up in the Beach Road area. A GuocoLand-led group is developing Guoco Midtown - a mixed-use development comprising Grade A offices, public and retail spaces, residences, and the former Beach Road Police Station which is a conserved building. Lendlease is managing the redevelopment of Guoco Midtown’s neighbour Shaw Tower, which will have Grade A office space as well as retail and food & beverage offerings.

A consortium comprising Far East Organization, Perennial Holdings and Sino Land bought Golden Mile Complex, which sits next to Golden Mile Tower, in an en bloc sale and will be redeveloping this site.

Sound fundamentals support longer term prospects for Singapore property. Political stability, good urban planning, good infrastructure, growing wealth in the region, rule of law, transparency, openness to talent and ease of doing business are among factors that support the growth in value of physical properties.

But, while longer term prospects for premier offices in Singapore are sound, near term, demand for space could take a hit if the technology sector cuts down on space needs. As owner Elon Musk pares expenses of Twitter, might Twitter give up its space at CapitaGreen building? Singapore serves as Twitter’s Asia-Pacific headquarters, a region that was hit hard by deep and abrupt job cuts when Musk took over the social media firm.

Last week, I attended a large-scale event held by a major real estate agency to usher in the lunar year of the rabbit. As we toss for prosperity, dark clouds are looming for Singapore property. Economic growth could be slow in 2023 while interest rates may remain high.

Interestingly, the last year of the rabbit saw the introduction of Additional Buyer’s Stamp Duty (ABSD) on the purchase of immovable residential properties in Singapore in December 2011. The introduction of ABSD was aimed at moderating demand for homes, thereby ensuring that homes remains affordable for Singaporeans and that prices move in tandem with economic fundamentals.

For a local who owns an existing home, paying ABSD to buy another home hurts - it makes such an investment costlier and less attractive.

In this week’s The Level Ground, I explore whether there is room to raise transaction and recurring taxes for pricier homes and non-residential properties. Also, is it fair that investors in non-residential properties generally pay much less in taxes than investors in private homes?

In Budget 2022, the property tax rates for many homeowners were raised effective 2023. These rates will rise further in 2024. The property tax payable for an investment home with an Annual Value (AV) of S$50,000 rose by 23 per cent in 2023 from 2022. And the tax payable will be up 45 per cent in 2024 versus 2022. The AV of a building is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings and maintenance fees.

As the government raises more revenue to fund growing spending on areas such as healthcare, should property owners look with trepidation to the announcement of Budget 2023 on Feb 14? On the other hand, perhaps there can be good news in Budget 2023. Leading agency group PropNex is hoping for ABSD rules tweaks for married couples upgrading from Housing and Development Board to private homes, as well as the release of more private housing sites for sale by the government.

Inevitably, China’s abrupt shift from pursuing a Covid-zero strategy is messy as the country battles with large numbers of Covid cases. Still, the opening of China’s borders could soon lead to many Chinese visitors visiting Singapore, hence helping hotels and malls here. Also, there could be a gradual pick-up in the buying of private homes here by Chinese nationals, according to real estate consultancy Huttons Asia.

However, demand for new private homes here may need little help. Demand was firm for this year’s first new residential launch Sceneca Residence. This project, which is located next to the Tanah Merah MRT station, sold 160 units or 60 per cent of the 268 homes, at an average of S$2,072 per square foot on Jan 14. It would appear that the allure of living the condominium lifestyle in homes that are near to an MRT station remains strong. Possibly, the positive response to Sceneca Residence’s launch bodes well for several residential launches that are expected shortly after the lunar new year break.

Property development can be a tough business. Competition for sites is intense. Development costs are rising. Profit margins are often thin. Developers have to comply with many rules. Still, if demand for physical properties stays strong, developers can lo hei with confidence.

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