[SINGAPORE] Several developers are reimbursing the hefty additional buyer's stamp duty (ABSD) - imposed by the government late last year to cool the residential property market - in a bid to move sales in selected projects.
And the practice, which has created concerns about the possible distortion
of property and loan values, has drawn the attention of regulators and
raised the possibility of intervention should it get out of hand.
"As long as they do not distort prices, there is no need for the government
to intervene against such business decisions and practices. We will
therefore continue to monitor the market closely for now to ensure
transparency," the Ministry of National Development (MND) said in response
to BT queries.
The Monetary Authority of Singapore (MAS) also reiterated that consumers, when taking up home loans, should disclose to the bank any rebates or discounts received from the seller or any other party in the transaction.
The latest sales ploy of reimbursing the ABSD is a step beyond the usual
marketing gimmicks of handing out furniture vouchers and giving upfront
discounts to defray the buyer's stamp duty. If isolated, such reimbursements may not have a serious impact. But on a wide scale, the practice could sabotage the government's efforts to promote transparency in the market, industry watchers say.
These "discounts" could distort property prices as they are given only after
a buyer has completed the transaction. This means sales caveats may not
reflect the actual purchase price of the property, unlike upfront discounts
which are worked into the reported transacted price.
Said one property consultant, who declined to be named: "The ABSD
reimbursement is being made in this way so that it does not affect the
pricing. If they give a discount on the price, then their pricing is
affected, and the developers don't want that because it may upset their
earlier buyers who did not get to enjoy the discount."
The steepest ABSD rate of 10 per cent applies to foreigners buying
residential property in Singapore. The offer to reimburse the ABSD in full
could amount to a hefty discount that is not reflected in the Urban
Redevelopment Authority's (URA) records, he added.
The Real Estate Developers' Association of Singapore (Redas) said it
"supports MND's position on fair and transparent practices which will enable
homebuyers to make an informed decision".
Developers which have been reimbursing the ABSD include Cheung Kong
(Holdings) Ltd, Far East Organization, Allgreen Properties and Aspial
Corporation's World Class Land.
Some offer to reimburse fully the additional stamp duty charges, while
others cover a part of it.
The projects involved range from high-end to mass-market developments. They include Marina Bay Suites in the Marina Bay area, which Cheung Kong is developing jointly with Hongkong Land and Keppel Land; Thomson Grand in Upper Thomson; and Holland Residences on Taman Warna in the Holland Road area.
Thomson Grand is a Cheung Kong project, while Holland Residences is being
developed by Allgreen.
A spokesman from Property Enterprises Development (Singapore), Cheung Kong's subsidiary, said: "The reimbursement of ABSD will be payable to the
purchasers upon the payment of the 20 per cent of the purchase price, the
proof of the Certificate of Stamp Duty on the Agreement and the duly
executed sales-and-purchase agreement."
Since introducing its reimbursement scheme in February, Cheung Kong has sold about 165 units at Thomson Grand. Roughly 10 per cent were sold to
foreigners, with unit sizes ranging from around 900- 1,400 square feet. The
units were sold at $1,250- 1,450 per square foot.
An Allgreen spokesman also confirmed it was offering partial ABSD
reimbursements to affected buyers of Holland Residences units.
At Fragrance Group's Parc Rosewood in Woodlands, sales agents said their
commissions were high enough for them to offer ABSD reimbursements out of their own pocket.
Marina Bay Suites' manager, Raffles Quay Asset Management, would only say that "more than 70 per cent of the units have been sold and we continue to sell our apartments through private previews and regional road shows, some of which were done in partnership with marketing agents".
Keppel Land, however, said it does not offer ABSD reimbursements for its own projects.
Said Far East's chief operating officer of property sales, Chia Boon Kuah:
"Our marketing programme seeks to build a stronger base of long-term buyers for the organisation. It could include discounts from the listed price,
stamp duty subsidies and furniture vouchers.
"The amount varies according to different projects as well as marketing
phases. For instance, some of our projects with stamp duty subsidies are
Hillsta, The Scotts Tower and Seawind."
Aside from price transparency, the practice of reimbursing the ABSD has
raised the concern that it could distort loan values.
"Developers may provide discounts, reimbursements or incentives such as
furniture vouchers," said Ku Swee Yong, CEO of International Property
Advisor (IPA). "Buyers who take loans should declare the value of such
incentives to the banks when they apply for the loan by giving the bankers
the Offer To Purchase and all other side letters. Otherwise, the
loan-to-value ratios might exceed MAS's limit."
When contacted, MAS said: "When taking up a housing loan, the consumer is required to disclose to the bank whether he has received any rebates or
discounts from the seller or any other party, and if so, the amount of the
rebate or discount. The bank will deduct any discount, rebate or any other
benefit offered from the purchase price before calculating the loan amount."
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