http://www.businesstimes.com.sg/prem...n-end-20140207
Published February 07, 2014
BUDGET 2014
Property sector hopes for the pain to end
Tweaking or removing some curbs would give foreign investors the 'right signal'
By Mindy Tan [email protected]
[SINGAPORE] For property players, there is one Budget wish above all else: that some of the cooling measures introduced previously - including the total debt servicing ratio (TDSR) and additional buyers' stamp duty (ABSD) - might be tweaked or even rolled back.
"Our wish is for the government to consider scaling back or loosening up certain measures which have yielded the desired results," said Donald Han, managing director at Chesterton Singapore.
After all, sub-sales and foreigners' participation rates are now at a new low compared to two years ago, largely due to the successful implementation of the sellers' stamp duty (SSD) and ABSD. Also, the TDSR framework has single-handedly put a check on escalating property prices and transaction volumes.
Reviewing these policies would send the "right signal" to foreign investors, said Mr Han.
According to Urban Redevelopment Authority (URA) data, prices of private residential properties decreased 0.9 per cent in Q4 last year - the first time that overall prices have fallen since Q1 2012.
Consultants concur that this is due to the combined weight of TDSR, ABSD and SSD, which have effectively slowed down the pace of the private property market in terms of transaction volumes and the rate of price increases.
Nicholas Mak, executive director at SLP International, echoed Mr Han's views, but conceded that it is unlikely the government will remove or reduce any of the cooling measures.
Indeed, while Budget 2014 may be more "neutral" on property and provide some preconditions for which measures may be eased, the earliest relaxation of measures will probably be in late 2014 or early 2015, said Bank of America Merrill Lynch economist Chua Hak Bin. "Any relaxation will likely come from changes in stamp duties rather than leverage ratios," he added, referring to the loan-to-value ratio (LTV) and TDSR.
On the stamp duties front, tweaking the SSD policy might be the way forward, suggested Christine Li, head of research at Orange Tee. Under the current SSD regime, losses are amplified for sellers who bought at a high price and are forced to sell at a loss, she said, adding that this could be catastrophic should interest rates rise or property prices soften.
"Also due to SSD, many units which have received their Temporary Occupation Permit (TOP) are not put on the market, restricting supply. Owners will be forced to rent out the units, intensifying competition in the already weakened rental market," she added.
While cooling measures preoccupy the industry, the Budget is expected to touch on other areas, including construction and real estate investment trusts (Reits), market watchers said. The construction sector would get some air play, given the continued productivity drive.
The most pressing issue would be the looming expiration of the Productivity and Innovation Credit (PIC) scheme. Introduced in 2010, the scheme offers tax deductions and payouts to businesses, including construction firms, that spend on productivity-related investments. It is due to expire in 2015.
Many have called for the scheme to be extended or, better yet, improved.
PwC Singapore, for instance, recommended that greater flexibility be introduced in applying the expenditure cap on the scheme.
"A combined cap or a higher cap for the more commonly undertaken activities would encourage companies to invest more in the activities that are relevant to their businesses," it said.
SMEs, for instance, could be allowed to claim higher PIC deductions or allowances for training and the acquisition of IT and automation equipment. Multinational corporations which focus on innovation- led activities on the other hand could enjoy a higher expenditure cap on their research and development and acquisition of intellectual property expenses.
KPMG recommended simplifying the incentives and regulations.
"More streamlined and effective business regulations and easily accessible tax incentives are particularly important for small and medium-sized enterprises (SMEs) . . . The PIC scheme needs revisions to make it less prescriptive and simplified, using principle-based rules," said Tay Hong Beng, head of tax at KPMG Singapore.
KPMG suggested that the Land Intensification Allowance scheme (LIA) be extended to other industries outside of the manufacturing sector given that other sectors, such as logistics and transportation, may also invest in new premises or upgrade their current premises to achieve higher productivity.
"The LIA should therefore be extended to all promoted industrial sectors, for buildings built on land zoned for industrial use (that is, Business 1, Business 2, and Business Park zones). This could be facilitated initially on a case-by- case basis," it said.
Apart from providing grants and tax incentives to lower the development and implementation costs of new technology, more incentives to encourage innovation should be introduced, said Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.
He added: "Strengthening the ties and collaborations between the industry and polytechnics/research institutions could prove more economical in the longer term."
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