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Thread: Don't count on making big bucks from your home

  1. #1
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    Default Don't count on making big bucks from your home

    Should cooling measures be eased, now that property prices are sliding further?

    That question has cropped up again.

    October data showed that private home prices fell 1.5 per cent in the third quarter from the second - the steepest such fall in seven years. That was also the 12th consecutive quarter of decline. In all, private home prices were 10.8 per cent lower, compared to the third quarter of 2013.


    But Singapore's property prices remain high when compared to many major cities. The 2016 survey of housing affordability by Demographia puts affordability here at a median multiple price-to-income ratio of five, which is considered "seriously unaffordable". This means median housing prices are five times the median household annual income - which means it takes five years of wages to pay for a property. A multiple of three and under is considered affordable.

    Those who think cooling measures should taper off would point to the long, steady slide in prices and add that a more buoyant property sector can lift a limping economy. Those who think otherwise will surely point to the fact that prices have just come off the edge of a cliff of 2009 to a gentle plateau and say there is scope for a soft landing down the road. Prices surged 62 per cent from the second quarter of 2009 to the third quarter of 2013; today's prices are just 10.8 per cent off that peak.

    Analysts have variously predicted that the trough will be hit later this year, or later next year, and there will be a cutback in cooling measures, and prices may then rebound.

    In the last decade, a distinct shift has occurred in Singapore that will affect the property market. They will no longer be the sure-win investments of yore, but will become more like any other asset, with risk-return ratios to watch out for, and uncertain prospects for capital gain.
    I think such views are unduly optimistic about the property market. They hark back to nostalgia for the heyday of the 1990s and early 2000s, when properties were unabashedly assets that people churned for massive gains free of tax, and the state actively promoted the doctrine of one's home as an asset to be upgraded, to enhance its value (remember the whole "asset enhancement" exercise?).

    In the last decade, a distinct shift has occurred in Singapore that will affect the property market.

    They will no longer be the sure-win investments of yore, but will become more like any other asset, with risk-return ratios to watch out for and uncertain prospects for capital gain. Yield in the form of rental income will remain low and will likely fall further as population growth slows in the face of popular pressure against rising numbers of foreign skilled labour.

    More pertinently, a not so subtle social shift is taking place in Singapore's values that could change the property market.

    (I should add here a big caveat that I am not a property analyst and I am not privy to regulatory insider insights. I merely offer these observations as a journalist with a keen interest in housing and property issues, who has lived in and owned both public and private housing units.)

    ST_20161010_LAWRENCE10H0GV_2655663.jpg
    Mr Wong (above, left) cited the experience at the Pinnacle@Duxton (above) in Cantonment Road. Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold their units.
    Related Story
    Plan to mitigate 'lottery effect' of downtown flats

    bishan_3.jpg
    Housing flats at Bishan estate.
    Related Story
    Curbing 'lottery gains' of flats may backfire: Experts

    First, there is a movement towards viewing property more as housing, as a social good, than as an investment item. This is consistent with the leftward drift in social policies in Singapore in the last decade.

    In the latest example, National Development Minister Lawrence Wong said the Government is considering selling downtown flats on different terms, to make up for the "lottery" effect of some couples enjoying huge capital gains - of up to $500,000 - from selling their Housing Board flats in the city centre after fulfilling the five-year minimum occupation period (MOP). Some of these flats have been sold for more than $1 million.

    He said the Government wanted a "fair and equitable" way to do so, such as by selling the flats under a shorter lease or increasing the resale levy or increasing the MOP.

    In another interview, Mr Wong said cooling measures will be here to stay for a while to curb capital inflows, including from overseas, adding: "We don't want to be a nation of property speculators."

    The pendulum has clearly swung the other way, with emphasis now placed on property as housing, with affordability and equity concerns, rather than as speculative assets.

    Second, consistent with this shift, there is an increasing move to tax property gains. Just think of the slew of additional stamp duties slapped on foreigners, and on Singaporeans buying their second and third residential properties, and those selling their residential properties within four years.

    While some analysts are hopeful that these stamp duties may be lifted, I do not think they will be - indeed, I do not think they should be, although the quantums can be adjusted.

    They halt speculative demand.

    They also introduce an element of equity into the property market, by raising the cost of acquisition for existing property owners to level the playing field - somewhat - for first-timers.

    The idea that first-time home owners may deserve a break was not one I was sympathetic to in the past. Then one day, back in those years when you could own private property and buy HDB resale flats, a woman I interviewed told me she had considered buying an HDB resale flat for investment but could not bring herself to outbid the hopeful young couples she met during home visits, who were trying to buy their first home. She had the financial power, but she walked away.

    I've forgotten her name, but what stayed with me was the compassion and sense of solidarity in her decision: One can give up a good investment option - every property player knows an HDB flat has the best rental yield - for the sake of a fellow citizen's home ownership dream.

    Third, there is more stress on equity and redistribution these days.

    It wasn't too long ago that government ministers urged people to buy new HDB flats to make capital gains from selling them after the requisite five years of living in them. Now, Mr Wong wants a fair and equitable way to offset large gains - a move towards better redistribution.

    If the Government wanted to go the whole hog, of course the best way to redistribute gains from property investments is via a capital gains tax. The United States, the United Kingdom, Australia, South Korea, Thailand and many countries have capital gains tax.

    Singapore does not - a fact highlighted by tax advisers. The nomadcapitalist website says: "Around the world, there are dozens of countries that impose no taxes on capital gains in one way or another. The list includes the usual suspects like Singapore..."

    To be sure, any move to remove Singapore from the "list of usual suspects" will be a radical departure from Singapore's laissez-faire, capital gains tax-free status. Arguments against such a tax, advanced in Parliament and elsewhere, are that it can impede investments and erode Singapore's tax competitiveness, jeopardising both its status as a talent magnet and a financial hub.

    But many cities with capital gains tax are financial hubs attractive to foreign talent, including New York and London. (Hong Kong and Switzerland, like Singapore, do not have capital gains tax.) A capital gains tax can also be structured to exempt home owners, or those who hold on to their properties for many years.

    What Singapore does have are rules that tax income from trading in properties - so if you buy and sell properties for profit, the taxman may come probing. But this still means the billionaire who makes $10 million from selling a Good Class Bungalow after five years pays no capital gains tax.

    Already, many analysts have pointed to the fiscal strain from a declining taxpayer base and rising social expenditure - resulting from an ageing population - and suggested that Singapore might have to consider a capital gains tax. I think a closer look at this option is warranted.

    In the short to medium term, property will remain an attractive investment for Singaporeans flush with cash, who have few other investment options with good yields. But I don't think they should bank on double-digit annual growth in prices.

    Property should be viewed as any other asset class, with attendant risks, especially when you consider that the entire social milieu of Singapore is shifting. Just how that will affect the regulatory environment - and policies on housing and on taxation - will be one of the chief risks in property investment in the future.http://www.straitstimes.com/opinion/...ime=1477188579

  2. #2
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    I think she is absolutely right.

    But still to be emphasized is the nature in which the curbing is achieved. The demand is moderated via curbing ability to buy / upgrade / invest, which means a huge chunk of potential demand component in willingness cannot be fully satiated.

    What is happening here in property scene is we see the downstream effects of a river controlled by a dam. The water downstream has much lesser volume and speed of water flow than before the dam was built, and everyone by now cannot foresee or believe the waters may once again in the future demonstrate the previous tenacity and volume.

    But the building of more and more HDBs for the last few years with no good outlets for the waters to flow for several years mean that very soon, a much higher dam is required to maintain the current gradual flow and volume. We do not know exactly when the dam may not be effective any more, but that appears to be the direction we are headed towards.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  3. #3
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    The writing is already on the Wall for quite some time.

    Only need to change CPF ruling and everyone Huat Ah.

    Singapore leasehold going to change from 99 years.

    They already tested on " The Hillford "

    All 281 units of The Hillford sold out on first day. JANUARY 18, 2014

    http://www.todayonline.com/singapore...-out-first-day

    SINGAPORE — Touted as the Republic’s first retirement resort, apartments at the 281-unit The Hillford sold out yesterday on its first day of sales due to overwhelming demand not only from senior citizens, but from investors shopping for shoebox apartments.

    Buyers whom TODAY spoke to cited the attractiveness of owning a private apartment in a prime location at relatively low prices, as well as the novelty of the project.

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    Among the hundreds of property hunters who thronged the showroom yesterday was a sizeable number of prospective buyers in their 20s, 30s and 40s.

    Flight steward Darren Chua, 26, said he had initially planned to buy a unit for his parents, but was considering renting out the unit instead. “The quantum is relatively low for the location,” said Mr Chua, noting the potentially high rental yields.

    Another buyer, who gave her name only as Ms Bakri, felt that the elderly-friendly features could be improved. The 55-year-old pointed out that, for instance, there were no grab bars in the toilets. She also felt that there should be age restrictions on ownership or occupancy — as is the case for retirement resorts or villages in other countries — so the development could live up to its billing.

    The site for The Hillford was released by the Urban Redevelopment Authority (URA) with special conditions to “facilitate the development of a private retirement housing product”. Among other things, the “anti-shoebox rule” was lifted and there were no restrictions on the maximum number of units that could be built. Prices at The Hillford ranged from S$388,000 for a 398 sq ft one-bedroom unit to S$648,000 for a 657 sq feet two-bedroom dual-key unit. The developer could also use the 10 per cent bonus gross floor area to build services such as medical clinics and “communal living facilities”.

    Responding to TODAY’s queries on the absence of age restrictions, a URA spokesperson said: “Since retirement is a lifestyle choice and people may choose to retire at different ages, we decided not to be too prescriptive.”

    She said as retirement housing was a relatively new concept here, the authority saw merit in adopting a market-led approach to provide flexibility for the developer to determine the business model and development form for this pilot site.

    “Prospective purchasers of units in this development should scrutinise the facilities and amenities provided within the development to see if they would meet their expectations and needs,” the spokesperson added.

    The site in Jalan Jurong Kechil where The Hillford will be built was first released in 2008 for the development of a retirement community.

    There had been no takers until 2012, after the site was released with special conditions, including a choice of 30-year, 45-year or 60-year lease options for developers.

    World Class Land beat 22 rivals and clinched the tender with a S$73.8-million bid. Its CEO Koh Wee Seng described the response to the development as “spectacular”.

    “While we are still collating the final figures, our observations show that a substantial proportion of buyers are over 50 years of age,” he said.

    The 60-year leasehold development, shorter than the usual 99-year lease for private developments, offers amenities such as 24-hour concierge service, a full-time resort manager as well as clinics and restaurants. The units come with elderly-friendly features, including emergency alarm systems, non-slip floor finishes and wide corridors.

    Property analysts said The Hillford could still live up to its name as a retirement resort, even though the units were not all snapped up by retirees. Century 21 Singapore CEO Ku Swee Yong pointed out that the investors could rent the units out to seniors.

    He attributed the strong demand not only to how the project was pitched as a retirement resort, but also the attractiveness of shoebox units here.

    The property analysts felt The Hillford’s strong showing could open the floodgates for retirement resorts.

    Mr Chris Koh, Director of Chris International, said he would not be surprised if the Government launched more plots with a 60-year lease. “If you are buying for the purpose of investment and for rental returns, the tenant doesn’t really bother if it’s free-hold, a 99-year lease or, in this case, a 60-year lease.”
    Last edited by Arcachon; 23-10-16 at 18:04.

  4. #4
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    Am I eligible to use my CPF savings under PPS?

    All CPF members who are eligible to buy a private property are eligible to use their CPF savings under PPS.

    You are not eligible if:

    you are buying a private property with a remaining lease of less than 30 years;
    you are buying a private property with a remaining lease of less than 60 but at least 30 years and your age plus the remaining lease of the private property is less than 80 years;
    you are a single person buying a private property with a non-related single and you have used CPF for an existing property; or
    you are a married person buying a private property with a non-related single.

    https://www.cpf.gov.sg/Members/Schem...perties-scheme

  5. #5
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    harlow ... we are already a "nation of property speculators"
    please call a spade, a spade

    In another interview, Mr Wong said cooling measures will be here to stay for a while to curb capital inflows, including from overseas, adding: "We don't want to be a nation of property speculators."

  6. #6
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    I think 60 years is a little short. Perhaps 70 or 75 years will be more acceptable. If one were to buy a flat at say 25-30 years old, 70 years lease will means can stay till 95-105 years old.

  7. #7
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    If 70 years lease property can be 20% cheaper than 99 years lease, I think many will find it attractive.

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