New stamp duty rules are ‘indirect attack’ on rising HDB flat prices: Property analyst

Key Concepts:

• Seller's Stamp Duty (SSD)
• Property Flipping
• Private Residential Property Market
• Housing Development Board (HDB) Resale Market
• Government Land Sales (GLS)
• Collective Sales (En Bloc Sales)
• Price Gap Up
• Short-Term Speculation

Seller's Stamp Duty (SSD) Changes

• New Rule: Private homeowners in Singapore selling their properties within four years of purchase will now be subject to Seller's Stamp Duty (SSD), extended from the previous three-year period.
• Objective: To curb the sharp increase in property flipping, especially of new homes not yet built.
• Applicability: Applies to private properties bought from the date of the announcement.
• Increased SSD Rates: SSD rates are increased by four percentage points for all holding periods.
  • Selling within one year: SSD is now 16% of the selling price or market value (up from 12%).
  • Selling after more than four years: No SSD is payable.
• Purpose: To discourage short-term speculation and stabilize the private property market.
• Exclusion: Does not apply to public housing (HDB flats).

Analysis of Property Flipping Trend

• Reason for Flipping: Private residential prices experienced a "step function" increase from 2017-2019 (relatively flat) to post-COVID new launches (significant jump).
• Windfall Gains: Buyers who purchased properties in 2018-2019 benefited from windfall gains due to the price increase, incentivizing them to flip.
• Dominant Group: Most flippers are Singaporeans, as they constitute the majority of new launch buyers.
• Flipping Mechanism:
  • Developers obtain permits to launch projects approximately 15-18 months after acquiring the site.
  • Buyers have a few years before project completion.
  • Another new project launches just before completion, often with higher prices.
  • Buyers who bought earlier see a "massive gap up" and flip their properties to capitalize on the profit.
• Condition: Flipping is less likely if prices remain flat.

Impact on the Property Market

• Impact on genuine buyers and investors: The new SSD rules are not expected to have a significant impact on people who buy to stay or for long-term investment, as they will hold the property beyond the four-year SSD period.
• Impact on flippers: The new SSD rules will make it more difficult for those who buy with the intention of flipping, as the short-term profit motive is diminished. The narrative of agents promoting short-term flipping will lose its appeal.

Impact on HDB Prices

• Potential Delay: The new SSD rules may delay the influx of buyers into the HDB resale market.
• Price Scenarios:
  • If HDB prices remain flat for 3-4 years, the SSD may not significantly impact flipping behavior.
  • If HDB prices rise rapidly, the SSD could have a positive spillover effect, indirectly curbing HDB resale price increases.

Price Predictions for 2024

• Private Market: Expected to increase by approximately 7% year-on-year.
• HDB Market: Expected to increase by approximately 5-6% this year.
• Timing of Impact: The effect of the new SSD rules is likely to be felt towards the end of the year and beyond.

Impact on En Bloc (Collective) Sales

• Challenges: En bloc sales are facing challenges due to sellers asking for prices that are too high.
• Developer Preference: Developers prefer to buy government land sales (GLS) sites rather than pursue collective sales projects.
• Project Size: Remaining collective sales projects are often large, requiring developers to sell a high number of units, making them less attractive.
• Preferred Size: Developers prefer collective sales projects with 300-600 units, which are more manageable.

Notable Quotes:

• "The policy is trying like what they said uh to uh cut down on those who had that windfall after buying a property and flipping it." - Alan Chong, Executive Director of Research and Consultancy at Savills Singapore.
• "...every couple of years it gaps up one level and those who bought know fortunately or fortuously for them they see that massive gap up and they are holding on to winfall profit they will flip." - Alan Chong, Executive Director of Research and Consultancy at Savills Singapore.

Technical Terms and Concepts:

• Seller's Stamp Duty (SSD): A tax imposed on sellers of private residential properties who sell within a specified holding period.
• Property Flipping: Buying a property with the intention of quickly reselling it for a profit.
• Price Gap Up: A sudden and significant increase in property prices.
• Government Land Sales (GLS): The process by which the Singapore government sells land to developers for development.
• Collective Sales (En Bloc Sales): The sale of an entire development (e.g., an apartment building) to a single buyer, typically a developer.

Synthesis/Conclusion:

The Singapore government's extension of the Seller's Stamp Duty (SSD) aims to cool down the private property market by discouraging short-term speculation and property flipping. While the new rules are unlikely to significantly impact genuine homebuyers or long-term investors, they are expected to reduce the profitability of flipping, potentially delaying the influx of buyers into the HDB resale market and indirectly moderating HDB price increases. The en bloc sales market continues to face challenges due to high seller expectations, with developers preferring government land sales for more manageable projects. Overall, the private property market is still expected to see price increases in the coming year, albeit potentially moderated by the SSD changes.