$80 million collected in Seller’s Stamp Duty

By
,
Esther Hoon
/ The Edge Property
|
June 10, 2015 9:00 AM SGT
$80 million collected in Seller’s Stamp Duty for non-landed private homes since 2011
Based on matched caveat data from the URA, there have been 1,700 transactions to date for non-landed private homes that were affected by the most recent revision of Seller’s Stamp Duty (SSD), which took effect on 14 January 2011. These properties were sold within four years of purchase and thus incurred SSD of between 4% and 16% on the sale price or market value, which ever was higher. The amount of SSD collected since 2011 is estimated to be about $80 million based on the caveated sales price.
Table 1: Summary of latest SSD revision

Source: URA, The Edge Property

$1.14 million paid in SSD for a single unit
The 20 transactions that incurred the highest SSD to date were required to pay more than $9 million in SSD in total (Table 2). The transaction that was levied the highest SSD was for a unit at Four Seasons Park, which had to pay a duty of $1.14 million. This increased the net loss of the seller, who had sold the unit at a loss of $1.5 million in February this year, to $2.6 million.
Among these 20 transactions, seven sellers would have realized a profit from the sale of their property if not for the SSD. For instance, a unit at The Trillium was sold in January 2013 for a profit of more than half a million. However, as it was sold within two years of purchase, it attracted a 12% SSD of $719,880 that wiped out the profit and resulted in the seller suffering a net loss of $170,000.
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Table 2: Top 20 transactions ranked by SSD paid

Source: URA, The Edge Property

Still profitable after SSD
Despite the hefty SSD levied by the government, 1,479 or 87% of the 1,700 transactions that incurred SSD from January 2011 to date still realized profits after accounting for the SSD payable. These transactions would have resulted in profits totaling $306 million if not for the $52 million in SSD incurred, which brought the total profit down to about $255 million.
From profit to loss after SSD
105 or 6% of the 1,700 that have incurred SSD since January 2011 were profitable after the sale but incurred SSD that was higher than the profit, resulting in a net loss for the sellers (Table 3). 30 such transactions were for properties sold within one year of the purchase date, which incurred the highest levy at 16% of the sale price or market value. There was a similar number of transactions for properties sold between one and two years from the purchase date. The number dwindled to 27 for properties sold between two and three years and 18 for properties sold between three and four years after purchase.
Table 3: Transactions that suffered loss after deducting SSD from sale profit

Source: URA, The Edge Property

SSD on loss
109 or 6% of the 1,700 transactions that incurred SSD from January 2011 to date involved properties being sold at prices lower than their purchase price (Table 4). These transactions resulted in a total loss of $19 million for the sellers. This loss was made worse by the SSD payable of around $13 million, resulting in a total net loss of $32 million or an average of close to $300,000 per transaction.
Table 4: Transactions where property was sold at a loss

Source: URA, The Edge Property

The purpose of the SSD is to discourage speculative “flipping” activity or trying to profit from the sale of a property after a short holding period. Such activities usually pay off only when property prices are trending up. However, the URA property price index for non-landed residential properties has fallen by about 5% from the peak of 148.9 in 3Q2013 to 140.9 in 1Q2015 and the downtrend is expected to continue. In a soft market, the SSD adds to the burden of sellers who might be forced to sell their properties due to reasons beyond their control, such as unemployment and the corresponding loss in income. A capital gain tax may be a more reasonable means of deterring speculative activity that does not penalize such sellers on top of their loss.
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This article appeared in The Edge Property Pullout of Issue 680 (June 8) of The Edge Singapore.