Beyond easing the seller’s stamp duty

By Feily Sofian / The Edge Property | March 20, 2017 8:00 AM SGT
The government recently announced that the seller’s stamp duty and holding period would be lowered for residential properties bought on and after March 11. The new SSD rates will be 12%, 8% and 4% of the property value for homes sold within the first, second and third year of purchase respectively. Previously, the SSD rates stood at 16%, 12%, 8% and 4% for homes sold within the first, second, third and fourth year of purchase. SSD was introduced to curb speculations.
There may seem to be no compelling reason for the government to recalibrate any property cooling measures at this juncture, given that the market is showing signs of bottoming out in the absence of active intervention. However, prices of apartments and condominiums continued to trend down for the 13th consecutive quarter in 4Q2016, suggesting that the previous macro-prudential set of cooling measures could be too stringent.
Firstly, going by the URA price index, prices now stand at 2010 levels. This puts the price increase over the past decade, between 4Q2006 and 4Q2016, at 3.6% annually on a compounded basis. It now appears that the long-term annual price increase is back to the inflationary rate, with a slight premium to account for the illiquidity of real estate.
Secondly, the uptick in transaction volume for private homes could be misinterpreted as a clear sign of market recovery. A total of 16,378 private homes were sold in 2016, up from 14,177 in 2015. While it is an encouraging sign, this was nearly 30% below the 22,719 units sold in 2013 and a far cry from 2010’s 38,900 units.
The pickup in transaction volume is also partly due to higher supply from homeowners who were compelled to sell their units. This is reflected by a surge in loss-making transactions. In 2016, about 16% of condo unit sellers incurred a loss, up from 9% in 2015.
Many of these sales also took place right after the expiry of the four-year SSD period. Analysis of URA caveats shows a number of homeowners chose to unload their units on the market right after the expiry of...