Why there are no goodies for property developers in Budget 2020

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/ EdgeProp Singapore
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February 20, 2020 7:46 PM SGT
SINGAPORE (EDGEPROP) - Budget 2020 was clearly focused on the longer-term view of helping Singaporeans to upskill and re-skill during challenging times, says Christine Li, head of research for Singapore and Southeast Asia for Cushman & Wakefield.
“Even for the relief on the Covid-19 virus, it seems that most of the help is catered to the frontline staff in the medical, tourism and aviation-related sectors,” she notes. “That was the priority for the country on a macro level.”
The government's concern is for housing the majority, which is HDB public housing flats, not high-end homes (Photo: Albert Chua/EdgeProp Singapore)
The government's concern is for housing the majority, which is HDB public housing flats, not high-end homes (Photo: Albert Chua/EdgeProp Singapore)
There was no rollback in property cooling measures either, especially the Additional Buyer’s Stamp Duty (ABSD), which was on the wish list of many property developers and consultants.
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“If things worsen, they [the government] may do it in the off-budget measures,” says Nicholas Mak, head of research & consultancy at ERA Realty. “They probably want to monitor the situation over the next few months.”
Mak says the government’s main concern is housing for the majority of the people, which means HDB flats, and that has not been affected. “What will be most affected is the type of residential property that is considered a discretionary purchase, that is, the high-end segment,” notes Mak. “This segment is also more dependent on foreign demand, mainly Chinese buyers who currently face travel restrictions.”
The Real Estate Developers’ Association of Singapore (Redas) commented, “We hope the government will continue to monitor the construction and real estate sector and consider off-Budget measures to help this sector which is affected by the Covid-19 outbreak. Apart from a labour shortage, the outbreak has also disrupted delivery of key construction materials and end-products.”
Crowd at preview of Parc Canberra executive condo where 316 units of a total of 496 units were sold last weekend (EdgeProp Singapore)
Crowd at preview of Parc Canberra executive condo where 316 units of a total of 496 units were sold last weekend (EdgeProp Singapore)

Limited hit on property-linked sectors

So far, property-related segments have not been severely impacted by Covid-19, says Cushman & Wakefield’s Li. “But should the outbreak situation persist longer than expected, we could see some impact on the completion of the projects under construction and potentially developers missing their ABSD remission deadlines,” she cautions.
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Desmond Sim, CBRE head of research for Singapore and Southeast Asia, was not surprised that there were no goodies for developers. “The budgetary measures are usually targeted at the masses, never for a select group,” he says. “The indicators are still relatively healthy, even the unsold stock of 30,162 units as at end 4Q2019. We have seen higher unsold stock during the Global Financial Crisis.” According to Sim, a helping hand was given in the recent exemption of Singapore-listed, Singapore-based property companies from the Qualifying Certificate (QC) regime.
While prime retail rents are not likely to be cut at this juncture, landlords will certainly step up the advertising and promotional efforts to help retailers to tide over this period (Photo: Albert Chua/EdgeProp Singapore)
While prime retail rents are not likely to be cut at this juncture, landlords will certainly step up the advertising and promotional efforts to help retailers to tide over this period (Photo: Albert Chua/EdgeProp Singapore)
The rebates targeted at the retail and hospitality sectors are a logical response by the government during this period. “Landlords are expected to pass on some of these savings from the property tax rebate to their tenants who are experiencing a fall in sales due to Covid-19,” says Li.
While prime retail rents are not likely to be cut at this juncture, Li says landlords will certainly step up the advertising and promotional efforts to help retailers to tide over this period.
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“The current situation should now push retailers to start thinking seriously about an omni-channel strategy to mitigate the impact of sudden unexpected disruptions to business and future proof retail in the long run,” adds Li.
The M, which previewed last weekend, drew a crowd of more than 2,000 (Photo: Wing Tai Asia)
The M, which previewed last weekend, drew a crowd of more than 2,000 (Photo: Wing Tai Asia)
As of now, the fundamentals for the rest of the real estate sectors remain healthy, notes Li. She cites the sales momentum at executive condominium (EC) Parc Canberra which saw 316 out of the 496 units sold at an average price of $1,085 psf. Meanwhile, Wing Tai’s 522-unit prime condo on Middle Road drew more than 2,000 last weekend.
Alan Cheong, executive director of research at Savills Singapore, however, feels that the recent sales at Parc Canberra and crowds at showflats are not necessarily a reflection of the market. “One swallow does not a summer make,” says Cheong.
“The projects priced from $3,000 psf will be hit by the travel ban on flights from China," he adds. "Those projects priced below $3,000 psf will also be affected because the Singaporean buyers in this segment are likely to be buying their second or third property and will be hit by the higher ABSD.”
Cushman & Wakefield says landlords have already enjoyed the upside of the office rental cycle and most have reported positive rental reversion over the last two years (Photo: Samuel Isaac Chua/EdgeProp Singapore)
Cushman & Wakefield says landlords have already enjoyed the upside of the office rental cycle and most have reported positive rental reversion over the last two years (Photo: Samuel Isaac Chua/EdgeProp Singapore)
For the office sector, landlords have already enjoyed the upside of the office rental cycle and most have reported positive rental reversion over the last two years, says Li.
“Although demand has weakened somewhat in recent months over lingering concerns such as the US-China trade war and slow GDP growth in 2019 and beyond, this can be attributed to the cyclical nature of the market,” she reasons.

Help for manufacturers

For the industrial sector, the impact from Covid-19 seems to have affected manufacturing in China which could have a ripple effect on Singapore’s manufacturing sector depending on how long the factories stay closed, she cautions.
Budget 2020 shows the government is taking a very targeted long-term approach to helping manufacturers. The Startup SG Equity targets deep-tech startups in the emerging areas of pharmbio, medtech, advanced manufacturing and agri-food tech which could eventually translate to higher demand for business park spaces and industrial spaces, says Li.
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