ST : Stamping out short-term speculation

Aug 31, 2010

new property rules

Stamping out short-term speculation

By Esther Teo



BARELY seven months after the Government imposed stamp duty for residential property sellers, the policy is being tweaked to further quell speculation.

Experts say that while this measure might increase costs for short-term speculators, it would have a limited impact on genuine long-term investors.

The Ministry of National Development (MND) announced yesterday that stamp duty will be imposed on those who sell properties within three years of purchase, up from one year previously.

This charge will be imposed in a staggered manner, with those selling their property sooner having to pay more.

The full duty, imposed for a sale within one year, is 1 per cent for the first $180,000, 2 per cent for the second $180,000, and 3 per cent for the balance.

A sale in the third year would be one-third of those charges.

CBRE Research executive director Li Hiaw Ho said raising the sellers' stamp duty period to three years reflects the Government's intention to cut the volume of short-term speculation without overly affecting medium and long-term investors.

ERA Asia-Pacific associate director Eugene Lim said, however, that this measure is not the most effective and significant of those unveiled yesterday.

'Over three years, if the economy is good, the price of your property should appreciate by more than the sellers' stamp duty that you have to pay.'

The sellers' stamp duty seems to be a modification of the capital gains tax introduced in 1996 to curb speculation in the property market, Mr Lim said.

Back then, the Government imposed - and later lifted in 2001 - income tax on gains which individuals made from selling properties within three years of purchase.

PropNex chief executive Mohamed Ismail said that the impact of the sellers' stamp duty will be 'marginal' since many buyers had already gone into the market with a mid-term perspective.

As a result, the one-year sellers' stamp duty, introduced in February this year, had failed to have much impact, he said.

'It sends a strong signal not to speculate and provides more of a psychological impact that would help dampen sentiments... Some investors might still buy after doing their sums,' he said.

OrangeTee head of research and consultancy Tan Kok Keong, however, said that the sellers' stamp duty could be considered the most effective approach to weeding out speculative demand.

However, the measures are most effective when taken together, he said.

'The package in totality would force all buyers to re-assess the timing of their purchase and could lead to buyers taking a longer time to decide. Thus, we could expect some softening in market activities.'