ST : No stamp duty boost for Govt

Nov 21, 2009
PROPERTY BOOM

No stamp duty boost for Govt
More units sold, but these may not match up to last year's overall value
By Fiona Chan

THIS year's surprise housing boom may have provided an unexpected windfall for property owners - but not necessarily for the Government.

Developers and individual sellers will probably sell twice the number of private homes this year than they did last year, going by the latest property market figures.

However, the Government is unlikely to see an increase in its revenues from stamp duty, which is a tax on transactions such as property sales.

This is mainly because many of the homes sold in the current boom are much smaller in size and located in the cheaper suburban areas.

So the value of homes sold this year - which determines the amount of stamp duty payable - may not surpass that of last year, when more luxury homes were sold, say property consultants.

Stamp duty takings so far this year bear this out. From January to September, the Government took in $1.37 billion in stamp duty, according to figures from the Department of Statistics website.

This is about 15 per cent less than in the same period last year, even though the property market was slowing down then in anticipation of the financial crisis that hit hard in September that year.

For the whole of last year, the Government received $1.84 billion in stamp duty. This year's stamp duty collections may be about the same level or even lower, now that the property boom appears to be losing steam, say property consultants.

However, stamp duties look set to exceed the Government's initial expectations at the beginning of the year, when the recession was at its worst and the property market was in a slump.

In its January Budget, the Government projected stamp duty takings of only $1billion for the 2009 financial year, which started in April and ends in March next year. So far, between April and September, the Government has already collected $1.1 billion.

Stamp duty is a tax on commercial and legal documents used in some transactions such as property sales, which make up the bulk of stamp duty collections.

For housing transactions, stamp duty ranges from 1 per cent to 3 per cent of the purchase price. In the massive boom year of 2007, stamp duty reached a record $4.1 billion.

In the first nine months of this year alone, almost 25,800 private homes were sold - nearly double the number sold in the whole of last year.

But the sizes of the homes sold this year have generally shrunk, said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

'Because unit sizes have fallen, the total quantum of the home price is less,' he said. 'The market value of transactions this year actually remains at about the same level as last year.'

A spike in demand for smaller mass-market homes means that while property developers are likely to double their sales of new homes this year compared with last year, the total value of sales will be halved, according to recent research by property consultancy CB Richard Ellis (CBRE).

In the coming months to the end of the Government's 2009 financial year, there may be a pick-up in sales of upmarket homes, which could add to stamp duty collections, said Mr Li Hiaw Ho, executive director of CBRE Research.

He said the higher-end segment of the property market has not moved much in the current boom, but recent improved economic data may attract more buyers.

Foreigners, in particular, could be drawn back into the market early next year after the festive season is over, said Dr Chua.

'The economy is showing a better outlook, and there is more bullishness compared with six months ago, so there is a potential for more interest in the high-end market,' he said.