Singapore Budget 2018 has only bad news for the property industry.
The top marginal Buyer’s Stamp Duty (BSD) rate is raised from 3 to 4 percent for residential properties valued over $1 million. The revised rate is effective immediately on or after 20 February 2018.
The Finance Minister explained this is done to enhance “progressivity” in our tax system.
For industry stakeholders who said confidently that the government would soon ease the property cooling measures “progressively”, this is no doubt a real slap in their face.
In July last year, I wrote the blog post “MAS makes commentators look foolish again”. Seven months later, our Finance Minister proved the commentators wrong again. It seems their betting skills haven’t improved at all.
Flexible payment scheme: genius or reckless?
Wait, what about buyers of new condo projects who are on flexible payment schemes?
What happen to those who bought under deferred payment scheme (DPS), stay-then-pay programme or lease option to help solve the developers’ Qualifying Certificate deadline problem? Those who got to own, stay or lease first, with a future date to exercise the option and pay the balance? Those who paid a slightly higher price, in exchange for better cashflow management? Those who bet the government would do something to Additional Buyer Stamp Duty (ABSD) in a year or two?
Projects which offer such options include:
1. Deferred payment scheme: OUE’s Twin Peaks and CapitaLand’s Sky Habitat;
2. Stay-then-pay programme: CapitaLand’s The Interlace and d’Leedon, Frasers Centrepoint’s Soleil @ Sinaran; and
3. Two-year lease option with refundable deposit: TG Development’s Lloyd Sixtyfive.
The matter is addressed in the IRAS website under “Requirement to Pay BSD”: If a buyer of a residential property has been granted an Option to Purchase on or before 19 Feb 2018 and executes it on or before the earlier of the following dates: 12 Mar 2018 or date of expiry of the validity period, the buyer may apply to IRAS for remission to apply the BSD rates prior to 20 Feb 2018.
Let’s hope that buyers who opt for such flexible payment schemes were not Ill-advised and have fully prepared for the possibilities and consequences.
Ladies know what DPS is
Deferred payment scheme is nothing new. I already used it in the 2000s.
When I received a marriage proposal with a diamond ring, I recalled a good advice from my sister. I didn’t have to give an answer, but could keep the ring with the option to revert on no specified date.
There are a few advantages of the deferment:
1. I can avoid making a rash decision by saying “yes”, or disappointing the other party by saying “no”.
2. I can still change my mind so long as I haven’t said “yes”.
3. I don’t have to be tied down so early. I can keep my options open.
4. It is a nice and expensive ring. I better keep it in case it ends up with another girl.
The same benefits apply for buyers who opt for DPS:
1. They can avoid making a rash decision by buying it now, or disappointing their property agents by turning them down.
2. They can still change their mind so long as they haven’t exercised the option.
3. They don’t have to be tied down by the property now. They can enjoy better cashflow using the balance of the payment for other financial commitment.
4. It is a good unit selling on DPS. They better book it now before it is taken up by other DPS buyers.
You think you are smart. But the other party is also not dumb.
How long can you drag? A year or two? Sooner or later, you have to make a decision.
Unless they don’t mind paying 4 percent BSD, buyers on DPS are forced to make the call before the remission deadline of March 12.
How could speculators get this wrong?
It is naïve to believe that the government will make concessions and try to speculate on the relaxation of cooling measures.
Before the government announced each round of cooling measures, did they consult the industry stakeholders, seek their opinions on suggestions to deal with the issue, or warn them ABSD, SSD and TDSR would be coming this Friday?
By the time the government made the announcement, it was a brief mention of the matter and what they thought was the best solution to solve the problem.
Take the hint from the recent incident of stolen A-Level Chemistry exam papers when 238 students from four Junior Colleges were affected. The exam papers were stolen in the UK while they were in transit from the Cambridge Assessment’s office to the examiner for marking. The same thing happened before back in 1993.
Students could go for re-examination or accept an average score of the other three papers. One lucky student left one-third of the paper unanswered but still scored an “A”. Straits Times then came up with the headline “Affected students mostly happy with awarded grades”.
Did the Ministry of Education let slip of the incident from the theft on November 16 to the A-level result announcement day on February 23? No.
Did Singapore Examinations and Assessment Board (SEAB) consult the concerned before they come up with the options? Not necessarily.
Did SEAB mention that the affected students were free to suggest a better alternative other than the two options given? Not really.
I just read a book by Hong Kong writer Li Yi (李怡). He explained how a big MNC’s recruitment mistake could have totally different consequences in different countries. Let me try to apply the concepts in the missing exam paper incident.
If this happened in the US, lawyers from different States would convince the parents of the affected students to sue the responsible party for negligence and pay for all tangible losses and psychological damages. The legal fee is a percentage of the compensation the students awarded after winning the case.
If this happened in Germany, parents would insist affected students to re-sit the paper for scoring accuracy. The public would put pressure on the government to check all security procedures, report the findings, and have measures in place to ensure the lapses would not happen again.
If this happened in Japan, the responsible party would call for a press conference. In front of the national TV network and media, the management team would bow 90-degree to admit their mistakes.
If this happened in China, parents of the students (who expected “B” or “C” but got an “A” instead) would bring the most expensive gift they could afford, kneel before the government officials, and thank them for giving their child the chance to score an “A” and qualify for admission to university.
Li Yi also has a good advice: Learn to appreciate the right thing in the right country – France’s culture, UK’s politics and US’s technology. But never the other way round – France’s politics, UK’s technology or US’s culture.
Got it?
Did you watch my video “2018 Singapore Property Market – what developers, agents, banks and analysts are hiding from you”? Watch it now!
Al says
Thank you for sharing.
I was eating dinner while reading your funny analogies and almost choked with laughter. That was so interesting.
Property Soul says
Sorry, I should have added this line at the beginning of my post:
“You are advised to read this before you eat, or finish eating before you read. But not at the same time.”
Raymond Chua says
Thanks for this blog. The developers are truly smart to come out with different ideas to sell their properties without affecting prices, But I thought the buyers have already signed the option, just that it will take much longer to complete the transaction? That is buyer cannot back out already.
Property Soul says
There are different schemes in the market. For lease option, buyers can choose to return the unit without buying after 2 or 3 years, depending on the contract. For deferred payment scheme, the date to exercise the option has been extended from the normal 2 weeks after signing the OTP (Option to Purchase) to a much later date. The seller can sue the buyer for damages if the latter fails to exercise the option on the agreed date.
Ben says
Li Yi seems to suffer from Pinkerton syndrome and an inherited colonial baggage that results in cultural inferiority which results him in writing to perpetuate soft power of being caucasian instead of power of being modern
what to appreciate of UK’s politics and France’s culture where in Europe 300 years of democracy there has been no non-white leader ?
Look on the Paris 2015 massacres as a good example of their unresolved multi century religious disharmony there
On US,UK,France Science & Technology I will agree.. with Edison’s light bulb, Newton’s gravity and Fleming’s penicillin
Let’s not confuse western with modern
Property Soul says
I think Li YI has good sense of humor which is rare to find.
Laura says
Dear Property Soul,
May I know which book of 李怡 this is? Thank you.
Property Soul says
人生网络