One size does not fit all

Like many other products, our property market caters to a variety of tastes and pockets.

Even the Housing and Development Board, the Government-owned body which builds homes for the masses, provides for different segments of the market – from one-room flats to executive condominiums which have all the amenities of private housing like swimming pools and tennis courts.

But recent measures to cool rising prices tend to have an impact on all sectors of the market. Shouldn’t they be better calibrated to impact only those sectors where affordability is an issue?

For instance, under new measures which came into force towards the end of last year, foreigners and corporate entities will have to pay an additional 10 per cent in stamp duty for their residential property purchases.

Permanent residents owning one and buying the second and subsequent residential property will have to fork out an additional 3 per cent in stamp duties. Singapore citizens owning two and buying additional homes will also have to pay this extra.

These levies are meant to dampen demand and bring residential property prices down. They, and other earlier measures introduced for the same purpose, appear so far to have had a very limited impact on prices.

In fact in the last two months, according to data put out by some property agencies, prices of both private homes and housing board resale flats have shown an upward trend.

Conversely, sales of property in the ultra luxurious sector of the market appear to have seen a significant slowdown.


But should the Government be concerned with all segments of the residential market?

The complaints about high home prices have come mainly from the middle class; in large part the gripes are from upgraders, for whom affordability is a real concern. So, the authorities should address their concerns and aim their cooling measures at that sector of the market – the S$2,000 psf or lower sector.

But the measures are also imposed on all and sundry, including the ultra-luxury sector whose buyers have less regard for prices.

While the Government may not want to appear to be favouring the ultra-rich by doing away with the additional buyer’s stamp duty for purchases of properties – say, for apartments above S$3,000 psf or bungalows costing more than S$10 million – it does not appear to make sense to discourage these people altogether from investing here.

For once, such people find Singapore no longer an attractive place to invest and it may take a very long time for us to lure them back. For the ultra-rich, the world is their market place and they go where they are welcomed and where they can find the best bargains.


For the ultra rich, taxes matter more than high prices – a high price is a status symbol while high taxes are something to be avoided. Isn’t that why we have a low personal income tax regime where the maximum tax is 20 per cent, whereas for many countries in Europe the top rate is around half of one’s income?

As Prime Minister Lee Hsien Loong recently told a dinner gathering of the Economics Society: “For decades we have gradually reduced our income tax rates, and partially made up with indirect taxes like the GST, in order to stay competitive with other Asian economies like Hong Kong. This has helped to foster growth and increase the resources available to strengthen our social compact. Raising taxes will do the opposite, long before they reach Scandinavian levels.”

While the measures of last December to cool the property market differentiate between Singapore citizens, permanent residents and foreigners, do we want to treat all foreigners the same? Obviously not.

There are some who are useful to us than others. This is the reality of life. In the case of the useful, especially those who happen to be very rich, do we want to drive them away with a multitude of taxes?

Furthermore, such measures to drive away high-net worth individuals could have an impact on our wealth management industry, as property is one of the sectors targeted for investment.

One size will not fit all. Measures should be targeted to impact those we desire less, and not all and sundry.

by Conrad Raj

Source : Today – 2012 Jun 18

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