Monthly Archives: April 2013

Analysts call for resale levy on HDB-to-EC upgraders

Posted on 29 Apr 2013 | Comments Off on Analysts call for resale levy on HDB-to-EC upgraders

Some property observers say imposing a resale levy on those upgrading from a HDB flat to an executive condominium (EC) could be one of the tweaks the government may make to the current EC scheme.

But they remain divided over the relevance of the current EC scheme in today’s market.

National Development Minister Khaw Boon Wan had said on Thursday that the EC scheme cannot carry on in its current form.

He pointed out a “sense of inequity” between HDB and executive condominium owners.

Mr Khaw had suggested that EC owners may make more profit than HDB flat owners in the resale market.

Executive condominiums seem to be drawing a larger profit margin for owners in absolute terms, compared to HDB flats in the resale market.

According to data from the Singapore Real Estate Exchange, a four-room flat in Choa Chu Kang was sold at a median price of S$136,000 in 2005.

But the median resale price for such a unit was more than S$420,000 last year.

In comparison, executive condominium The Quintet was priced at about S$478,333 in 2005.

The median resale price for such EC units was about S$905,000 last year.

Observers point out that the price increase in percentage terms tell a different story.

For the same four-room Choa Chu Kang HDB flat, there was a 209 per cent price increase, as compared to the 89 per cent increase for the executive condominium.

Analysts say the percentage gain should also be considered when factoring the profit made by home owners.

Currently, HDB flat owners upgrading to a new Build-To-Order flat are subject to a levy, ranging from S$15,000 for a two-room flat to S$50,000 for an executive flat.

Property observers said imposing a resale levy on HDB flat owners upgrading to an executive condominium could be one of the tweaks the government may make.

Mr Mohamed Ismail, CEO of PropNex, said: “An existing BTO flat owner, when he buys another BTO flat, he is subjected to a levy based on the existing size of a BTO flat.

“But on the other hand, an existing HDB owner, when he wants to upgrade to an executive condo, he is not subject to a levy. There again, a sense of inequity.

“The point that you can afford and the point that you are making a profit from your BTO flat, why are you not subject to a levy while an HDB upgrader is? Probably this is another area, if any form of tweaking may well take place.”

Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group also held this view of imposing a resale levy on those upgrading to an EC.

Mr Ismail added that the government could choose to get rid of all forms of grants for ECs or impose a tax on the capital gain made from selling an EC.

But he said these measures would be extreme.

According to data from the Singapore Real Estate Exchange, 135 executive condominiums have been sold on the resale market this year, fetching a median price of S$990,000, an 8 per cent increase compared to 2012.

The executive condominium scheme was re-introduced in 2010 and caters to the sandwich class in Singapore – those who do not qualify for a new HDB flat but who also cannot afford a new private property.

But just how relevant is the EC scheme in today’s context?

Observers have mixed views.

Ku Swee Yong, CEO of International Property Advisor, said: “ECs in the totality of things only cater to a fraction to the total market of 1.2 million households in Singapore.

“There are about 10,000 of them today, with another 9,000 on the way. Do we really need a scheme for just this category of people?

“Is the scheme of executive condominiums today outdated? Is it right in today’s age, given the income that’s above the median GDP per capita, that these families really need to buy taxpayer subsidised products? Are they really a sandwiched class?”

But Nicholas Mak, executive director for research & consultancy at SLP International Property Consultants, said: “Right now, the scheme does serve its purpose. There are many households out there who are aspiring to buy private condominiums but are not able to do so and actually this EC scheme is serving a large part of this sandwich class.

“But the other thing is that buyers of executive condominiums are bounded by public housing rules. So, if the government were thinking of reducing the subsidy given to EC buyers, they should likewise roll back on the public housing rules that bind EC buyers.

“But if the government were to roll back all the subsidies, that means reduce all the subsidies to nothing, then ECs would be no different from the mass market private condominiums.”

Mr Mak also suggested the government could potentially consider having the HDB, and not private developers, develop EC projects.

He said if the government were to develop EC projects, it would be able to control the price of ECs as well.

The topic of executive condominiums is set to be discussed further at other Our Singapore Conversations on housing in the next few months.

Source : CNA – 29 Apr 2013

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New guides for real estate industry

Posted on 27 Apr 2013 | Comments Off on New guides for real estate industry

New rules will be implemented for the real estate industry.

From 1 June 2013, the practice of collecting “blank” cheques from property buyers will come with tighter safeguards.

The practice is often used to book private properties before they are launched.

Property agents will no longer be allowed to collect cheques unless there is a request in writing from the developer directly to the agent.

Any issued cheques must be crossed and made out in the name of a payee, like the developer or the project account. It should also come with an authorisation letter setting out clear terms to safeguard the buyer’s interests.

Many industry players say the practice of collecting cheques, including “blank” ones, in the private property market have many grey areas and differing perceptions.

With tighter controls kicking in, many say it will reduce impulse buying.

Lim Yong Hock, senior vice president at PropNex Realty, said: “It will help consumers make more informed decisions, rather than writing cheques impulsively without knowing the price of the property. It’s a positive change for buyers.”

Steven Tan, managing director of property firm OrangeTee, said buyers who give blank cheques to agents often do not have full understanding of the development.

“It’s often an impulse purchase,” he said.

With the new guidelines, he believes developers will provide more information to buyers, like the concept, floor plans and even the price range, before buyers have to make any decision.

The tighter controls are part of a slew of new rules for the industry.

Issued by the Council for Estate Agencies (CEA) in a professional service manual, the guidelines also require property agents to be extra careful when working with vulnerable consumers, like those who are financially unstable or illiterate.

CEA said it is the first time property agents have a manual that guides them in detail from the start to finish of a transaction.

Chan Mun Kit, director of regulatory control at CEA, said: “Even for those already in the industry, it helps to highlight to them certain practices perhaps they can do more professionally, and certain things they should not be doing anymore.”

If the guidelines are flouted, property agents can be fined up to S$75,000, and have their licenses suspended or revoked.

Speaking at a consumer seminar on Saturday, Acting Minister for Manpower Tan Chuan-Jin said the real estate service is not just about closing the deal.

He said: “I think it’s important for us, those of us who’re in the real estate business, to think about not just closing the deal, but I think to remember that the people we’re servicing and helping, are making a very big step. For many of them who are homeowners, it’s not just buying a physical property; it’s buying a place where they’re trying to build a home.

“The onus is on those who are in the industry, who understand the landscape better, to advise individuals to understand what it means, to invest, how much loan to take and so on, rather than think about how much commission you might get with a bigger deal done. That’s values in action. That’s something we appeal to everyone who’s involved in the industry to spare a thought, not only from a professional standpoint but from a values standpoint to think about their responsibility to the people around them.”

The consumer seminar is part of an effort to educate the public on their responsibilities as well. Those in the industry say there is often a mismatch of expectations between the consumer and the property agent on what their respective duties are.

In tandem, authorities have also launched a brochure to help consumers out.

Lim Biow Chuan, president of Consumers Association of Singapore, said: “Reading this consumer guide gives you some background knowledge, some basic knowledge so that if you transact with someone else you don’t go in blind.”

With regulation only able to go so far, authorities are also urging consumers to do their part.

Source : CNA – 27 Apr 2013

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