Speculators Reign Supreme

Posted: July 29, 2009 by fievel in Labels: ,

The recent proposal for taxation on selling more than 1 property within 4 years was met with much dismay, shock and protest from the industry players ranging from banks to housing agents to individuals who could do a little flip here and a little flip there and get what a billion flips at the Macs kitchen will never get ya. Capitaland's stock prices took a small hit when the proposal came out but with the follow up declaration that it IS NOT AN ANTI-SPECULATION measure, everything has gone back to normal for all the actors in this theatre. What, may I ask, is so wrong with curbing speculation on the residential housing market?

MP for National Development, Mr Mah, how about we create a 4th segment to Singapore's property market? A segment for foreigners to flip and speculate on and on and on, and allow only foreigners to buy and live in. Get rid of this speculation cost from our non-speculative Singaporeans' dream of true home ownership that is not a 99 yr leasehold in the form of HDB. Speculation on derivatives such as Commodity futures is condoned only because it facilitates a proper functioning of the primary physical market. It is the vehicle that transfers the risk for the primary producers. Here in Singapore's housing market case (unlike other countries that has capital gains tax on foreigners) it is but transferring the wealth, and perpetuating the income disparity. Where is the value-add?

Analysts say more feedback should be gathered before amending tax policy
By May Wong, Channel NewsAsia Posted: 10 July 2009 2332 hrs

SINGAPORE: It may be best to gather more public feedback before changing the tax policy on profits earned from property sales, say analysts.

Analysts Channel NewsAsia spoke with said that it is because some are concerned the proposed amendment may hurt the property sector.

The Singapore residential property market is showing signs of picking up, but analysts say the proposed tax amendment may hurt sentiment and derail the rebound.

That is because potential buyers may hold back on fears that if they sell more than one property during a four-year period, they may then be taxed on the profits.

The Finance Ministry has said there is no change to the current and longstanding income tax treatment on property sales.

It said the proposed amendment does not mean that individuals who have sold more than one property within a four-year period will automatically be subject to income tax.

The ministry said the only change proposed is to give certainty that individuals will not be taxed on the gains made from selling their properties if they have not sold any properties in the preceding four years.

It also stressed that the proposed change is not an anti-speculation measure.

However, it is still something to think about for those with more than one property, or planning to own more than one.

Chong Lee Siang, partner at International & Corporate Tax Services at Ernst & Young, said: "It probably comes as a surprise to a lot of people. But the government has said that it's not an anti-speculation measure so that may be a little assuring, but still (at the) back of people's minds would be 'when will I be taxed?'

"As you can see, the public is reacting and giving its feedback and expressing its concerns. So hopefully, the government will take a while to think through it more carefully and see what would work better or make people more comfortable."

If the proposed change for the tax policy goes through, observers say local banks would get hit badly as housing loans make up a large chunk of their business.

Looking at the housing rental agreements, some say the government may want to consider introducing a two-year period of non-taxation if a person sells only one property, instead of the suggested four years.
As many HDB flats are financed through banks today, some believe that misconceptions over the suggested tax amendment may hurt the banks' portfolio.

Jeremy Goh, associate professor at the Lee Kong Chian School of Business in the Singapore Management University, said: "The banking business is basically taking deposit and making loans. If this proposal puts a damper in the market, then it will definitely have an impact on the bank.

"There will be less people needing loans, or people staying out of the housing market. So the demand for loans will be somewhat affected."

The public consultation for the draft Income Tax (Amendment) Bill ends next Tuesday. So far, It has attracted about 50 responses.