Significant drop in sub-sales of private residential properties

The level of speculative activities in the private residential market in Singapore has dropped substantially in the past few years.

Sub-sales of private residential properties hit a six-year low of 4.5 per cent in the first quarter of 2013, according to data from the Urban Redevelopment Authority.

Analysts said sub-sales – which refer to the resale of uncompleted units – should continue to trend down in the next year.

In the past, some investors have been able to make a quick buck by flipping private residential properties.

But it has been a lot less profitable to do so after the government introduced the Seller’s Stamp Duty in 2010.

It later increased the sales tax and holding period for properties in 2011.

The moves have helped bring down sub-sales, an indicator of speculative activity, over the last three years.

Nicholas Mak, executive director of SLP International Property Consultants, said: “The number of speculative sales as a percentage of total number of sales has dropped to about the same level as 2006.

“We are seeing one of the lowest levels, you can almost say that speculation has gone to such a low level it is no longer a problem.”

From 14 January 2011, buyers who sold properties within four years of their acquisition will have to pay a tiered sales tax, with a hefty 16 per cent levy imposed on those sold in the first year and 12 per cent in the second year.

Units re-sold in the third and fourth year will have a Seller’s Stamp Duty of 8 per cent and 4 per cent respectively.

Alan Cheong, research head at Savills Singapore, said: “People are not going to pay 16 per cent; even if you make 20 per cent, they are not going to say I am content with a 4 per cent gain, and lose 16 per cent in terms of a Seller’s Stamp Duty. That will be a big turnoff for people thinking of sub-selling.”

Mr Cheong said the sub-sales segment is also losing steam because many home hunters prefer buying new units from developers at project launches.

With these measures, analysts said the average holding period of private homes has increased from six years to 10 years in the last few years.

Ku Swee Yong, CEO of International Property Advisor, said: “Speculative activities are still around, but they are outside of the residential segment now. So (this is) good news for the residential segment; it means that we can expect more price stability and less speculative activity that might bring risk to the rest of the market.

“Less speculative activity means that there are fewer investors who are stretching themselves.”

Going forward, analysts believe the sub-sales number should remain fairly low, unless there is a severe economic downturn forcing owners to sell, or if home prices run up substantially and home owners could still make a decent profit after accounting for the Seller’s Stamp Duty.

Source : Channel NewsAsia – 5 June 2013

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