Tycoon Cheng Wai Keung’s plan to sell Singapore’s most expensive private property faces the dual challenge of additional government taxes designed to cool the market and restrictions limiting the sale to locals.
Wing Tai Holdings Ltd. (WINGT) (WINGT) Chairman Cheng is seeking a record S$300 million ($242 million) for a home near the Orchard Road shopping belt. The 85,000-square-foot site on an elevated lot at 33 Nassim Road, near the Botanic Gardens, includes a two-story home, swimming pool and tennis court, according to Jones Lang LaSalle Inc., the sole marketing agent.
Singapore, which boasts the most millionaire households per capita in the world, has become the priciest property market in Asia after Hong Kong, prompting the government to impose curbs. While home prices climbed to a record in the first quarter, the pace of growth was the slowest since the middle of 2012 after a seventh round of measures was unveiled, including higher stamp duties for housing transactions.
“It’s a bit of a long shot,” Png Poh Soon, director of valuation at Knight Frank Pte. in Singapore said in a phone interview. “It’s the asking price; I don’t expect anyone to match the asking.”
The island state’s private residential property price index rose 0.5 percent to a record in the three months ended March 31, easing from a 1.8 percent increase in the fourth quarter, according to preliminary estimates released by the Urban Redevelopment Authority on April 1. The gain was the smallest since the second quarter last year.
The asking price is about S$3,000 per square foot for the land, Png said. That’s a 50 percent premium from the last transacted price of S$2,000 per square foot in the Nassim area, he said. The housing market is a bit “soft on the high-end residential side” and whoever buys it will have to pay the additional buyers stamp duty, he said.
The property was put on sale only days before Singapore posted a surprise economic contraction in the first quarter. Gross domestic product fell an annualized 1.4 percent from the previous quarter, the government said April 12. Economists in a Bloomberg News survey had expected 1.7 percent growth.
Singapore restricts foreigners from buying most landed property. Only residential houses can be built on the plot and it can’t be converted for other use, according to local rules.
“They cannot sell to a foreigner and the government won’t bend rules,” Singapore-based Nicholas Mak, the executive director at SLP International Property Consultants said in a phone interview. “If the Singapore law becomes a rubber law then we become a Banana Republic.”
Singapore is Asia’s most expensive housing market after Hong Kong, Knight Frank and Citigroup Inc.’s private bank said in a report last year that compared 63 locations globally.
Property prices have grown with increasing wealth in the island-state. Singapore’s millionaire households rose 14 percent in 2011, according to a Boston Consulting study. The proportion of millionaire homes in the city of 5.3 million people was 17 percent, the most in the world.
The highest price for a residential property in Singapore was a S$87.5 million site on Swettenham Road, according to Jones Lang LaSalle. The site is also close to the Botanic Gardens, a 154-year-old downtown park.
Singapore’s home sales plunged 65 percent to a 14-month low in February after the government introduced its seventh round of property curbs to cool record prices in January.
The measures included an increase in the stamp duty for homebuyers of between 5 percentage points and 7 percentage points, with permanent residents paying taxes when they buy their first home. Singaporeans will also have the levy starting with their second purchase.
Singapore “has put in so many property cooling measures, but the fact remains that liquidity remains extremely abundant,” said Michael Wan, an economist at Credit Suisse Group AG in Singapore. “We’ve seen prices moderate but haven’t seen the kind of correction the government wants to see.”
The government also plans to raise taxes for luxury homeowners and investment properties. The higher tax will apply to the top 1 percent of homeowners who live in their own residences, or 12,000 properties, Singapore Finance Minister Tharman Shanmugaratnam said in his budget speech on Feb. 25.
The “measures do have some bearing but it’s not a price sensitive market as it would be for a typical condo,” said Karamjit Singh, head of investments and residential at Jones Lang LaSalle in Singapore, said in a phone interview. “The dynamics are entirely different.”
Singapore’s population has jumped by more than 1.1 million to 5.3 million since mid-2004 as the government used immigration to make up for a low birth rate. There are 3.3 million citizens and 2 million foreigners on the island.
The Nassim Road site is owned by Winright Investment Pte, property records obtained by Bloomberg News show. Cheng, and his wife, Helen Chow, who list their address at another Nassim Road home, own Winright, which was set up in March 1995 for “holding of property for long-term investment purposes,” according to company records obtained by Bloomberg News.
Cheng, 62, is also managing director of Wing Tai, a Singapore property developer and retailer of brands including Adidas AG (ADS), G2000 and Fast Retailing Co.’s Uniqlo.
Lee Hwee Hong, a spokeswoman at Wing Tai, declined to comment. The stock fell 1.9 percent to S$2.04 at the close in Singapore, the biggest decline in a month.
The tender for the property closes on May 16, Jones Lang LaSalle said in an e-mailed statement on April 9. A developer could build five houses on the property by dividing it into two plots, one of which can be subdivided into three plots and the other into two plots, according to the statement.
Even then, the developer won’t have much of a profit margin at this price, SLP’s Mak said.
“On one hand it’s very rare to have such a site on sale,” Mak said. Still, “people ready to pay more than S$50 million for a house is extremely rare, just probably 100 people in Singapore.”
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