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Singapore ‘Shoebox’ Condo Sales May Prompt Extra Taxes

Condominiums and houses, foreground, and public housing blocks, middle ground, stand against the skyline of the Central Business District in Singapore. Photographer: Sam Kang Li/Bloomberg
Condominiums and houses, foreground, and public housing blocks, middle ground, stand against the skyline of the Central Business District in Singapore. Photographer: Sam Kang Li/Bloomberg

April 24 (Bloomberg) -- Singapore may introduce additional measures to cool the housing market after private home sales reached a record in the first quarter as more “shoebox” apartments were sold, property services company Jones Lang LaSalle Inc. and brokerages including Nomura Holdings Inc. said.

Home sales climbed to 6,682 units in the three months ended March 31, the highest quarterly figure since 1996 when the Urban Redevelopment Authority began reporting the data. Prices rose 1.2 percent for the mass market in the same period, preliminary estimates from the authority showed earlier this month.

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built. Analysts at Jones Lang, CLSA Asia Pacific Markets, Nomura and Bank of America Corp.’s Merrill Lynch unit all expect the government to introduce further measures to curb price increases.

The volume and price increases “suggest that there could be some policy measures,” Chua Yang Liang, head of research for Southeast Asia at Jones Lang’s Singapore unit, said in a telephone interview. “The policy risk is high. If they do implement, they could do it in four to six weeks as they are quite quick to react.”

Smaller Unit Sales

Sales have risen as developers offer smaller units, according to CBRE Group Inc. The median size of apartments declined 24 percent to 667 square feet in the quarter ended March from the previous three months while the median price slid 18 percent to S$786,340, it said.

Foreigners and corporate entities have to pay an additional 10 percent stamp duty following measures introduced in December. The extra levy is 3 percent for permanent residents purchasing a second home and for citizens buying their third residential property.

The next round of cooling measures will be targeted at curbing investment demand from Singaporeans, CLSA, a unit of Credit Agricole SA, said in a report dated April 17. The evidence of strong investor demand can be seen in the overwhelming response to “shoebox developments,” according to the CLSA report.

“We believe the government could potentially introduce further cooling measures should the positive trend persist,” analysts Melinda Baxter and Xin Yan Low at Merrill Lynch said in a note to clients dated April 16.

Merrill Lynch forecasts prices will fall 12.5 percent this year and recommends investors avoid exposure to residential developers.

Hong Kong Contrast

Among the measures Jones Lang’s Chua expects is a change in taxes for Singaporean buyers of second and third homes. Locals have to pay a 10 percent tax if they are buying their third property, while permanent residents need to pay the levy for the second property and foreigners are liable for the duty on their first-home purchase, according to Chua.

The government may “fine tune it where they may ask Singaporean buyers, who own more than two properties, to pay the higher tax,” Chua said. “But I don’t think they will take any measures that will affect first-time buyers.”

Concerns of an oversupply of smaller units in Singapore are in contrast to Hong Kong where the government has tried to increase the supply of smaller units on concerns that rising home prices are making properties unaffordable.

Hong Kong home prices have gained more than 70 percent since early 2009. An apartment that is less than 100 square meters (1,076 square feet) in size would be defined as a smaller unit.

Taxes Weigh

Not all expect tighter real estate policies are imminent in Singapore. The government will wait for a quarter or two before it reacts to the latest sales data and introduce any new measures, Chor Hoon Chua, head of Asia Pacific research at DTZ Holdings Plc’s Singapore unit, said.

Singapore home prices fell for the first time in almost three years after the government imposed new taxes on house purchases. The island-state’s private residential property price index declined 0.1 percent to 206 points in the quarter ended March 31 from the previous three months, according to preliminary estimates from the government on April 1.

Sales to foreigners fell by 74 percent in the quarter ended March 31 from a year earlier, Jones Lang said, citing URA data. Sales to Singaporeans declined by 12 percent from a year ago, according to the data.

Expectations that more cooling measures will be introduced may prompt “developers to continue to push out more projects,” DTZ’s Chua said in an e-mail. New projects including Sky Habitat, designed by architect Moshe Safdie, as well as Hillsta, Katong Regency and EON Shenton will drive sales, she said.

Singapore’s private home sales this year may exceed 2011 after the first quarter ended with record purchases, according to DTZ, the London-based real estate advisory business acquired by UGL Ltd., a Sydney-based engineering and property services company.

To contact the reporter on this story: Pooja Thakur in Singapore at

To contact the editor responsible for this story: Andreea Papuc at

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