By Stuart Chng (guest contributor)
And so, at 10 pm on the 6th of May 2020, finally, some much-awaited good news came in for the property market.
Amidst the generous support packages for our worst-hit industries like the airlines, retail and hospitality industry, and the generous packages given out to Singaporeans and PRs to tide through these times, real estate industry stakeholders have been eagerly waiting with bated breath for the words to be spoken.
For it is expected. And would have been unreasonable had it not been.
That the real estate market, where perhaps tens of thousands of locals are employed in, would be the next industry in need of a rescue.
Big brother Wong has swooped in with temporary relief measures that are just sufficient at this point in time; what the market needs and not too little or too much.
With the past 2 weeks of constant reminders from the media that jobs are going to be lost en-masse, a longer than predictable recovery, and how life will never be the same again, it did not require much more to make developers and agents sulk even in their sleep.
Property sellers I have spoken to recently have mostly agreed to be more flexible on their prices now than they were in early March, while buyers and upgraders are now negotiating much harder than before; hoping to scoop up a good deal.
How will these relief measures impact the real estate market in the next 6 months then?
Let’s take a look at the two key relief measures.
Extension of ABSD remission period for the sale of matrimonial homes
Couples who bought their 2nd matrimonial homes and are selling off their 1st one will get 6 more months to do so to qualify for their ABSD remission (refund).
Prior to this, Singaporean married couples are given 6 months upon the date of purchase (Exercise date) of their 2nd matrimonial home (completed property bought under two names) to sell off their 1st matrimonial home.
For uncompleted properties, the 6 months countdown starts from the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) date, whichever comes first.
By doing so, they qualify for the ABSD refund which they had paid upfront when purchasing the 2nd property. This can amount to a fair bit of money as the ABSD for Singaporeans buying their 2nd property is 12% or $120,000 for a $1 million dollar property.
This condition has so far been strictly enforced by IRAS and rarely do we hear of exemptions to the rule.
How does this help them?
In light of the disruptions so far, the 6 months grace period is highly welcomed by all married couples worried about missing their sell by deadlines.
In fact, although we are just 1 month into the circuit breaker which commenced on April 7, the MND has factored in additional buffer time and extended the qualifying period to those whose deadlines were 1st Feb and after.
This should be great news for many couples who had failed to qualify for their ABSD refunds since Feb 2020.
So hopefully, once life resumes on 1st June (fingers crossed!), and you’re one of the affected ones, you can sell on time and get your money back!
(i) The couple’s second residential property was jointly purchased on or before 1 Jun 2020; and
(ii) Prior to the 6-month extension under this temporary relief measure, the specified timeline (last date by which the couple must sell the first residential property to fulfill the ABSD remission conditions) expires on or after 1 Feb 2020.
Read more and apply via: IRAS ABSD Remission for Married Couple
Extension of sale timelines for property developers
Developers with qualifying residential, commercial and industrial property developments.
Prior to this, developers were bounded by a strict time frame to sell out or face stiff ABSD or Qualifying Certificate (QC) penalties.
Given that the circuit breaker and pandemic will take its natural toll on the market, it is clearly not equitable for developers to suffer a reduced sell by time frame on top of additional pricing pressures that were not of anyone’s fault.
This automatic extension of sale period will allow market conditions to stabilize, hopefully recover, and deter unnecessary panic selling by developers which would have a cascading effect on the rest of the market.
An important joint statement to highlight by the Ministry of National Development, Ministry of Finance, Ministry of Law, and Ministry of Trade and Industry stated that:
“The Government will continue to ensure that prices for private residential properties remain broadly consistent with economic fundamentals.
(My interpretation: We think that prices should not deteriorate at a pace faster than the rest of the economy. However, if the economy deteriorates substantially, then prices might have to follow suit.)
“Hence, these temporary relief measures do not alter the other existing residential property market cooling measures.”
(My Interpretation: We are happy with the current measures and do not see the need to tweak anything yet so please do not get the wrong signal.)
How do these then impact the rest of the market?
First, the sell-side pressures are now temporarily eased and developers and matrimonial home upgraders can now heave a sigh of relief.
On top of the mortgage loan deferment schemes which have helped ease liquidity concerns for property owners, these additional reliefs will see price elasticity stiffen once again, with better solidarity among developers and resale property owners to maintain prices as long as they can.
In short, prices should remain a lot more resilient and drastic discounts won’t materialize.
Sorry to burst your bubble.
The primary market plays a large role in influencing resale owners, and as long as developers maintain prices, it is very likely that the bulk of the resale market will be propped up as well.
Does this mean that we are out of the woods?
No. We might at best have deferred an eventuality.
How long the global and local recovery will be, the job losses and speed of new ones being created, and the spread and vaccine for COVID-19 still remain as variables that even renown investors and world leaders have no answer for.
What we do know and should take heart in, is that the bulk of Singaporeans’ wealth is held in local properties and CPF, of which a large part is also in properties.
I do not profess to have all the answers but i hope to help you derive your own through these 3 questions.
1. Would any sound government allow the collective wealth of its people to be eroded over a prolonged period of time?
2. Would they do all they can, within their might (With the huge range of policy easing tools at their disposal), to ensure that the masses do not end up feeling poorer from mass asset depreciation?
3. Has the standing of Singapore changed substantially over the course of these months that we will fail to attract similar and increasing amounts of foreign investments in the future?
Maybe then, we can all cling on to these glimmers of hope that safety nets have long been put in place for times like this and focus on riding through this momentous event with our heads held high and hearts emboldened that our future will be better than ever.
Perhaps the worst will happen, or perhaps not. But until then, look forward to a better future.Seneca
Stuart Chng, Senior Associate Executive Director of OrangeTee & Tie, is a renowned leader, real estate broker and personality in the real estate industry. He is a licensed real estate agent, team leader, industry trainer and speaker, columnist for several property newsletters and blogs and is often quoted in media interviews on 938FM, Channel 5, PropertyReport, PropertyGuru and other publications. Throughout his career, he has also coached many top million dollar producing agents from different real estate agencies in Singapore.
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