Wednesday, January 25, 2012

Who paid 16% Seller’s Stamp Duty?

During bad times, selling at a loss might be the best way out before it gets worse. Indeed, some investors are doing just that. Recall that the Seller’s Stamp Duty (SSD) of around 3% was first imposed in February 2010. It was revised once in August 2010 and again in January 2011, where it was ramped up to 16% for residential properties sold within a year. Overall residential property prices rose less than 6% in the past year so any transaction hit by a 16% SSD is likely to have sold at a loss. We analysed caveat data by the Urban Redevelopment Authority and reveal exactly how many people paid the full 16% SSD.

Based on caveat data, 14 apartments were sold within a year of purchase after the 16% SSD took effect. Reflections at Keppel Bay had the most cases, followed by Hillview Regency. Interestingly, there was a case in Hillview Regency where the owner made a 42.4% gain in just over 3 months, more than offset the 16% SSD. In all other cases, the owners sold at losses, after factoring in 19% stamp duty (3% buyer’s and 16% seller’s) and 2% agent’s commission. Such transactions are worrying and reflect current investor confidence in the property market but the level of such activities is still low, averaging about 1 transaction a month since the16% SSD took effect. The latest round of cooling moves in December 2011 could be a catalyst for more such sales, especially as the SSD steps down to 12% in the second year versus market’s expectation that prices may drop 15-20%.

We think bigger projects are likely to see more such cases, as competition heats up among neighbours to unload their units, and possibly undercutting each other. In the next page, we look at a handful of other projects, highlighting unprofitable transactions post-January 2011’s curbs...

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

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