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13 July 2013

Property agents want sellers to pay GST on fees

Source: Straits Times 

By Daryl Chin Property Correspondent
A FLAT is about to be sold, and both sides are happy with the price.

But right at the last minute, the seller - who is supposed to pay tax on the property agent's commission - refuses to do so, bringing the deal to a standstill.

The only way out, agents say, is to absorb the goods and services tax (GST). Increasing numbers of them have been taking this step.

Now, the agents are urging regulators to take a stronger stand by forcing consumers to pay up.

However, the Council for Estate Agencies (CEA) says it cannot mandate this as the tax is dictated by law, and it is up to the firms to decide whether or not to absorb it.

At the moment, the Government levies 7 per cent GST on an agent's commission on the sale or rental of a property.

About six in 10 sellers haggle over the levy, twice as many as five years ago, say industry observers.

They attribute this to rising property prices, which mean consumers are faced with paying higher commissions and therefore, higher taxes.

Ms Sally Siew, 38, told The Straits Times that the issue lies in the profit agents already make.

"They are already earning such a tidy sum when the deal goes through," added the marketing manager, who sold a private property last year. "A small tax is a meagre amount in comparison."

Commission rates are negotiable, and can be up to 2 per cent for a property being sold. On a $1 million home, GST works out to $1,400 for a $20,000 fee.

Other consumers say it is the agents who volunteer to absorb GST to ensure they close the deal.

"If two agents can get me the same deal for a property, it makes sense for me to opt for the cheaper one," said Mr James Wong, 33.

Institute of Estate Agents president Jeff Foo added: "The nub of the issue is this: If consumers can't negotiate when they go to an established restaurant or hotel, why are they allowed to do so for property transactions?"

Agent Jason Lim, 26, started an online petition last month asking the CEA to make it compulsory for sellers to pay up. So far, 400 members of the profession have signed it.

A spokesman for the council said that it does not have the power to mandate this payment, but consumers should check with their agents if GST is already factored into the commission. "Both parties should agree upfront on the fees and charges payable for the estate agency services rendered."

An Inland Revenue Authority of Singapore spokesman said it is up to the businesses to decide whether to absorb the tax. She added that none of them has lodged a complaint on the matter so far.

The levy on an agent's commission applies only if the property company is GST-registered.

Registration is required for larger firms such as ERA Realty, as their annual taxable turnover exceeds $1 million. But smaller firms with less profits can choose not to register, and so avoid the tax.

An estimated 75 per cent of the 30,000 property agents here have to collect taxes on behalf of the Government.

PropNex chief executive Mohamed Ismail said GST-registered businesses are larger, which means they are likely to have a wider network and support system.

"Commission is negotiable but taxes need to be paid by law," he said. "It will help if the authorities take a stronger stand."

Investment homes face declining rental yield
Trend a result of property prices rising faster than the increase in rent

Source: Straits Times | Money 
By Fiona Chan

PROPERTY investors in Singapore are starting to feel the squeeze as rental yields for investment homes sag across all segments of the market.

This is due to fewer leasing transactions taking place and rents flatlining even as home prices continue to rise, property consultants said.

Information compiled by Colliers International for The Straits Times showed that net yields of non-landed private homes have been declining since 2008, and are now at 3 per cent or below as of the second quarter of this year.

Net yields are calculated by deducting service charges and property taxes from the annual gross rent, which is then divided by the property's purchase price.

Homes in the suburban areas, where prices have proved stubbornly resilient in recent years, saw the largest dip in rental yields, from 4.1 per cent in 2008 to 3 per cent now, Colliers said.

Yields on the city fringe fell to 3 per cent, from 3.6 per cent in 2008, while yields for centrally located homes slipped from 3.3 per cent to 2.7 per cent in the period.

"The downward movement in yields in the last five years can be attributed to price appreciation in the residential market," said Colliers director of research and advisory Chia Siew Chuin.

"Rents have increased in a moderate manner, while prices continued to increase at a faster clip to reach a record high in the second quarter of this year, based on the recent flash estimates."

While home prices are now partly supported by home buyers' "aspirations" to own an investment property, leasing interest is generally more grounded on fundamentals, said Mr Ong Kah Seng, director of R'ST Research.

Tenants prefer "cost-effective, practical choices amid the ample new housing completions, and many expatriates have limited or no housing allowances", he said.

"This accounts for a generally stagnant, or slightly dipping yield situation."

A more in-depth look at rental yields by the Singapore Real Estate Exchange (SRX) also found that most areas across the island are offering lower rental yields for non-landed private homes now than last year.

Of the 34 planning areas in Singapore that had more than 30 rental transactions in the first half of this year, 32 areas posted lower yields, said SRX. Singapore has 55 urban planning areas in all.

The only two areas that recorded higher yields were the downtown core around the Central Business District, and Outram. In fact, investors in Outram scored the highest yields in the country, at 4.6 per cent, SRX said.

At the other end of the spectrum, Sentosa Cove and the Southern Islands had the lowest rental yield in the first half of this year at only 1.7 per cent, followed by Newton's 2.2 per cent and Orchard's 2.6 per cent.

Overall, rental yields for the island dipped to 3.9 per cent in the first half of this year, from 4.2 per cent last year and 4.4 per cent in 2011, SRX added.

Over the next 12 months, consultants expect rental yields to stay flat or even decrease. While prices are not likely to keep soaring, a slew of new homes will be completed soon, putting downward pressure on rents.

Colliers' Ms Chia said housing prices "are not expected to increase much further in the next 12 months", as buying interest - especially from investors - wanes amid the spectre of rising interest rates and recent loan caps introduced by the central bank.

"However, rents might slowly correct and ease downwards as there is a significant amount of new completions, bringing more supply into the market," she added. Some 32,700 units are expected to be completed between now and the end of next year.

"Generally, yields are not expected to increase in the next 12 months, and might experience a mild compression," Ms Chia said.

Still, net yields of 3 per cent for investment homes are not far below historical trends, and investment activity is likely to continue as Singapore offers a "safe haven" to park excess funds, she said.

"Whether yield numbers increase, stagnate or dip, it will not deter many intent and 'aspirational' investors, unless yields consistently drastically dip across the board," added R'ST's Mr Ong.


Generally, yields are not expected to increase in the next 12 months, and might experience a mild compression.

Interesting mix of history, industry in far east
Checking out the page views on the STProperty website gives an instant snapshot of what projects buyers are keen on. This week, we look at developments in districts 17 and 18 that have drawn the most attention.

Source: Straits Times | Money 
By Rachel Scully

MENTION the far east of Singapore and one may think of the area as being inaccessible.

But home buyers are drawn to the area for its interesting mix of history, industry and entertainment.

District 17 covers the Changi and Loyang areas where you can find industrial hubs and factories, World War II relics and good food places in Changi Village.

Changi Airport is in the district and is popular among residents as a place to unwind. The colonial bungalows in Changi, now serving as chalets, offer a getaway for those who like to venture off the beaten track.

Heading the list of top five private homes by page views on STProperty's website from July 1 to 7 was freehold Carissa Park Condominium.

The 528-unit project had an average asking price of $989 per sq ft (psf) during the week for its two- and more bedder units.

The project with the highest average asking price among the top five in District 17 was Ocean Front Suites at $1,396 psf.

Despite being a small development of only 58 units, the 946- year leasehold project offers a mix of one-, two-, three- and more bedder units.

It also had the highest average transacted price at $1,437 psf, according to Urban Redevelopment Authority data between January and last month.

The other three projects on the list were all freehold: Ferraria Park Condominium, Estella Gardens and Edelweiss Park.

Farther west lies District 18, which covers Pasir Ris, Simei and Tampines. Simei used to be a village by the sea, while Tampines was a former fishing village.

With modernisation and development, the district boasts a wide variety of entertainment and shopping options. These include Pasir Ris Park and malls such as Century Square and Tampines One.

The top five projects in the district that had the most page views on STProperty from July 1 to 7 were all 99-year leaseholds.

The 1,232-unit Melville Park trumped the rest with an average asking price of $847 psf for its two- and more bedder units.

Rounding out the list were NV Residences, Double Bay Residences, Stratum and D'Nest.

Home buyers living in both districts can hop onto the East-West MRT line to head to the city area and elsewhere.

New property projects to test market reaction

Source: Straits Times | Money 

THIS weekend's upcoming projects will be one test of market sentiment since the Monetary Authority of Singapore (MAS) announced restrictions on mortgages late last month.

One project being launched today is the 99-year leasehold Vue 8 Residence condominium in Pasir Ris Drive 3 that is marketing its sea views.

The indicative price range is $900 to $1,200 per sq ft (psf). This will be slightly lower than the $1,300 psf that similar new launches in the area have commanded, consultants said.

The 463-unit development by Capital Development and ZACD Investments consists of eight 16-storey towers. Sizes range from 474 sq ft for a one-bedroom unit to 1,701 sq ft for a five-bedroom unit.

Vue 8 Residence also includes penthouses ranging from 1,873 sq ft to 3,391 sq ft in size.

Over at Fernvale Close, City Developments' (CDL) 380-unit executive condominium (EC) called Lush Acres will open for e-applications today.

No official prices have been released yet but the project will be "competitively priced with affordability in mind", said CDL.

Units at the Topiary EC nearby sold for $677 psf to $818 psf, while units at CDL's own H2O Residences condominium sold for $897 psf to $977 psf.

Lush Acres is set in the up-and-coming area of Sengkang. It is sited near Layar LRT station and is close to amenities such as the Fernvale Point shopping mall, and Seletar Mall, which is being developed. Nearby, there is also the Seletar Aerospace Park.

Covering an area of 150,000 sq ft, Lush Acres will have four towers of up to 25 storeys. The project will have 380 units with sizes starting from 915 sq ft for a three-bedroom apartment to up to 1,722 sq ft for a five-bedroom apartment.

An unusual design feature will be the balcony entrance for some units.

E-applications will close on July 21. Bookings will be conducted on Aug 17.

The response to these projects will be a sign of buying demand after MAS imposed a total debt servicing ratio framework late last month that capped how much property buyers can borrow if they are already in debt.

Other upcoming launches expected over the next two to three months include the freehold Liv on Wilkie at Wilkie Terrace, which is being developed by Roxy-Pacific.

That is the only upcoming project in the central areas.

Another suburban project is the 99-year leasehold condominium The Glades, which is near Tanah Merah MRT Station. The developer is Keppel Land.