Singaporeans unfazed by foreign property curbs
SINGAPORE investor interest in overseas property is unlikely to change drastically because of a recent string of measures introduced by governments abroad on foreign investors, market watchers said.
The latest move came from Britain, which is imposing a capital-gains tax on foreign investors of up to 28 per cent on profits made on sales after April 2015.
This followed several recent changes introduced in Malaysia, including a 3 per cent levy on foreign purchasers of property in Penang from February next year, and planned higher assessment charges on Kuala Lumpur homebuyers.
Malaysia and Britain (especially London) are popular destinations, along with the likes of Australia and the United States, for Singapore investors looking for an alternative following a string of cooling measures introduced at home.
Most of these moves made by foreign governments are meant to level the playing field and are not targeted at slowing the market, consultants said.
In the case of the capital-gains tax in Britain, only citizens and residents are currently taxed on the profits of the sale of the property that is not their main home.
Mr Martin Bikhit, managing director of Britain-based estate agent Kay & Co, said: "If it was possible for British buyers to buy in Singapore and then sell without paying any tax whatsoever on the profits, and Singaporeans have to pay tax on the profits, they absolutely will feel hard done by."
Mr Donald Han, managing director at Chesterton Singapore, said such measures, which are likely to become a norm, are more to make sure locals are not priced out, "especially when money is going in and where capital gains are a little bit more evident".
There are fears of a property bubble in London, where new supply is limited and prices are reported as climbing up to 10 per cent a year. Estate agent Savills was quoted by the BBC as saying that up to 70 per cent of newly built properties in central London are bought by overseas investors.
That said, Mr Tim Murphy, chief executive officer at IP Global, noted that the overall foreign ownership of central London properties is around only 5 per cent.
Even with the imposition of the tax, Britain should remain an attractive location for Singapore investors.
Mr Han said "it's easy to go in and it's easy to get out as well" for established and liquid markets such as London.
Mr Bikhit said the top rate of 28 per cent for the British capital-gains tax still compared favourably with other places such as New York and Paris, where it ranges from 35 to 50 per cent, depending on the residency status of the owner.
Consultants also emphasised that a capital-gains tax is unlike a stamp duty or property tax.
"You are paying tax only if you make a profit on the asset when you sell it. So people need to remember that if you pay tax, you have to make a bunch of money first," said Mr Murphy.
The main group who will be hit by the new tax are speculators looking to turn a quick profit as their gains (being lower than what they would have for longer-term investors) would be notably lower, market watchers said.
They noted that Singapore investors are mainly middle-term to long-term investors looking for capital appreciation with some rental yield.
Mr Gavin Sung, head of international property sales (Asia Pacific) at Savills, said that there may be some who will head for the exit but the number is not likely to be significant.
"I don't think that it's going to be en masse," he said. For example, if there were 100 homes on the market now in London, it may edge up to 105-106 units, he said.
The traditional favourites will still hold strong appeal for Singapore investors, analysts noted. For example, Malaysia has great development potential and relatively low taxes, while Australia remains a familiar market as many Singaporeans have studied there.
Mr Sung said the interventions by foreign governments should be seen as preventing local property markets from spiralling out of control.
"The worst thing you want is to keep having big booms and crashes, booms and crashes; what you want is long-term sustained growth because that benefits everybody," he said.
Ultimately, when a Singapore investor decides to venture abroad, he or she must look beyond these immediate measures, said Mr Han. Factors such as political stability, currency risks, supply and overall buoyancy of the market should all be considered.
"Don't go into a market where you are completely a greenhorn because you will be paying a premium to learn - they call it tuition fees," he added.