Corinne Kerk
PROPERTY stamp duty collected in the first nine months of the government’s current fiscal year fell 15.7 per cent year on year, and is expected to finish FY2022 (ending March 2023) lower than in FY2021.
Stamp duty collections for the first three quarters of FY2022 – which covers the period from April to December 2022 – stands at S$4.43 billion.
It is down from the S$5.26 billion collected in the corresponding period in FY21, based on data from the Accountant-General’s Department available online at the Singapore Department of Statistics.
The fall reflects a slowdown in total property transaction volumes in 2022 amid economic uncertainty due to rising borrowing costs and higher inflation, said Wong Xian Yang, head of research at Cushman & Wakefield.
As property prices largely continued to rise, some buyers adopted a wait-and-see stance, which also led to lower volumes.
In the fourth quarter of 2022, property price growth slowed, with private residential and resale Housing and Development Board (HDB) flat prices rising 0.4 per cent and 2.3 per cent quarter on quarter, respectively.
In the private residential market, year-on-year sales volume dipped 35 per cent in 9M FY2022 while HDB resale volume eased 10.6 per cent, said Huttons Asia’s senior director of research, Lee Sze Teck.
Similarly, private home and HDB rental volumes have fallen by 10 per cent and 18.7 per cent, respectively.
“In the private market, there were fewer launches which led to lower new sales, while the resale market saw lower volume due to rising interest rates and cooling measures,” said Lee.
He said the impact of the September 2022 cooling measures, which include a 15-month wait-out period for private property sellers downgrading to an HDB resale flat, was felt immediately on the ground, as “quite a number” of homeowners were not able to obtain a waiver from the HDB and had to cancel their purchase.
“According to HDB figures up to Nov 30, 2022, there were 902 appeals; and about 38 per cent of them were successful,” Lee noted.
“The cooling measures took some wind out of the sail for the HDB resale market, with transactions falling by more than 10 per cent to 6,474 in Q4 2022 from 7,546 in Q3 2022.”
As for the rental market, fewer private homes were leased due to displacements to the HDB market and more tenants choosing co-living spaces.
Meanwhile, fewer HDB flats were leased due to a large volume of Malaysians not renewing their leases and a lower number of new private homes sold, he said.
At the same time, there was a fall in the number of permanent residents (PRs), foreigners and companies buying residential property, which may have also played a part in the lower stamp duty collected since they pay higher stamp duties than Singapore citizens.
Still, Nicholas Mak, ERA’s head of research and consultancy, believes the reopening of China’s border could lead to more Chinese buyers purchasing properties here and increasing the percentage of foreign buyers.
Huttons’ Lee concurs. He believes a higher number of buyers from China and other countries may push the percentage of foreign buyers of Singapore homes to 5 per cent from the estimated 4.1 per cent for 9M FY2022.
Christine Sun, OrangeTee & Tie’s senior vice-president (research and analytics), noted that more transactions are expected in the first three months of 2023 – which is also the last quarter of FY2022.
However, since the total number of transactions in 9M FY2022 has already dropped substantially versus the year-ago period, she reckons the total stamp duty collected for FY2022 may be slightly less than in FY2021.
Cushman & Wakefield’s Wong shares a similar view. “Though we anticipate stronger property transaction volumes in Q1 2023 compared to Q4 2022, current market headwinds such as a cooling measures overhang, heightened interest rates and economic uncertainty continue to persist.”
Huttons’ Lee estimates stamp duty to be 25 per cent lower year on year for FY2022.
But since the number of residential projects expected to be launched in 2023 could be double that of 2022, the number of residential units sold this year could also be higher than last year’s, noted ERA’s Mak.
“As a result, the government could potentially collect more property stamp duty in 2023,” he said.
Meanwhile, property tax collection grew 5 per cent to S$3.02 billion in 9M FY2022 from S$2.87 billion in the year-ago period, and is expected to finish higher in FY2022 than in FY2021.
Property tax revenue depends on the property tax rate, the number of properties to be taxed and the annual value of each property.
Property tax rates will go up in two rounds, the first already effective since Jan 1, 2023, and the second on Jan 1, 2024.
“Since more new homes will be completed in 2023 and 2024; and with the higher property tax rates, it’s only natural that the property tax revenue will rise,” noted Mak, adding that the annual value for most residential properties – as appraised by valuers in the Inland Revenue Authority of Singapore based on rental rates – will also be adjusted in 2023.