Foreign property buyers in Singapore are being promised a 'partial reimbursement' of the additional buyer's stamp duty (ABSD) which was introduced in early December 2011 in an attempt to curb overseas interest.
Property developer Far East Organization is giving foreigners at its Watertown development (pictured) in Punggol a three percent 'reimbursement' upon contract signing and a further two percent when the project receives its Temporary Occupation Permit (TOP) in 2016.
The 'reimbursement' has formed part of Far East's marketing and advertising initiative overseas, including in Indonesia where a recent property exhibition in Jakarta attracted good levels of interest from local buyers. PropertyGuru understands that more than 20 units have been sold to Indonesian buyers in recent weeks.
A Singaporean house hunter choosing to remain anonymous told PropertyGuru, "We can't do anything about (foreigners being offered reimbursements) as that's a result of market forces. But it totally defeats the purpose of a tax, so I think it's pointless."
When asked about this, Colin Tan, Research and Consultancy Director at Chesterton Suntec International, said he does not believe the new measures were introduced to differentiate locals from foreigners and has nothing to do with politics.
"The authorities see the inflow of foreign funds as potentially damaging, if not now, then in future. Foreigners who are already working and living in Singapore are really not the problem but because they need a proxy to stem the inflow of outside funds, the most convenient target is all foreigners!"
Tan added that the stamp duty reimbursement doesn't necessarily mean a discounted property bargain. "The ability of the developer to reimburse (or actually pass on the costs) of the stamp duty depends on how much monopoly power its product has over the market and it is tantamount to a price increase if does not actually absorb the cost. By playing with discounts, the developer gives the impression that it is absorbing the stamp duty cost when it is not."
Most recently, PropertyGuru reported widespread incidents where local developers are offering reimbursements to Singaporeans and permanent residents (PRs). Analysts say there is nothing wrong with this marketing tactic.
"If developers give an outright discount of five percent, people will think the government measures are working," said Png Poh Soon, Head of Research at Knight Frank.
"But buyers will also be thinking of the additional stamp duties they will have to pay. So in a way, it also helps developers show that they are addressing the needs of their buyers," he noted.
Watertown sold 771 units during January although the figure is now understood to be more than 800.
Replying to an enquiry from PropertyGuru, Far East Organization said its promotions are intended as price discounts rather than a total reimbursement of stamp duty. It is not meant to offset the additional stamp duty that applies to some buyers.
The company added that subsidy rates differ among the various Far East projects, but that at each project it applies at the same rate to all buyers across the board. It can take the form of furniture vouchers or cash, both of which are typically given to buyers when a project attains its TOP.
PropertyGuru understands that incidents of Singapore developers offering 'partial reimbursements' to foreign buyers is not yet being used as a widespread marketing tactic. Related Stories:
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