SINGAPORE (Reuters) - Singapore’s decision to increase stamp duty on expensive home purchases is unlikely to derail a recovery in the city-state’s housing market, with modest price gains still expected this year, the head of a property developers’ association said on Friday.
The government this week raised the stamp duty on the portion of a residential property’s value above S$1 million ($761,615) to 4 percent from 3 percent.
“Although the stamp duty hike may add some friction to transaction volumes and buyers are still price-sensitive, it is unlikely to derail the recovery,” Augustine Tan, president of the Real Estate Developers’ Association of Singapore, said at an industry gathering.
Tan said the tax hike, together with substantial premiums paid by developers for residential sites, may translate into higher prices for new projects in the future, but he told Reuters the broader recovery is likely to remain slow.
Prices in Singapore’s private home market rose for the first time in four years in 2017, though it was a modest 1.1 percent.
“We should be able to see a slow rise (in prices in 2018). At least what we had last year, if not more,” Tan said on the sidelines of the event.
Some analysts, however, have forecast price rises of as much as 10 percent this year, and Singapore’s central bank has warned about an “excessive exuberance” in the property market.
Eager to refill their project pipeline after a long property slowdown, developers have recently been bidding aggressively at government land sales and on “en bloc” or collective sales of residential apartment buildings.
Tan said developers could become more “selective” about these collective sales going forward, partly due to the higher taxes.
“They might want to consider in their bidding for the land that there is an additional cost...Developers could be more selective but those who have not bought yet will buy,” he said.
Reporting by John Geddie Editing by Shri Navaratnam and Kim Coghill