When taxes are high, it can be tempting to avoid paying such taxes. However, using dodgy tax avoidance schemes will land one in hot soup.

In a written parliamentary reply last week, Deputy Prime Minister and Minister for Finance Lawrence Wong said the “99-to-1” scheme is a tax avoidance arrangement used by some property buyers to reduce the rightful Additional Buyer’s Stamp Duty (ABSD) payable on the purchase of residential property.

The Inland Revenue Authority of Singapore discovered 166 cases of private property purchases that involved tax avoidance as at April. Around S$60 million in ABSD and surcharges will be clawed back. About 10 cases with evidence of potential involvement by property agents are under review by the Council for Estate Agencies (CEA).

Under the “99-to-1” arrangement, a homebuyer who pays zero ABSD may buy a home entirely in his name and shortly thereafter transfer an ownership interest of 1 per cent to another person with a higher ABSD profile so the other person can be the property’s co-owner as well as a co-applicant for a loan to finance the purchase. 

Meanwhile, the CEA, a body under the Ministry of National Development (MND), is investigating the recent resale listings for two Housing and Development Board or HDB flats for being “misleading” and “unrealistic” in their asking prices of S$2 million.

In a joint statement last week, MND, HDB and CEA said the listing for the Sengkang flat, with 2,400 square feet in size, is misleading because there are no jumbo flats in the area. According to the statement, the ‘jumbo flat’ listed is actually two adjacent five-room flats, which are not eligible to be converted into and sold as a single unit.

The government agencies also noted the S$2 million listing price for the flat in Toa Payoh was nearly S$500,000 higher than the highest transacted price in the area. 

Perhaps transparency and efficiency in HDB resale flat sales will improve with the launch of the HDB Flat Portal. Owners of HDB flats or their property agents can list their homes for sale directly on the HDB Flat Portal from May 13.

Market watchers reckon that the new service can help to prevent price manipulation and promote market stability. Some analysts also believe that the new resale flat listing service may lead to less reliance on property agents.

BTO flats

While no HDB resale flats have transacted at close to S$2 million, a small proportion of resale flats have sold for well over S$1 million each. And the HDB Resale Price Index has risen substantially since the outbreak of the Covid-19 pandemic.

It might be timely to help homebuyers who have to resort to the HDB resale market because they cannot buy subsidised Build-To-Order (BTO) flats from the HDB.

In The Level Ground, I suggest expanding the eligibility criteria for buying BTO homes. This can be done together with safeguards such as tougher resale conditions. 

One possibility is to allow high-income local couples who bust the S$14,000 monthly household income ceiling and households comprising permanent residents (PRs) to buy BTO homes. Additionally, consider giving local singles the chance to buy three-room and larger BTO units, as some singles may have a genuine need for larger-sized BTO homes.

Despite its declining birth rate, Singapore still needs to build large-scale housing developments in areas such as Paya Lebar Air Base and the turf clubs in Bukit Timah and Kranji, said Lim Eng Hwee, chief executive of the Urban Redevelopment Authority. Lim noted the country’s housing needs have shifted over time, “partly driven by increase in population, but a lot more driven by change in lifestyles”. For example, the average household size among Singapore’s resident population – Singaporeans and PRs – in 1990 was 4.25, compared with 3.11 in 2023.

Abundant liquidity

Beyond the housing segment, Singapore properties continue to attract robust demand.

Sales of shophouses rose 52.2 per cent to S$169.1 million in Q1 from the previous quarter, as interest from high-net-worth investors returned, said a report by property consultancy Knight Frank. Overall average unit price per square foot (psf) of land area rose 27.1 per cent to S$5,566 in Q1 from S$4,380 in Q4 2023.

Meanwhile, PGIM Real Estate reportedly received firm offers and is close to sealing deals on two floors of strata office space at 108 Robinson Road in the Central Business District. Three floors of the freehold building were put up for sale at a guide price of S$18.2 million per floor, or about S$3,850 psf.

Frasers Property (FPL) is reported to be in advanced negotiations for a potential sale of its 72-unit serviced apartment property and three conserved warehouses along the Singapore River. An entity linked to Tuan Sing Holdings is tipped as the prospective buyer. It has reportedly been doing exclusive due diligence for a potential purchase at slightly over S$130 million.

Last week, FPL announced an 81.8 per cent drop in net profit in the six months ended March. Non-cash unrealised fair-value losses and impairment on some of its commercial properties in the UK and Australia, as well as lower residential contributions from Singapore and Thailand, dragged down earnings for the group. For the six-month period, FPL executed capital recycling transactions totalling S$1.1 billion.

Outside of Singapore, new home sales in Hong Kong surged to a record high in April, as buyers rushed to the market after the government removed property curbs. The value of primary market home sales reached HK$42 billion (S$7.3 billion) last month, more than triple the value of transactions in March, according to Ricacorp Properties. The number of monthly sales at 3,545 was the highest since 2006.

Two major Chinese cities - Hangzhou and Xian - said last week they would lift all restrictions on buying homes, joining a growing list of urban areas rolling back curbs as they look to prop up the faltering property market.

As China is into its third year of an unprecedented housing downturn, President Xi Jinping is said to be finally getting worried, prompting speculation of quantitative easing and fuelling a bull run in Hong Kong-listed Chinese stocks, according to Bloomberg. 

Should more people be allowed to buy HDB BTO homes? Let me know your thoughts at lyee@sph.com.sg