And so, at 10pm on the 6th of May 2020, finally, some much awaited good news came in for the property market.
Amidst the generous support packages for our worst hit industries like the airlines, retail and hospitality industry, and the generous packages given out to Singaporeans and PRs to tide through these times, real estate industry stakeholders have been eagerly waiting with bated breath for the words to be spoken.
For it is expected. And would have been unreasonable had it not been.
That the real estate market, where perhaps tens of thousands of locals are employed in, would be the next industry in need of a rescue.
Big brother Wong has swooped in with temporary relief measures that is just sufficient at this point in time; what the market needs and not too little or too much.
With the past 2 weeks of constant reminders from the media that jobs are going to be lost en-masse, a longer than predictable recovery and how life will never be the same again, it did not require much more to make developers and agents sulk even in their sleep.
Property sellers i have spoken to recently have mostly agreed to be more flexible on their prices now than they were in early March, while buyers and upgraders are now negotiating much harder than before; hoping to scoop up a good deal.
How will these relief measures impact the real estate market in the next 6 months then?
Let's take a look at the two key relief measures.
Extension of ABSD remission period for the sale of matrimonial homes
Couples who bought their 2nd matrimonial homes and are selling off their 1st one will get 6 more months to do so to qualify for their ABSD remission (refund).
Prior to this, Singaporean married couples are given 6 months upon the date of purchase (Exercise date) of their 2nd matrimonial home (Completed property. Bought under two names) to sell off their 1st matrimonial home.
For uncompleted properties, the 6 months countdown start from the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) date, whichever comes first.
By doing so, they qualify for the ABSD refund which they had paid upfront when purchasing the 2nd property. This can amount to a fair bit of money as the ABSD for Singaporeans buying their 2nd property is 12% or $120,000 for a $1 million dollar property.
This condition has so far been strictly enforced by IRAS and rarely do we hear of exemptions to the rule.
How does this help them?
In light of the disruptions so far, the 6 months period of grace is highly welcomed by all married couples worried about missing their sell by deadlines.
In fact, although we are just 1 month into the circuit breaker which commenced on April 7, the MND has factored in additional buffer time and extended the qualifying period to those whose deadlines were 1st Feb and after.
This should be great news for many couples who had failed to qualify for their ABSD refunds since Feb 2020.
So hopefully, once life resumes on 1st June (fingers crossed!), and you're one of the affected ones, you can sell on time and get your money back!
(Need help with marketing your property? Drop me a note. My team of more than a thousand has specialisations in almost all areas of Singapore.)
(i) The couple’s second residential property was jointly purchased on or before 1 Jun 2020; and
(ii) Prior to the 6-month extension under this temporary relief measure, the specified timeline (last date by which the couple must sell the first residential property to fulfill the ABSD remission conditions) expires on or after 1 Feb 2020.
Read more and apply via: IRAS ABSD Remission for Married Couple
Extension of sale timelines for property developers
Developers with qualifying residential, commercial and industrial property developments.
Prior to this, developers were bounded by a strict time frame to sell out or face stiff ABSD or Qualifying Certificate (QC) penalties.
Given that the circuit breaker and pandemic will take its natural toll on the market, it is clearly not equitable for developers to suffer a reduced sell by time frame on top of additional pricing pressures that were not of anyone's fault.
This automatic extension of sale period will allow market conditions to stabilise, hopefully recover, and deter unnecessary panic selling by developers which would have a cascading effect on the rest of the market.
An important joint statement to highlight by the Ministry of National Development, Ministry of Finance, Ministry of Law and Ministry of Trade and Industry stated that:
"The Government will continue to ensure that prices for private residential properties remain broadly consistent with economic fundamentals.
(My interpretation: We think that prices should not deteriorate at a pace faster than the rest of the economy. However, if the economy deteriorates substantially, then prices might have to follow suit.)
"Hence, these temporary relief measures do not alter the other existing residential property market cooling measures."
(My Interpretation: We are happy with the current measures and do not see the need to tweak anything yet so please do not get the wrong signal.)
Enhancements to the Temporary Relief Measures for the Property Market
On the 13th of May 2020, enhancements were made to the temporary relief measures for the property industry. You can read the detailed FAQ here but here is a brief overview.
The enhancements cover 2 contracts used in the purchase of new projects sales and HDB sales - namely the Option to Purchase (OTP) and Sale and Purchase Agreement (S&P) also known as the Agreement For Lease (AFL) in HDB transactions, which were entered into before 25 March 2020, and with contractual performance due on or after 1 Feb 2020.
Buyers who are unable to exercise their options
This allows buyers who are at the OTP stage but are facing financial difficulties in exercising it, the option to serve a Notification for Relief on the developer so that it cannot forfeit any part of the booking fee up to 19 Oct 2020.
Buyers who are unable to make payments on schedule
Buyers who are unable to make progressive payments due to COVID-19 will also have the option to negotiate for an extension of payment or partial payments with the developer. If a solution fails to materialise, the buyer may serve an NFR to the developer who is then prohibited from suing the buyer or terminating the S&P agreement until after 19 Oct 2020.
In the event where parties cannot agree, both parties may apply to have an Assessor determine a just and equitable outcome for all.
The enhancements are a timely add-on to the 6th May temporary relief measures which had initially solved the woes of matrimonial home upgraders and developers by extending the time frame that they had to dispose of their properties.
However, that initial relief did not address the loss of jobs, income and loan servicing abilities of those who had bought properties prior to the impact from COVID on our shores.
Some of them have been financially impacted and are unable to exercise their options or pay for progressive payments on time.
In normal situations, they will lost their deposits or get sued for specific performance of the contract.
However, as Minister Shanmugam stated, in such times, contracts should be set aside for equity and justice to prevail; in other words, the livelihoods and solvency of people should come first.
The government is giving stakeholders a direction on how legal binding contracts should be handled compassionately in this climate, so that affected parties do not resort to too drastic a stance such as suing or forfeiture of deposits, or even advantage of the other, through rising penalties such as late interest charges or requirements for additional deposits.
The reliefs encourage all parties to negotiate in better faith and do their best to keep the ball in the air long term; which aids in a quicker recovery for everyone.
Overall, this bodes well for the entire market as buyers get more breathing room; and those in genuine financial hardships get to turn to an assessor for help.
Developers would also more likely prefer extensions than get caught up with termination of contracts and legal suits.
How does these then impact the rest of the market?
1st, the sell-side pressures are now temporarily eased and developers and matrimonial home upgraders can now heave a sigh of relief.
On top of the mortgage loan deferments schemes which has helped ease liquidity concerns for property owners, these additional reliefs will see price elasticity stiffen once again, with better solidarity among developers and resale property owners to maintain prices as long as they can.
In short, prices should remain alot more resilient and drastic discounts won't materialise.
Sorry to burst your bubble.
The primary market plays a large role in influencing resale owners, and as long as developers maintain prices, it is very likely that the bulk of the resale market will be propped up as well.
Does this mean that we are out of the woods?
No. We might at best have deferred an eventuality.
How long the global and local recovery will be, the jobs losses and speed of new ones being created and the spread and vaccine for COVID-19 still remain as variables that even renown investors and world leaders have no answer for.
What we do know and should take heart in, is that the bulk of Singaporeans' wealth are held in local properties and CPF, of which a large part are also in properties.
I do not profess to have all the answers but i hope to help you derive your own through these 3 questions.
1. Would any sound government allow the collective wealth of its people to be eroded over a prolonged period of time?
2. Would they do all they can, within their might (With the huge range of policy easing tools at their disposal), to ensure that the masses do not end up feeling poorer from mass asset depreciation?
3. Has the standing of Singapore changed substantially over the course of these months that we will fail to attract similar and increasing amounts of foreign investments in the future?
Maybe then, we can all cling on to these glimmers of hope that safety nets have long been put in place for times like this and focus on riding through this momentous event with our heads held high and hearts emboldened that our future will be better than ever.
Perhaps the worst will happen, or perhaps not. But until then, look forward to a better future. - Seneca
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Stuart Chng, Executive Group District Director at Huttons, is a renowned leader and personality in the real estate industry.
He adores music and can play a few instruments decently without upsetting his neighbours. When not doing so, he enjoys pillow fighting with his son and coming up with silly puns which barely amuses his wife.
Professionally, he is a licensed real estate agent, investor, team leader, speaker and columnist for several property newsletters and blogs and is often quoted in media interviews on 938FM, Channel 8, PropertyReport, PropertyGuru and other publications. Throughout his career, he has helped many clients grow their wealth through selecting great property investments and managing their portfolios actively. Read his clients' reviews here.