The latest report has it that the new Seller’s Stamp Duty (SSD) imposed on industrial properties since 12 January 2013 has worked its spell in crimping demand for strata factories. The SSD slaps industrial properties sold within the first three years after purchase with varying rates of stamp duties. The below shows the SSD rates for sale made during the different years.
Seller’s Stamp Duty (SSD) Rates
Holding period = 1 Year
% of price or market value, whichever is higher = 15%
Holding period = 2 Year
% of price or market value, whichever is higher = 10%
Holding period = 3 Year
% of price or market value, whichever is higher = 5%
SLP International reveals that sales of strata factory units declined from 133 in the 28-day period before the imposition of the SSD to 118 in the period after. Breaking down the data into new, sub-, and re-sale, the figures show that demand fell across all categories too.
This is in contrast to the post time-frame after the 5th and 6th rounds of cooling measures in 8 December 2011 and 5 October 2012, respectively, when new sale and subsale rose; while overall sale figures fell. Specifically, for the 5th round, new sale spiked from 78 in the 90-day period before the cooling measures took effect to 170 after. For the 6th round, subsale edged up from 65 to 81 in the pre- and post-period, respectively.
Prices of strata factories with 60-year leases, on the other hand, demonstrated a steady upward trend since the start of 2011, according to Knight Frank. The 5th and 6th round of cooling measures which only involved curbs on the residential markets served to transfer demand to the industrial segment, fuelling price increases.
However, demand in the second half of 2012 might have been dampened by the imposition of a 30-year cap on the tenure of industrial GLS (government land sale), according to Lee Lay Keng, head of Singapore research at DTZ.
For this latest round of measures, it is too early to gauge the effectiveness of the SSD. Less than one quarter has passed since. Senior manager, consultancy and research, Alice Tan, at Knight Frank said that at least two quarters are needed before the impact of the SSD on prices and sales can be ascertained.
The observed lower demand could be due to a knee-jerk reaction from buyers and the approaching Chinese New Year then, noted Tan Boon Leong, executive director of industrial services at Colliers International.
According to DTZ’s Ms Lee, SSD may have limited impact since it will not be a deterrent for owner-occupiers, Reits or developers with a long term view. Moreover, the cooling measures in the residential market will drive buyers to the commercial and industrial segments. Still, price growth is expected to slow due to the regulation imposed by the Urban Redevelopment Authority on non-qualifying users, which could affect rental income.
Using price data of strata factories and warehouses, I found that average unit prices per sq foot (psf) of industrial properties continue to experience price growth in the month after each round of cooling measures except for the 5th round of measures when average month-on-month price dropped by some 6% in January 2012.
Even as demand for strata factories softened following the imposition of SSD, average unit price for all industrial properties grew by about 8% for February 2013 from January 2013. This is in agreement with the findings of Knight Frank, on 60-year lease strata factories, which showed that new sale price remained steady up to February 2013, averaging $420 psf.