How Will Budget 2020 Impact Singapore’s Real Estate Market?
Singapore’s Budget 2020 stands out because of the flu. The coronavirus makes this a real rescue situation, with a lot of measures to combat the outbreak, and deal with the aftermath. But behind this immediate concern, there are ongoing efforts to smooth over existing issues as well. Here are the things that will impact the real estate sector:
For residential real estate
Some of the key things to note here are:
- Enhancements to the Silver Housing Bonus and Lease Buyback Schemes
- Double the U-Save vouchers to help with utility bills
- Another year of conservancy rebates
- HDB Green Towns programme
- Support for start-ups may indirectly mean support for the rental market
1. Enhancements to the Silver Housing Bonus and Lease Buyback Schemes
In his speech, Deputy Prime Minister Heng Swee Keat said that: ” We will do more to help Singaporeans tap their housing assets for retirement by enhancing the Silver Housing Bonus and the Lease Buyback Scheme.”
We don’t know the exact details other than this, as the Ministry for National Development will provide more later.
At present, the Silver Housing Bonus (SHB) gives you up to $20,000 bonus for downsizing your flat (on top of your sale proceeds), and putting the money in your CPF for retirement. $20,000 isn’t a huge incentive, when trying to nudge Singaporeans to make the painful move to downsize (a lot of older Singaporeans see it as a legacy for their children) – we wouldn’t be surprised if the amount is increased.
The Lease Buyback Scheme (LBS) lets you sell the tail end of your remaining flat lease. The exact amount you get for selling the remaining lease is based on current market value. The proceeds go toward topping up your CPF for retirement.
LBS also gives you bonuses of up to $20,000 for three-room or smaller flats, $10,000 for four-room flats, or $5,000 for bigger flats. This is in top of what you get for selling the lease.
There’s currently a cap on how much you can get from the LBS in total ($100,000). We feel this amount is likely to increase.
Like us on Facebook, we’ll update you once we get the details.
2. Double the U-Save vouchers to help with utility bills
Under the wider $1.6 billion Care and Support Scheme, some HDB dwellers will receive double their usual U-Save vouchers to help with utility bills.
Eligible households with five or more members will get even more help with an additional rebate; in total, they’ll get up to 2.5 times their regular U-save vouchers:
|HDB Flat Type||Regular GSTV – U-Save||GSTV – U-Save Special Payment||Additional GSTV – U-Save rebate||Total GSTV – U-Save for FY2020|
For all eligible households
For eligible larger households
3. Another year of conservancy rebates
We had this last year, but it’s being extended for 2020. The Service and Conservancy Charges Rebate will be between 1.5 to 3.5 months for various HDB households again. Wherever you are, it’s probably going to be the same amount you got last year.
4. New HDB Green Towns Programme
The Minister announced a new HDB Green Towns Programme, with three main aims:
- Reduce energy consumption
- Recycle rainwater
- Cooling the towns (no lah, not with more air-conditioning! With more efficient layouts, etc.)
We’re going to find out more details later. But besides the new programme, new HDB estates will now aim for about 45 to 60 per cent “green cover” (that’s a fancy way of saying more planted vegetation). One existing example is the community gardening found in many HDB estates.
The government will also introduce new incentives, to help lower-income households upgrade to more energy efficient appliances. That will also cut down on their power bills, while subsiding the cost of renewing their old appliances. About time, since some of these households have refrigerators so old they could buy you a beer.
4. Support for start-ups and enterprises may indirectly mean support for the rental market
This will get the landlords smiling.
The government wants to “catalyse investment into deep-tech startups”, which translates to pumping $300 million into the industry; the aim is to give them better access to capital, expertise, and industry networks. This is expected to draw around $800 million in private funding over the next decade.
We already saw signs of a push from last year, such as with the Tech@SG pilot programme – this expedites the work passes of foreign tech talent, to support initiatives like our national Artificial Intelligence strategy.
All of this can help to bring in more prospective tenants; and our soft rental market could do with some good news.
For commercial real estate
Commercial real estate is bearing the brunt of the coronavirus outbreak, so it’s no surprise they’re getting more help.
For starters, the GST hike has been postponed. There was a chance it would rise from seven per cent to nine per cent this year. This has two effects on commercial property: first, it helps to support retail and F&B tenants who are already struggling. That eventually translates to lower risk of vacancies or late payments to landlords.
Second, commercial property doesn’t incur the Additional Buyers Stamp Duty (ABSD), but it does incur GST. As such, anyone buying commercial property this year is spared the two percentage point hike.
While it may come as a relief to some sellers (e.g. those rushing to offload their commercial assets this year), we don’t feel many buyers are eager to move into this space right now; this is given weak global economy that’s hurting manufacturing (and hence industrial space), and the impact of the virus on office, retail, and hospitality assets.
For hawkers, there will be a one month rental waiver for NEA-managed hawker centres and markets. HDB, meanwhile, is providing half a month’s rental waiver to commercial tenants. This is to help offset the losses from the coronavirus.
For establishments in private property (e.g. those shops in your condo), there’s a 15 per cent property tax rebate that landlords are encouraged to pass on to tenants.
In a broad based sense, other support schemes will indirectly help the property sector
Other schemes, ranging from help in re-skilling workers to Workfare Special Payment, don’t directly boost the property market. But in the broad sense, they do help to raise confidence in buying a home, or just in paying the mortgage.
We feel a lot of the top “giveaways” for home ownership already came about last year, with the Enhanced Housing Grant (EHG).
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