Proposed property tax change in Singapore criticised as it could harm recovery

Proposals to change to income tax laws on gains from property sales in Singapore has come under fire as some believe it is a move to curb real estate speculators.

The real estate industry is calling for greater clarity on whether gains from property sales will be taxed. The Ministry of Finance said that there will be no tax on the gains from an individual who sells a property after 1 January 2010, if they have not sold any other property in the previous four years.

But some believe that individuals who have sold more than one property within a four year period will automatically have to pay more tax. This has now been denied by the MOF. 'The proposed change is not an anti-speculation measure. It does not mean that individuals will automatically be subject to income tax,' the department said in a statement.

But the proposals have panicked some property investors, many of whom returned to the market only recently. Despite the MOF statement there are fears in the real estate industry that investors might pull out of the property market due to the rumours and confusion of the new ruling. They claim that it is already affecting the prices of properties in several areas.

Despite the reassurance by the government, industry watchers are skeptical of the changes. Some of whom stand by the anti-speculation theory.

'We believe that the government may be sending out a signal through this proposal to cool property transactions, especially in the high-end,' said Donald Chua, an analyst at CIMB.

The real estate industry does not want the current improving property sector to be hit. The country may be in a recession but the latest figures from the Urban Redevelopment Authority shows that more new properties are being sold.

'Singapore is probably the only place on earth where there is a recession and unemployment but the property market is still so hot,' said Eugene Lim, associate director of property firm ERA Asia Pacific.

Investors prefer to put their money into property than to earns poor interest rates from the banks, according to Chua Chor Hoon, head of research at DTZ South-east Asia.