The current hot topic of discussion about property investment is about the misuse of industrial properties and investing into shoe-box industrial properties.

It first started when the Straits Times wrote an article about how more and more companies were shifting their operations to industrial properties because of the lower rental.

This drew the attention of Minister for National Development Khaw Boon Wan who called on developers and property agents not to mislead buyers into misusing industrial land for unauthorised office or commercial activities.

Even worse, there were shoe-box industrial properties which were being developed and sold.

According to the minister, it is unlikely that a property of such size (50-80 sq m) could be used for any meaningful industrial use.

Investors who buy those shoe-box industrial properties with a view of renting them out later might find themselves stuck with the property.

Shoe-box Factories? (Blog of National Development Minister Khaw Boon Wan)

Financial institutions who provide housing loans will now be required to provide a loan fact sheet to the person taking the loan.

The objective of the fact sheet is to help potential borrowers see the basic information of the loan in an easy to read format.

Borrowers will also be given projections of the loan repayment amounts if the interest rate changes. This is a good thing as some people might not be aware that the monthly loan repayment amount can change drastically if there is a big change in interest rates. Hopefully, it can encourage prudence among property buyers.

The sheet will also include notes such as the seller stamp duties that will be incurred if the buyer of the property sells it early.

In addition, fact sheets will have to be updated and provided to the buyer whenever there are changes to the loan’s key features.

The requirement to provide fact sheets will only apply to individual and not corporate borrowers.

For high net worth individuals or private banking clients, financial institutions will still need to give them the fact sheet if it is a standard mortgage loan. However, if the loan has a non-standard customised structures, where it is difficult to illustrate the residential property loan terms on a standalone basis in the Fact Sheet format, the FI will not be required to provide the Fact Sheet to these people.

The government yesterday announced more measures to cool the property market.

With immediate effect, an Additional Buyer’s Stamp Duty (ABSD) will be imposed on certain categories of residential property purchases:

• Foreigners and non-individuals (corporate entities) buying any residential property will pay an ABSD of 10%;
• Permanent Residents (PRs) owning one and buying the second and subsequent residential property will pay an ABSD of 3%; and
• Singapore Citizens (Singaporeans) owning two and buying the third and subsequent residential property will pay an ABSD of 3%

The decision to impose a high stamp duty on foreign buyers is in view of the large pool of external liquidity and strong buying interest from abroad, and the relatively small size of the Singapore market. Foreign purchases account for 19% of all private residential property purchases in 2H2011.

I think this is something way overdue.

The 10% ABSD could have a psychological as well as financial impact on foreign and corporate buyers, especially those short term speculators. People might not feel a 1, 2, 3, or 5% stamp duty but when it crosses the double digit mark, the feeling is somehow different.

The full press release of the announcement can be found here:

Additional Buyer’s Stamp Duty for a Stable and Sustainable Property Market