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Q My Wife and I own three properties. We live in one and rent out the others. On my death, how will they be assessed for estate duty?

I understand that residential properties worth up to $9 million are not subject to estate duty.Will the property value for estate duty purposes be calculated after deducting any outstanding mortgages?

Will the value be my half share or the full value? Will the $9 million threshold be applied to just one property or all three?

My wife and I also have joint ‘either and or’ bank and investments accounts. Will the value of these assets be based on the full value or just my share?

A Let’s assume all three properties are used or rented out for residential purposes and the deceased and his co-owner paid for their respective share of the properties.

In that case, the deceased’s share of the total value of the properties, less the outstanding mortgage, will enjoy the $9 million exemption.

All other assets, including CPF balances, of up to $600,000 are also not subject to estate duty.

If any of the properties is used for non-residential purposes - a shophouse, for example - the deceased’s share in the value of the shophouse less the outstanding mortgage, will be added to the value of the other assets. The combined value up to $600,000 will be exempted from estate duty.

In the case of assets in joint names, the value of those liable for estate duty would generally depend on the share of funds contributed by the deceased to acquire them.

For example, in the case of a bank or investment account, if the deceased provided all the funds, the full value of the account will be added to the ‘other assets’ for the $600,000 exemption threshold to be applied.

If there is evidence that the deceased’s contribution was half, only half of the balance (of the account) will be treated as his estate.

For more information on estate duty, please see

 http://www.iras.gov.sg/ESVPortal/others/estate/index.asp

Lee Leng Kiong Director (Corporate Communications) Inland Revenue Authority of Singapore

Advice in this column is not meant as a substitute for comprehensive financial advice.  

Source : Sunday Times - 28 Jan 2007

New URA indices also show 25% price jump in prime districts, Downtown Core, Sentosa

Divergence

URA Price Index Q4 2006

Revamped private housing data from URA released yesterday show the highest volume of sub-sales last year was in the prime districts, the Downtown Core including Marina Bay, and Sentosa. Prices of uncompleted non-landed homes in these areas also jumped 25.4 per cent in 2006.

Sub-sale deals in the core central region comprising districts 9,10, 11, Downtown Core and Sentosa made up almost 10 per cent of all private housing deals in these locations in Q4 last year.

The URA data also show further evidence of a very uneven market, with full-year price gains for completed non-landed homes of as little as 0.9 per cent in the rest of the central region (which includes places like Bukit Merah, Geylang and Toa Payoh), 2.9 per cent outside the central region, and 9.9 per cent in the core central region.

Welcoming the detailed indices, DTZ Debenham Tie Leung executive director Ong Choon Fah said they confirm the development of a two-tier market. ‘This year, we’re going to see more launches and new benchmark prices set in the core central region.’

Colliers International director Tay Huey Ying said: ‘The new figures tally with the common perception that newly launched, non-landed projects in the hotspot locations of the Orchard Road luxury belt, Marina Bay and Sentosa Cove have registered the sharpest gains.’

URA’s overall private home price index rose 3.8 per cent in Q4 from the preceding quarter, and 10.2 per cent for the whole of last year.

In the core central region that includes the traditional prime and newly popular waterfront districts of Marina Bay and Sentosa Cove, the price index for non-landed private homes rose 4.9 per cent quarter-on-quarter in Q4 2006 and 17 per cent for the year.

A further breakdown of the figures shows uncompleted properties posted bigger gains than completed properties. The former rose 6 per cent in Q4 and 25.4 per cent full-year, while the latter rose 3.1 and 9.9 per cent respectively.

The overall - uncompleted and completed properties - index for non-landed private homes in the rest of the central region was up 2.2 per cent for Q4 and 3 per cent for the year.

The outside central region - which covers typical suburban mass market locations such as Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok - posted smaller increases of 1.5 per cent in Q4 and 4.2 per cent for the full year, on an overall basis.

In the public housing segment, the HDB resale flat price index rose 1.97 per cent for the whole of 2006.

Prior to yesterday, URA had only made public global private home price indices for various housing types - condos, apartments, terrace, semi-detached and detached - without giving a breakdown by location. This tended to mask the two-tier market that has been developing over the past couple of years.

Prices in prime districts and new waterfront districts at Marina Bay and Sentosa Cove have been racing ahead - fuelled by strong demand from foreigners, won over by the global city story the Singapore authorities have been pitching, as well as well-heeled Singaporeans.

In contrast, prices in traditional suburban locations like Woodlands, Hougang, Tampines and Bedok, where most average Singaporeans live, have gone up much less.

URA’s figures also show the highest concentration of sub-sale activity - a gauge of speculation - last year was in the same core central region, with 285 deals or 67 per cent of the total 426 sub-sale transactions island-wide in Q4 last year.

Sub-sales accounted for 9.7 per cent of total private home deals in the core central region in Q4, compared with 3.5 per cent in the rest of the central region, and 2.3 per cent in outside central region.

Across the island, 426 private homes changed hands in the sub-sale market in Q4 last year, up 47 per cent from the preceding quarter. The Q4 sub-sales made up 5.4 per cent of the total 7,896 private home transactions island-wide in both primary and secondary markets in Q4 last year - higher than 2.7, 2.5 and 5.1 per cent respectively in Q1, Q2 and Q3 last year.

For the whole of last year, there were 989 sub-sale deals, accounting for 4.1 per cent of total transactions. This was up from 3 per cent in 2005 and 2.72 per cent in 2004 - confirming that sub-sale activity is on the rise.

Still, current sub-sale shares are lower than during the two recent property bull runs. In Q2 1996, sub-sales accounted for 28.4 per cent of all transactions of private homes, while in Q3 1999, the figure was 11.1 per cent.

URA has also given a breakdown of unsold private homes from projects with planning approval (either provisional permission or written permission) by location. This shows there were 11,361 unsold homes in uncompleted projects in the core central region at end-Q4 2006, down from 12,958 a quarter earlier.

Developers launched 11,069 private homes last year - comprising 3,850 in the core central region, 4,003 in the rest of the central region and 3,216 in the outside central region.

They sold a total of 4,162 uncompleted private homes in Q4 last year and 10,363 for the whole of 2006 - surpassing the previous high of 9,565 recorded in 1996. The 10,363 units comprised 3,957 in the core central region, 3,751 in the rest of central region and 2,655 in outside central region.

In total, 7,896 private homes were sold in the primary and secondary markets in Singapore in Q4 last year, one of the highest quarterly figures ever.

Source : Business Times - 27 Jan 2007

Disproportionate demand for plum apartments skews figures
 
IT’S confirmed — condo prices in areas like Marina and Sentosa are outpacing their mass-market cousins in neighbourhoods like Woodlands.

Statistics from the Urban Redevelopment Authority, which for the first time is breaking down the prices of private homes by geography, show that there is a disparity of growth between the luxury and low-end markets.

High Rise Figures

Last year, non-landed property prices in the prime areas, also known as the core central region — defined as districts 9, 10, 11, Singapore’s downtown and Sentosa — increased by 17 per cent.

However, its lower-tiered peers at the rest of central region — such as Toa Payoh and Marine Parade — saw only a 3-per-cent jump in prices, while those outside of it, in areas such as Sembawang, had a 4.2-per-cent rise.

Properties in the core central region also dominated the fourth-quarter sub sale market, usually seen as a measure of speculative activity.

Of the 426 sub sales made during the last three months of last year, some 67 per cent came from the top-end market.

Overall private residential property prices for the whole of last year showed a 10.2-per-cent growth, compared with the 3.9-per-cent increase of 2005.

“The property price index clearly shows that the rise in the price of all types of residential property was led by the price growth in the newly-launched non-landed projects in the hotspot locations of the Orchard Road luxury belt, Marina Bay and Sentosa Cove,” said Ms Tay Huey Ying, director for research and consultancy, Colliers International.

The rental market for private homes also hit a 16-year record, with prices rising 14.1 per cent for the whole year.

This can be attributed to the diminished supply and increased demand caused by the year’s collective sales, said experts.

And the good news is that the property market will likely continue on its upward trend.

“The heat from Sentosa and Marina Bay will cool for a short while as investors re-focus on Orchard Road properties such as St Thomas Suites, the Beaufort on Nassim,” said Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

Ms Tay expects the price index to increase by 10 to 12 per cent for the coming year, with uncompleted non-landed properties in the core central region leading the way with a potential 15-to-20-per-cent rise.

However, other experts are taking a more conservative view.

“The market will exhibit steady growth but will remain sluggish outside of the core central region,” said Mrs Ong Choon Fah, executive director, regional head, consulting and research at DTZ Debenham Tie Leung.

In the public housing sector, the Housing and Development Board’s (HDB) resale price index for Q4 2006 climbed to 103.6 points, a 1-per-cent increase over the previous quarter. However, the total resale transaction volume for the year stood at 29,723 — some 4.3-per-cent less than the 31,056 resale transactions conducted in 2005.

The average valuation of resale HDB flats showed little growth in the final quarter, registering an increase of less than 1 per cent across the board. Three and four-room flats showed the largest increase, rising 0.5 and 0.6 per cent, respectively, to $165,300 and $234,800.

Unlike that of the luxury market in the private sector, experts project a rise of only 1 to 2 per cent in HDB resale prices.

“We are in a mature market and are likely to experience similar price increases throughout this year as the market is very much stabilised, with no significant factors causing prices to move significantly up or down,” said Mr Eugene Lim, assistant vice-president, ERA.

Source : Weekend Today - 27 Jan 2007

The number of Housing Board resale flats transacted fell below 30,000 for the first time in a decade in 2006, a move which could indicate homeowners’ refusal to part with their assets while the valuations are still under water, industry players said.

Resale transactions totalled 29,723, some 1,333 units or 4.3 per cent less than 2005’s 31,056 units - and 40.1 per cent lower than the transaction volume of 49,618 seen in 1998 - according to data provided by property firm ERA. ERA said it compiled the data provided by HDB over the years. While those in the industry attributed the drop in transaction volume to a few reasons, one chief cause has to be the small increases in prices of HDB resale flats over the past few years.

This means that owners are sitting on flats which they can’t sell for a profit.

The HDB resale price index released yesterday shows that prices climbed one per cent in the fourth quarter of 2006, and some 2 per cent over the whole year. But the index is still lower than it was throughout 1996, 1997, 2000 and 2004, as well as during certain quarters in 1998, 1999, 2003 and 2005.

‘They (HDB flat owners) purchased the flats at higher than today’s prices,’ said Mohamed Ismail, chief executive of property firm PropNex.

Another reason, said ERA assistant vice-president Eugene Lim, could be the condominium launches targeting the mass market seen in the second half of 2006. ‘According to the Urban Redevelopment Authority’s statistics, there were 2,936 new sale transactions in the ‘Outside Central Region’ in 2006, compared with 2,363 units in 2005 and 2,179 in 2004,’ said Mr Lim. Upgraders could be buying these entry-level condominium apartments rather than bigger HDB flats.

Also contributing to the low resale flat volume are HDB’s continued efforts to clear its unsold stock via the Walk-in-Selection programme, its Build-To-Order programme, and the successful launch of the Design, Build & Sell Scheme by private developers. More such launches are expected in the near future. Some HDB homeowners are doing better than others, however. Chris Koh, director of Dennis Wee Properties, said that some flats in the premium estates and those located near amenities are selling for $5,000-$10,000 above their valuations.

However, at less popular locations, sellers are having trouble moving their units at valuation prices, and at times are selling their homes for $5,000-$10,000 below the valuation price.

Property firms expect the low volume of resale transactions to continue in 2007 as prices continue its slow climb. PropNex’s Mr Ismail predicts that resale volume will fall to 28,000 while ERA’s Mr Lim is slightly more bullish, expecting it to hit between 29,000-30,000.

For the HDB resale price index, market watchers say it could increase by about one per cent each quarter in 2007, ending the year about 4 per cent up.

Source : Business Times - 27 Jan 2007

Q4 2006 private home rents up 14%; office rents up 30.3% year-on-year

RENTS for homes as well as offices have soared in the past year, with the latest official rental index figures showing levels not seen in at least eight years.

Comparison of Rental Index 2006

For private homes, the Urban Redevelopment Authority’s rental index for the fourth quarter of 2006 is now 14.1 per cent higher than it was a year ago. The index has gone past the peak in Q3 2000 and at its highest since Q3 1998. It is also 18.6 per cent above the trough of Q2 2004.

Office rents increased even more dramatically, with the index for all areas up by 30.3 per cent year-on-year. The index is higher than the recent peak of Q1 2001 and the highest since Q1 1998. It is also 52.8 per cent higher than the trough in Q1 2004.

Other sectors including shops and industrial space registered more moderate year-on-year increases of 5.6 per cent and 4.2 per cent.

Most analysts say one factor in the upward pressure on residential rents is the depletion in stock due to collective sales. CB Richard Ellis (CBRE) Research executive director Li Hiaw Ho says: ‘Just in the Orchard area alone, we expect a depletion of some 900 apartments as these properties give way to new developments.’

By Savills Singapore’s calculations about 6,000 homes have been lost through collective sale in the last two years. The agency’s director (marketing and business development) Ku Swee Yong believes this suggests ‘net negative supply’ for 2007, and could push rents up another 15-20 per cent by the end of the year. Based on Savills’ own basket of properties in the prime districts, rents increased 19 per cent year-on-year from $4.08 psf to $4.87 psf, and 6 per cent quarter-on-quarter from $4.58 psf.

Comparing the increase of the rental index against the property price index - which also saw record highs in Q4 2006 - Mr Ku says the figures seem to support the line that property speculation is not rampant as the ‘capital values are supported by the rental values’. ‘This would not be the case in a speculative market,’ he says.

Still, Chesterton International head of research and consultancy Colin Tan reckons the rental index could be more useful if it were broken down into sub-indices reflecting geographical areas. He believes rents in some areas have increased by as much as 50 per cent.

Knight Frank director (research and consultancy) Nicholas Mak believes expatriates make up 90 per cent of the rental market.

Mr Mak also noted that the 14.1 per cent increase is the steepest since 1991, which could signify a milestone in the property market as he believes the performance of private residential rental index can be more ‘timely’ than the property price index. ‘The rental index gives a gauge on the property market even for properties that do not register high transactions,’ he explained.

As such, the dramatic increase in the rental index for offices, which increased 11.6 per cent quarter-on-quarter and 30.3 per cent year-on-year, should be setting off alarm bells.

Most analysts have lamented the lack of new office space supply.

At CBRE, Mr Li notes that official figures reveal that demand for office space totalled 2.4 million sq ft in 2006, higher than the 1.959 million sq ft for 2005. ‘The steepest rental increase is expected in the next 12-18 months as demand drivers remain extremely strong,’ he added. CBRE estimates prime rents to rise between 35-40 per cent during 2007.

Demand for shop space was about 980,000 sq ft or 8.3 per cent higher than 2005. Mr Li notes that new supply of about 1.7 million sq ft was added in 2006 and quickly absorbed. The last peak was 1.78 million sq ft of new supply in 1998.

Source : Business Times - 27 Jan 2007