Death Tax Buried

Source : TODAY, Weekend, February 16, 2008

Banks hail move that will boost S'pore's position as a premier financial centre

With intensifying calls over the years for estate duty to be abolished, the Government has finally laid the outdated tax to rest, in a move that should boost Singapore's standing as a wealth-management centre.






















Explaining the decision to do away the source of $75 million in average annual revenue for the Government, Finance Minister Tharman Shanmugaratnam noted that the tax on estate was inherited from the British.

"Estate duty is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time," he said. "It was especially relevant at the time when the bulk of wealth comprised land that was passed down through the family."

But these days, wealth is being created in many more ways, and by a wider group of entrepreneurs, he added.

And with wealth being managed on a global basis, financial experts have been stressing that the removal of estate duty in Singapore would encourage wealthy individuals from all over Asia to bring their assets here.

Ordinary Singaporeans have also said they would like to pass their assets on to their families. Some incurred estate duty when their estates received large life insurance payouts upon their deaths, noted Mr Shanmugaratnam.

Exemption from estate duty had applied to the first $9 million of residential properties and the first $600,000 for non-residential assets. While the Government did consider raising the $600,000 limit so estate duty would have less effect on middle and upper-middle-income estates, this would further shrink an already narrow tax base and render the tax less effective.

Thus, removing Estate Duty would not just be a "practical or expedient measure", but one that "on balance will be in our collective interest", he said.

"If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth."

Banks and financial institutions here enthusiastically hailed the death of estate duty.

"We are happy to give estate duty a decent burial and final send-off, said Ernst and Young's partner of tax services, Ms Winnie Liew. The Association of Banks in Singapore said the move was "very favourable for the further development of Singapore as a premier financial centre".

Standard Chartered Singapore's general manager of wealth management, Mr Dennis Khoo, noted that while it might mean a loss in tax revenue, there is an overall nett gain for Singapore if the wealthy choose to retire here.

Singapore's remaining tax on wealth is now on property and this would be retained, said Mr Shanmugaratnam: "You cannot tax-plan it away. It also does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones."

Pullback In Property Buying To Continue, Car Sales Likely To Pick Up In Coming Months

Source : TODAY, Weekend, February 16, 2008

Latest housing and retail sales data both show increased cautiousness led to a pullback in buying. But while sales of cars and other big-ticket items are likely to pick up in the coming months on the back of rising incomes, the slow take-up rates in property sales will likely continue to bleed into the next two to three months.

According to the Urban Redevelopment Authority, the number of new private homes sold in January remained unchanged from 328 in December, while developers launched 410 units, down from 492 in December.

“Investor demand has clearly dried up,” said Mr Colin Tan, head of consultancy and research, Chesterton International. “It’s related to the stock market. It’s very volatile, one day up, next day down. So, I think the tremendous amount of uncertainty with respect to the global economic outlook is obviously causing investors to stay away from buying property at this time.”

Smaller developments, especially those outside the central areas, saw demand, said Mr Tan - citing the sale of 79 units at Waterfront Waves at Bedok Reservoir Road. Most of the units sold last month were from outside the central region (170) and cost below $1,000 per square foot.

The modest start to the year is likely to prevail, said property consultants.

“The low numbers would probably continue for the next one or two months, certainly for the first quarter of this year, until the dust settles and we get a clearer picture of how the sub-prime problem has affected bank earnings,” said Mr Donald Han, managing director of property consultancy Cushman and Wakefield.

That cautious outlook also holds true for the retail sector, even as festive shopping led to a 2.5 per cent year-on-year gain in sales in December, which reverses a 0.3-per-cent decline in November, Department of Statistics data show.

But motor vehicle sales contracted for the third straight month in December, dropping 12.5 per cent year on year.

“This possibly reflects an increased cautiousness with regards the future or that potential car owners are very sensitive to certificate of entitlement costs and petrol prices,” HSBC economist Prakriti Sofat said. Oil prices breached US$100 a barrel last month, increasing fuel and transport costs for consumers.

20,000 Sq M Office Space To Help The Squeeze

Source : TODAY, Weekend, February 16, 2008

By 2012, Singapore will have an additional 1.4 million sq m of office space. Some 150,000 sq m of additional space will also be added near term.

But that is small consolation to businesses facing a rapid rise in rentals on a surge in the growth in business and financial sectors. To ease the squeeze in office space further, the government will move some government agencies out of the central area.

“We will now free-up 20,000 sq m or more by first quarter 2009 for use by the private sector. This is equivalent to 20 floors or more of an office tower block in Suntec City,” said Finance Minister Tharman Shanmugaratnam.

The government will also defer $1 billion of less-urgent projects to ease construction costs, Mr Shanmugaratnam said. “This will only affect projects that are less urgent. Key investments such as the expressways, the Downtown Line and the NUS University Town will not be affected.”

Office rents climbed 56.1 per cent last year, according to Urban Redevelopment Authority statistics. “Although, 20,000 sq m does not seem like much, we are now in a situation where office space is so tight that every little bit helps,” said Mr Ku Swee Yong, corporate business and residential director at Savills Singapore.

Robust Economy, Property Market Lead To $6.4b Surplus

Source : The Straits Times, Feb 16, 2008

THE Government racked up a Budget surplus of $6.45 billion last year, the highest since 1994, outdoing even the most bullish of market forecasts.

Unexpectedly strong economic growth and a runaway property market sent tax revenues surging, putting paid to an initial projection of a $700 million deficit.

But such a sizzling performance is not expected in the next financial year, with an $800 million deficit pencilled once handouts and changes announced in the Budget are accounted for.

Economists, who were predicting a surplus of between $4 billion and $5 billion, said they were caught out by higher-than-expected consumption and real estate-related tax collections.

They were also surprised by the size of ‘budget hongbaos’ that will be given out next year. ‘It’s a very generous Budget, with much more special transfers than last year,’ said United Overseas Bank (UOB) economist Ho Woei Chen.

Finance Minister Tharman Shanmugaratnam yesterday told Parliament the unexpected surplus came on the back of exceptionally strong economic growth.

‘We started the year expecting a growth rate of 4.5 to 6.5 per cent, which was also in line with market forecasts. With actual growth at 7.7 per cent, corporate and personal income taxes came in some $1 billion higher than projected.’

As anticipated, strong company profits sent income tax collections from businesses up 6.2 per cent to $9 billion despite a cut in the corporate tax rate from 20 per cent to 18 per cent.

Bigger wages and a tight job market sent personal income tax revenues up 18.1 per cent to $5.56 billion.

The strong economy also boosted goods and services tax (GST) revenues.

While a rise was factored in, given last July’s GST hike from 5 per cent to 7 per cent, the final figure was $1.2 billion higher than initial estimates. This, said Mr Tharman, was due mostly to higher consumption.

He added that the rate hike raised $1.4 billion in revenues, matching the size of benefits paid out in the year through the GST Offset Package and Workfare.

Economists said a buoyant economy enabled retailers to raise prices to pass on the GST hike. The higher prices, in turn, translated into more GST paid.

But the biggest surprise came from the red-hot property market, said Mr Tharman. Stamp duty rose to a record $3.8 billion, $2.3 billion higher than expected. Other property -related revenues also clocked in $1.1 billion above projections.

‘These were large gains, out of the ordinary, and which we cannot expect to see very often,’ he said.

UOB’s Ms Ho noted that net investment income contributions seemed low at $2.3 billion, given buoyant markets last year. ‘It’s the lowest since Sars-hit 2003.’

Mr Tharman said the Government is amending the Constitutional framework to let it draw on more investment income from its reserves. This would allow it to further enhance tax competitiveness.

A Bill will go before Parliament later this year.

In the year ahead, operating revenues are predicted to inch up 0.5 per cent. Spending will rise 12.5 per cent and special transfers will more than double.

Citigroup economist Chua Hak Bin said the estimates are very conservative as in previous years. ‘We could see another surplus next year.’

More Office Sites In The Offing To Ease Space Crunch

Source : The Straits Times, Feb 16, 2008

AT LEAST 20,000 sq m of office space - equivalent to 20 floors or more of an Suntec City block - will be freed up to help the private sector deal with the space crunch.

The initiative will kick in by early next year.

Finance Minister Tharman Shanmugaratnam said the tight supply of office space, a short-term problem, stemmed from the surge in business growth, which has brought higher rents in its wake.

‘Although office space on average still costs 30 per cent to 50 per cent less in Singapore than in Hong Kong and Tokyo, the pace of cost increases has been rapid and unsettling for businesses,’ said Mr Tharman.

The Government is even planning to relocate several agencies out of the pricey and congested central business district (CBD). A Jones Lang LaSalle report said these could include the Economic Development Board at Raffles City, the Singapore Land Authority at Temasek Tower, and the Ministry of Law and Ministry of Finance at The Treasury.

Mr Donald Han, the Singapore managing director of property consultant Cushman & Wakefield, said the move was a practical one: ‘It’ll create some breathing space for the private sector. Government agencies will be better off, as they won’t need to incur the opportunity cost of prime CBD rental.’

Mr Tharman said the Government has released 15 transitional office sites and vacant state properties , which will yield 150,000 sq m of additional office space.

‘Companies are already relocating to some of these sites and to our new regional centres,’ he said.

He noted that the shortage should ease over the medium term, given the completion of big projects now under construction. These include Phases 1 and 2 of the Marina Bay Financial Centre, the Marina View sites and South Beach.

‘By 2012, we will have an additional 1.4 million sq m of office space,’ said Mr Tharman.

The Government will also defer projects worth about $1 billion to ease the pressure on construction costs. This follows a decision last November to postpone public-sector building projects worth at least $2 billion.

But the latest deferment will not affect key projects such as the expressways, the Downtown Line or NUS University Town.

Deficit Next Year? Just Don’t Bet On It

Source : The Business Times, Feb 16, 2008

Wealth management gets a boost, but Tharman keeps his powder dry.

EVERY year at Budget time, Singapore’s Finance Minister, Tharman Shanmugaratnam, faces a task that must make him the envy of his peers in the rest of the world: he must explain why the nation’s tax revenues were so much higher than originally planned. Like those of his immediate predecessors, Lee Hsien Loong and Richard Hu, Mr Tharman’s Budgets have been inherently conservative in outcome - even if they are often (as this year and last) intended to be stimulative at the outset.

In each of the last four years, real GDP has grown much faster than anticipated at Budget time. Tax revenues have consequently far exceeded those projected at Budget time. This fiscal year (which ends on March 31, 2008) was expected to yield a fiscal deficit of $0.6 billion, but the government now estimates that the final outcome will be a surplus of $6.35 billion. In fact, over the first three quarters of the fiscal year, the actual fiscal surplus was $10.8 billion. All tax revenues were higher (as they almost always are in Singapore), but asset taxes surged most spectacularly as property values soared.

The January-March quarter tends to be the seasonally-weakest one for the fiscal balance, but the deficit for that quarter is unlikely to be $4.4 billion, so the actual surplus for this year will almost certainly be larger than the government’s current estimate.

With a larger surplus as the base, next year’s fiscal balance will also be stronger, assuming budgeted increases in revenue and expenditure. A betting man could do worse than place a large wager on actual revenues comfortably exceeding the Budget’s projections next year too!

The government’s intention is to provide a fiscal stimulus in the year ahead - evident in the projected fiscal deficit next year of $0.8 billion, which is not very different from last year’s projection.

Modest tax reductions include a 20 per cent rebate on personal income tax (capped at $2,000), revenue-neutral changes to the alcohol tax, a slight reduction in vehicle taxes (largely offset by planned increases in the coverage of ERP), and the elimination of estate duty.

Of these, the last will have a permanent positive impact on the wealth management industry (and Singapore’s attractiveness as a home for the wealthy) without hurting the exchequer much. The market will be disappointed that the top rate of income tax will not decline from 20 per cent, and the corporate tax from 18 per cent.

Mr Tharman has kept his powder dry for a rainy day - leaving ample room to lower taxes further were the global economy to weaken substantially more. He has still outlined an ambitious spending programme on further honing Singapore’s world- beating transport infrastructure, tweaking its skills-development schemes, and moving Singapore’s three (soon to be four) universities closer to the global frontiers of research and innovation.

Fiscal incentives and spending will further bolster Singapore’s R&D capabilities, by boosting both start-ups and existing companies’ research and also by attracting global talent. And for the community, there are further incentives for more voluntary saving and a deepening of funds to help the needy, vulnerable and sick.

Most exciting for the longer term, however, are the steadily-widening schemes for sharing surpluses with citizens. Singapore’s budgetary accounting system is among the most conservative in the world. The fiscal balance is obtained by subtracting both operating and development expenditure from the government’s operating revenue alone.

The government’s ample investment income (from land sales, as well as the dividends, interest and capital gains of its sovereign wealth funds) is not counted as government revenue. In recent years, the government has made a small concession by using up to 50 per cent of the dividends and interest income from its invested reserves to fund the special transfers (to MediShield for the elderly, growth dividends for citizens, GST credits, etc, which are properly skewed towards benefiting the needy more).

However, the substantial capital gains on the government’s investments continue to accumulate, and cannot yet be distributed to citizens.

By next year, a constitutional amendment will allow the government to share the fruits of the capital gains made by investing its burgeoning reserves over the past several decades. That will give Singapore the ability to turn the dream of being the pre-eminent global city into reality. Clearly, only a small proportion of capital gains will be made available for spending in this way - the prudent practices of rich university endowment funds being cited as a precedent to preserve much of the corpus for the future while spending largely the recurrent components of capital gains.

When it begins to free up some of the capital gains from past investments, Singapore will have the wherewithal to realise the vision of an innovative, research-driven global city. This Budget contains merely the hint of those vast possibilities, but the vision is already there for those who choose to look.

The author is chief economist (Asia ex-Japan) at Daiwa Institute of Research (Singapore) Pte Ltd. These are his personal views.

私宅市场保持淡静 上月只卖出328单位

《联合早报》Feb 16, 2008

本地豪宅市场很可能已经感受到美国次贷风暴所吹来的“寒气”。去年7月，发展商卖出了72个每平方英尺售价超过4000元的超级豪华共管公寓单位，到了去年12月，这类超级豪宅的销售量剧跌至五个。

根据市区重建局昨天公布的2008年1月份数据，上个月完全没有任何尺价超过4000元的超级豪宅单位成交。

莱坊(Knight Frank)研究部主管麦俊荣指出：“今年1月尺价最高的一个共管公寓单位，是以每平方英尺3671元成交的一个史格士广场(Scotts Square)单位。”

新加坡至今尺价最高的共管公寓，是去年10月以每平方英尺5600元成交的一个卓锦豪庭(Orchard Residences）顶层豪宅单位。

自去年最后一季，新加坡的私宅市场就因为美国的次贷危机和全球的股市动荡，而明显冷却下来。去年8月，发展商仍能卖出1720个私宅单位，但随后的三个月却减少至每个月600个单位左右，过去两个月更进一步下跌至300多个单位。

市建局昨天公布的最新数据显示，今年1月，本地发展商总共卖出了328个房屋单位，跟去年12月一样。其中316个属于私宅单位，另外12个属于执行共管公寓(Executive Condominium)单位。

其中一个原因是发展商也因为市场气氛不明朗，而将项目扣着不发，减少将新的私宅单位推出市场销售。今年1月，发展商只推出了410个单位，比去年12月的445个单位减少了8％。

一般认为，虽然最近的私宅成交量大减，但价格仍然稳在同样的水平。不过，昨天刚出炉的数据显示，今年1月，整体私宅的中位成交价(median price)其实也稍微下跌3.2％，由12月的每平方英尺1124元降至每平方英尺1088元。

淡静气氛料延续

昨天受访的房地产分析员一致认为，这种淡静的气氛会在本月延续下去。

世邦魏理仕(CB Richard Ellis)执行董事李晓和说：“由于2月的大多数日子都是农历新年庆祝期间，再加上次贷危机的影响力仍挥之不去，所以成功售出的单位可能比1月份还少。”

不过，他相信，发展商会把价格稳住在现有的水平，并密切留意市场的情况。

他认为，今年1月，大多数高档共管公寓的价格仍然守住阵脚，例如Grange Infinite、Helios、Hilltops和史格士广场的成交价格就介于每平方英尺3300元至3671元。升涛湾的滨海精品共管公寓和Turquoise共管公寓的售价则在每平方英尺2650元以上。

在销售表现方面，“只有少数一些项目表现不错，例如勿洛水池路的Waterfront Waves推出148个单位，但卖出了79个单位，中位价为每平方英尺800元。”

Wilkie 80则卖出了推出的全部50个单位，每平方英尺售价介于1550元至1700元。

Innovation - The Budget Buzzword

Source : The Business Times, February 16, 2008

S'pore aims to rise up competitive ladder with R&D push, education thrust

Flush with a projected $6.4 billion surplus in FY2007, Singapore's latest Budget is set squarely on securing the country's place in the top league of global cities.















For those seeking immediate gratification, Finance Minister Tharman Shanmugaratnam did give, not the widely anticipated personal income tax cut but a 20 per cent rebate for Year of Assessment 2008, and some $1.8 billion worth of surplus-sharing 'dividends' and top-ups. And he finally abolished the estate duty.

But there's no mistaking the broader thrust of the government's financial policy and priorities, at this time of slowing global growth and rising inflation.

'This Budget is about how we are looking ahead to create new advantages and fresh opportunities for Singapore in a competitive world,' Mr Tharman Shanmugaratnam told Parliament yesterday as he announced a host of industry-specific tax incentives to keep business competitive - and particularly to turn Singapore into a research hub.

'We will help all our companies move up the innovation ladder,' he said, unveiling three schemes that will 'make Singapore one of the most competitive places for companies, big and small, to do R&D'.

These include increased tax deductions of 150 per cent for R&D done in Singapore, including forays into new areas unrelated to the company's existing activities.

The drive to 'make innovation pervasive in the economy' - which will extend to a new Chief Innovation Officer in each ministry - may not yield quick results and will likely have to be enhanced, Mr Tharman said. But he is confident it 'will eventually pay off'.

Another key plank of the Budget - invest more across all levels of education, and promote lifelong learning - is also geared towards producing a 'first- class workforce' in 'a world where we are competing on skills, quality and productivity, not on costs alone'.

Building capability and keeping the economy competitive is also a key part of the strategy to help Singaporeans cope with inflation, Mr Tharman said.

The main tool in moderating imported inflation is Singapore's exchange rate policy.

Had the Monetary Authority of Singapore not allowed the Sing dollar to appreciate over the past two years, the inflation rate in Q4 2007 would have averaged 6.5 per cent instead of 4.1 per cent, he disclosed.

Still, 'there is a limit to how fast the Singapore dollar can appreciate without hurting our economic performance and growth, and eventually causing wages to fall,' he pointed out.

Hence Singapore cannot be completely insulated from the effects of global inflation. But what is important is not to let domestic inflationary expectations set in, with wages rising to offset not only current but also future expected inflation, he said.

For now, Singapore has a budgetary windfall in hand, thanks to a robust economy and a property market boom that raked in record revenue for the 2007 fiscal year.

Stamp duties alone amounted to $3.8 billion - or $2.3 billion higher than expected. These large, extraordinary gains are not to be expected very often, Mr Tharman said. But the record inflows turned the FY2007 Budget balance around from an initial projected $0.7 billion deficit to a whopping $6.4 billion surplus.

For FY2008, a $0.8 billion deficit is projected, after special transfers of $5.4 billion for the young and old, as well as long-term old age needs.

Reactions to the Budget were somewhat mixed. While many hailed it as generous and balanced, others said it was 'cautious' and conservative, given the huge 2007 surplus.

There was a sense, particularly, that the Budget could have done more to ease business cost pressures. Says KPMG managing director Danny Teoh: 'Although the larger picture in relation to Singapore's competitiveness has been sketched out, businesses would probably have liked to see more immediate measures taken to alleviate the inflationary pressures on prices.'

He also thought the Budget is skewed towards SMEs - 'with most of the goodies appearing to go to them' - but 'falls short of the expectations of MNCs and big business'.

Meanwhile, Ajit Prabhu, tax partner at Deloitte Singapore, is still holding out for a cut in personal tax rates, which he said would have been 'a real icing on the cake'. He hopes to see it in upcoming Budgets.

But, for once perhaps, the so-called 'sandwich' middle-class is not left out. This group stands to gain most from the 20 per cent personal tax rebate, capped at $2,000, analysts point out.

For all the handouts, HSBC economist Robert Prior-Wandesforde reads the giveaways another way: The Budget 'may suggest that the government is more worried about Singapore's short-term growth prospects than the competitive threat posed by higher inflation and the risk of a mini wage-price spiral', he said. 'It's certainly a gamble.'

OCBC To Reject Offer For Straits Trading

Source : The Business Times, February 15, 2008

Singapore's Oversea-Chinese Banking Corp said on Friday that it does not intend to accept the offer for Straits Trading, a move by a key shareholder that could end the tussle for the commodities and property firm.

OCBC and its insurance arm Great Eastern Holdings control about 25 per cent of Straits Trading, which is the subject of a takeover battle involving the Singapore lender's main shareholder and the family of OCBC's late chairman.

The Lee family, OCBC's biggest shareholder, on Thursday raised its offer for Straits Trading to $6.55 a share, valuing the firm at $2.1 billion (US$1.5 billion). The Lees' revised bid surpassed the $6.50 a share offered by Tecity, which is controlled by the family of former OCBC chairman Tan Chin Tuan.

'OCBC has held the Straits Trading shares as a long-term investment for many years,' the bank said in a statement. 'Over the three-year period ended Dec 31, 2007, STC (Straits Trading) shares achieved a total shareholders' return of approximately 40.7 per cent per annum.'

Straits Trading is one of Singapore's oldest trading houses and its businesses including tin smelting, metals trading, hotels and property. -- REUTERS

Gantries In Heartland To Make Residential Estates More Liveable

Source : The Straits Times, Feb 16, 2008

TAKING the Electronic Road Pricing (ERP) scheme into the heartland will ease an expected islandwide traffic gridlock and make residential estates more liveable, Transport Minister Raymond Lim said yesterday.

With 850,000 vehicles on the road and more intensive use of cars than in other major cities, Singapore's arterial roads will also soon face congestion, he said in response to queries on the planned expansion of ERP coverage.

Dr Lee Bee Wah (Ang Mo Kio GRC) questioned the point of evening ERP charges along the Central Expressway (CTE), which she said is the shortest route home for Ang Mo Kio and Yishun residents.

But Mr Lim replied: Imagine a situation where heartland roads are exempted from ERP charges and only the Central Business District and expressways leading there are affected.

Drivers would then use alternative roads, including detours through the heartland and other estates.
'If you're living in a residential estate, is that what you want - gridlock?' he asked.

He said his ministry studied many European cities such as those in Switzerland and Germany, which have measures to cut down vehicle traffic in residential areas.

Congestion exacts costs on both the economy and the environment and 'going ahead, the key thing here is to have a liveable city, a quality urban living environment', he said.

Singaporean drivers clock up 21,000km a year in their cars, more than Londoners (9,100km) and even those in Los Angeles (19,800km).

In response to other questions, he said that the 16 new ERP gantries coming up this year are part of a package of measures to manage gridlock on Singapore's roads.

The measures include road and rail upgrades totalling nearly $54 billion.

This means the Government is giving back to the public more than the projected increase in ERP revenue, he said.

The increase in the number of gantries will bring the total number to 71.

'I think it is worthwhile for us to realise that when we are dealing with congestion, we can't rely on any single measure. You need a whole suite of measures,' he said.

Anyone who says he has found a panacea or a single solution is 'selling you snake oil. Ignore the medicine man, it doesn't work that way', he said.

Madam Ho Geok Choo (West Coast GRC) asked him how the $168 million in ERP revenues will be accounted for following the rate hikes.

Mr Lim said the money would go towards funding various government programmes for Singaporeans, including public transport and road projects.

From now till 2020, some $14 billion will be spent on road developments, and around $40 billion on extensions to rail lines.

While his ministry expects the additional revenue from the upcoming ERP changes to be about $70 million annually, the reduction in road tax will cost the Government about $110 million every year. It will also collect $200 million less annually due to a reduction in the Additional Registration Fee (ARF) for cars, he said.

The point of the ERP, he told Madam Ho, 'is to address congestion and is not a revenue measure'.

CLARISSA OON

12 Sites Set Aside For New Hotels To Ease Room Crunch

Source : The Straits Times, Feb 15, 2008

12,000 new rooms to be added to current 37,000

THE old Safra clubhouse site in Bukit Merah may get a new lease of life - as a hotel.

It is currently up for developers to indicate interest under the Government's land sale programme, and could wind up being a 540-room hotel.

The site is one of 12 slated for hotel developments - some of which are in the unlikeliest of places.

MAKING ROOM: This old Safra site in Bukit Merah may host a 540-room hotel, under the Government's land sale programme. -- ST PHOTO: CHEW SENG KIM

For instance, one site, in Jellicoe Road, sits next to the Jalan Besar CC and will offer views of the Immigration and Checkpoints Authority Building in the Lavender area.

Just a few metres away will be another that will sit next to HDB blocks.

The release of the 12 sites - to be completed by the first half of the year, should developers actually take them up to develop rooms - should help ease a hotel room crunch that some players say is threatening to derail ambitious plans to attract record numbers of tourists.

The sites are located in areas as diverse as Bukit Merah - 'minutes' drive from Orchard Road', according to the online prospectus - and in Outram Road, at the edge of Chinatown, a sure-fire tourism hot spot.

The release of the plots follows similar exercises in the last two years, and points to steady growth in the tourism industry.

Some 10.3 million visitors - a record high - visited Singapore last year.

They fuelled increases in the average room rates, which also broke records month after month.

The average room rate last year hit $202 - a growth of 23 per cent over 2006, and total room revenue reached $1.8 billion. Hotel occupancy also hit 87 per cent.

Even more tourists are expected here this year - 10.8 million in all - driven by events such as the Formula 1 Grand Prix in September.

This is likely to make the room crunch worse and push rates up - hotel rates here are already the sixth-highest among Asian cities - squeezing out low-end tour groups and budget travellers, which industry players say may comprise up to 30 per cent of visitors here.

Tour agents are already scrambling to put their guests up, and are having to resort to hotels in Geylang and the East Coast because rooms downtown just aren't available.

And because of rising rates, some agents are being forced to send budget tour groups to Johor Baru or Batam instead.

The release of the 12 sites though, is aimed at averting a real squeeze down the road: in 2010, to be precise.

That is when many predict push will come to shove.

Said Mr Donald Han, managing director of property consultants Cushman & Wakefield: 'It is estimated that in 2010, 14 million foreigners will visit Singapore.

'Based on a conservative average length of stay of 3.4 days, Singapore will experience an acute shortage of rooms.'

He added: 'In short, existing hotel stocks need to be doubled in the next three years to meet rampant demand.'

Singapore has said it wants to get 17 million visitors by 2015.

The 12 sites should contribute about 5,000 rooms to the mix within the next few years.

Another big contribution will come from the Marina Bay Sands and Resorts World at Sentosa integrated resorts, which will add another 4,400 rooms to the inventory.

All told, including other upcoming hotels, 12,000 rooms are expected to be added to the 37,000 now available.

It may not be quite enough, but Mr Robert Khoo, CEO of the National Association of Travel Agents Singapore, will take it.

'If you tell me that the rooms would be here tomorrow, I'd be happier. Hopefully, they'll help bring down the room rates as well.

'Some of my agents have told me about how they have lost tours because they can't secure rooms.'

New Home Sales Remain Low With Cautious Property Market

Source : The Straits Times, Feb 16, 2008

Developers launching fewer units as fears over US slowdown, stock volatility linger

CAUTION remains the watchword in the property market, with buyers still kept on the sidelines by concerns over the United States economy and choppy stock markets.

Developers sold just 316 new homes last month - a tad up on the 305 sold in December - and launched only 410 units, compared with December's 445.

Prices also reflected the uncertain mood and remained largely flat, with overall median prices showing a slight dip.

The removal of the deferred payment scheme has brought transactions to a more sustainable level, according to property services firm Jones Lang LaSalle.

There were some bright spots. Wilkie 80 in Wilkie Road was sold out, while Waterfront Waves in Bedok Reservoir Road reported favourable sales. They made up 41 per cent of all new units sold last month, according to the sales figures out yesterday.







The pinch was felt most in the high-end sector, with few homes sold and none above $4,000 per sq ft (psf). This is a sign that the high-end segment may be experiencing a 'challenging period', said Knight Frank director of research and consultancy Nicholas Mak.

The new figures, which came from developers but were released by the Urban Redevelopment Authority, show that some of the heat may have come out of the market.

Median prices for new private homes, excluding executive condos and landed homes, fell 3.2 per cent from $1,124 psf in December to $1,088 psf last month.

The lowest transacted price was $737 psf for a unit at Coastal View Residences in Jalan Loyang Besar, while Scotts Square in Scotts Road achieved the highest at $3,671.

Projects outside the central region performed best. There were more sales, and the 220 units launched marked the highest since last August.

Buyers at the leasehold Waterfront Waves picked up 79 units and pushed prices up to $909 psf.

In the mid-end segment, Wilkie 80 was sold out at a median price of $1,544 psf. Zenith in Zion Road, launched in December, sold 22 units, while 12 out of 50 units at Mount Sophia Suites went for a median price of $1,719 psf. At the landed project Pavilion Park, 24 terrace houses sold at between $1.8 million and $2 million.

Consultants project lower sales this month, as the Chinese New Year festival will deter buyers from venturing into the market.

'However, developers are likely to maintain prices at current levels as they monitor the market situation,' said Mr Li Hiaw Ho, the executive director of CBRE Research.

Mr Mak expects sales volume for the first quarter to remain thin due to uncertainties over the US economy and stock market turbulence. More developers are delaying or reviewing launches, particularly high-end ones.

'The challenging period experienced in the high-end segment is expected to continue, but the fall in the volume could be compensated by the steady volume in the other segments,' he added.

Colliers International director for research and consultancy Tay Huey Ying said: 'We see the mass and mid-end segments supported by en bloc sellers looking for replacement homes.'

Developers could end up launching and selling up to 9,000 new private homes this year, compared with 14,811 last year, she said.

Some Govt Units Moving Out To Free Up City Space

Source : The Business Times, February 16, 2008

20,000 sq m or more will be available to private sector

THE government has decided to relocate several agencies out of the Central Area to free up space of 20,000 square metres or more by first quarter next year for use by the private sector.

The space being released, which will help to address the office space shortage in the near term, is equivalent to 20 floors or more of an office tower block in Suntec City.

Finance Minister Tharman Shanmugaratnam did not identify the government agencies that will be moving out of the city but market watchers suggest that they may include Singapore Land Authority, which currently occupies several floors at Temasek Tower near Tanjong Pagar MRT Station; the Energy Market Authority, which is housed in Singapore Power Building on Somerset Road; Intellectual Property Office of Singapore, located at Plaza by The Park on Bras Basah Road; and Info-Communications Development Authority of Singapore, now at Suntec City.

The Workforce Development Agency, housed at One Marina Boulevard, has also been highlighted by market watchers as being a possible candidate for relocation out of its prime CBD offices.

The Economic Development Board is expected to vacate its offices at Raffles City when its lease expires next year and move into Fusionopolis at one-north in Buona Vista.

Market watchers suggest that some of these government agencies with public counters are likely to move to city-fringe locations, rather than to outlying areas to minimise inconvenience to the public. 'Vacant state properties could be their new homes,' an industry observer reckons.

In his Budget speech, Mr Tharman noted that in the short term, Singapore faces tight office space capacity, caused by the surge in business growth, especially in the business and financial sector.

'Office rentals have risen sharply. Although office space still costs 30 to 50 per cent less in Singapore on average, compared to Hong Kong and Tokyo, the pace of cost increases has been rapid and unsettling for businesses,' he added.

'The tightness in office space should ease over the medium term, with the completion of major projects currently under construction, such as phases one and two of the Marina Bay Financial Centre, the Marina View sites and South Beach. By 2012, we will have an additional 1.4 million sq m of office space.'

To address the problem in the short term, the government has released a total of 15 transitional office sites and vacant state properties, which will yield 150,000 sq m of additional office space. Companies are already relocating to some of these sites, and to new regional centres, Mr Tharman noted.

Demand For Mass Market Projects Shifts Into Higher Gear

Source : The Business Times, February 16, 2008

Developers not keen to release high-end projects in shaky market, say analysts

DEVELOPERS' housing sales figures for January reflect a change in strategy to focus more on mass market projects.

Despite the still lacklustre figures for overall developer launches and sales last month, an analysis by Knight Frank shows the number of private homes (excluding executive condominiums) launched and sold in January in the Outside Central Region (covering traditional mass-market/suburban locations) rose 190 per cent and 123 per cent respectively from December 2007.

In contrast, launches and sales in the Core Central Region and Rest of Central Region fell in January, compared to December.

Given the dearth of activity in high-end locations, the Core Central Region suffered the biggest drop in median prices for units transacted during the month, with the figure halving to $1,623 per square foot in January, from $3,200 psf the previous month.

Elsewhere, median prices held steady, edging up 1.6 per cent to $1,053 psf in the Rest of Central Region and $811 psf in the Outside Central Region. The median prices include private homes as well as ECs.

Property consultants expect developers to continue to push out mass market projects, since demand fundamentals are stronger in this segment than the high-end sector, where buying traditionally emanates more from speculators.

'Despite the more dismal global economic outlook, the employment rate in Singapore is still high and this will continue to support demand for mass market homes,' says Colliers International director of research and consultancy Tay Huey Ying.

'As for high- end/luxurious projects, developers are quite cautious and not so prepared to release them amid the current, uncertain market conditions. They will want to wait for better conditions before they launch these projects,' she said.

Monthly data from the Urban Redevelopment Authority (URA) show developers sold a total 316 private homes (excluding ECs) in January, up slightly from 305 units in December, which was the lowest figure since URA began publishing developers' monthly sales figures and prices in June 2007.

However, Colliers' Ms Tay says that stripping out the bulk sale of 97 units at Goodwood Residence in December, the January sales figure was roughly a 52 per cent improvement from December.

January volume was boosted by the launch of new projects like Waterfront Waves at Bedok, which sold 79 units during the month, and Wilkie 80, which saw 50 units sold.

'We observed that luxury prices remained firm despite a decline in sales volume. In the prime districts, units in Grange Infinite, Helios Residences, Hilltops and Scotts Square were sold at median prices between nearly $3,300 psf and $3,700 psf.

'At Sentosa Cove, units in Marina Collection and Turquoise were sold at above $2,650 psf,' says CB Richard Ellis executive director Li Hiaw Ho.

However, Knight Frank director (consultancy & research) Nicholas Mak points out that the number of homes priced above $4,000 psf sold by developers has fallen from 72 units last July to five units in December.

In January, there was not a single primary market transaction in this price range.

Colliers' analysis shows the highest priced home sold in January was a $3,671 psf unit at Scotts Square, compared with $5,146 psf in December achieved at The Ritz-Carlton Residences, and the record $5,600 psf achieved for a unit at The Orchard Residences last October.

The number of new private homes (excluding ECs) developers launched in January sank to a low of 410 units, about 8 per cent less than the 446 units in December and about a fifth of the high of 1,885 units in August last year.

Property consultants suggest developer sales in February may be lower than those in January because of the Chinese New Year.

'However, developers are likely to maintain prices at current levels as they monitor the market situation,' CBRE's Mr Li says.

OCBC Rejects Improved Takeover Offer For Straits Trading

Source : Channel NewsAsia, 15 February 2008

OCBC says it intends to reject an improved takeover offer for one of its listed subsidiaries, Straits Trading.

This could effectively end a tussle for the listed commodities and property company between two of the Singapore's prominent banking families.

On one side is the Lee family, who are OCBC's main shareholders.

They have offered to pay S$6.55 a share for Straits Trading, valuing it at S$2.1 billion.

That was higher than an earlier revised S$6.50 offer made by Tecity, which is controlled by the family of OCBC's former chairman, Tan Chin Tuan.

Straits Trading is one of Singapore's oldest trading houses and its businesses including tin smelting, metals trading, hotels and property. - CNA/ch

Less Private Home Launches As Property Market Slows Down

Source : Channel NewsAsia, 15 February 2008

There are more signs that Singapore's property market is slowing down.

Latest numbers from the Urban Redevelopment Authority (URA) show that developers launched just 410 new housing units in January – that is 16 percent less than the number of units launched in December, which was also a quieter month.

Industry watchers said market sentiments have cooled due to the sub-prime crisis and global economic slowdown.

In fact, private home sales in Singapore were at a standstill in January, with developers selling 328 private homes last month.

A unit at Scotts Square at Scotts Road commanded the highest price of S$3,671 per square foot.

At the lowest end, 12 units at La Casa in Woodlands Drive fetched between S$537 and S$601 per square foot.

While last year's property boom is not expected to be repeated, analysts do expect the market to pick up again in the second quarter. - CNA/so

Parkway's Novena Bid Poised To Set Govt Land Sales Record

Source : The Business Times, February 16, 2008

Hospital operator Parkway Holdings looks set to shatter all records for government land sales (GLS) with its $1.25 billion bid for a hospital site at Novena.

Parkway's bid, which works out to be about $1,600 per square foot per plot ratio (psf ppr), topped the previous record set by Australia's Lend Lease, which paid $1,455 psf ppr (or $617.2 million) for a commercial site just above Somerset MRT Station in August 2006.

The Urban Redevelopment Authority (URA) will assess all bids and award the site in a few weeks' time, but it is unlikely that Parkway's bid will lose out to the two other bidders, Napier Medical and Raffles Medical Management, which put in bids of $694.5 psf ppr and $344.1 psf ppr respectively.

On its likely win, a spokesman for Parkway Holdings said: 'We believe that the value we have placed in this tender reflects ParkwayHealth's desire to enhance Singapore's position as a global medical hub with leadership in specialist services.'

He added that the hospitals that it operates - East Shore, Gleneagles and Mount Elizabeth Hospitals - are operating at capacity and the new hospital will add beds and critical space needed.

The Novena site, which has a permissible gross floor area of 778,768 sq ft, is the first hospital site to have been launched in about 30 years. URA said that the last hospital site launched was at Mount Elizabeth in 1976.

Knight Frank director (research and consultancy) Nicholas Mak, who had earlier estimated that the Novena site could fetch bids of $770-860 psf ppr, said that it is difficult to price the site. However, he believes the broad range of bids received suggests that his estimated price would be closer to market expectations.

Mr Mak also noted that Parkway's bid could boost the value of neighbouring properties, especially Novena Medical Centre, where medical suites sold for around $2,500-3,000 psf last year.

Parkway has not indicated that there could be medical suites for sale if it builds a hospital, but Mr Mak estimates these would have to sell for around $4,000 psf. He added that a unit at Mount Elizabeth Hospital recently sold for around $5,000 psf.

Still, Mr Mak does not believe Parkway's record bid price will be used as a benchmark for future land sales, and may be considered more of an anomaly.

The possibility of injecting the new hospital into Parkway's healthcare real estate investment trust, Parkway Life Reit, also seems unclear. 'To put it in the Reit, the land price should be lower to make the deal yield accretive,' he added.

Napier Medical director Mark Wee also 'cannot fathom' Parkway's bid except to suggest that it could have been a defensive play against competition.

Based on Napier's own projections, a new hospital would probably not make money for the first six years either.

Parkway Top Bidder For Novena Hospital Site

Source : The Straits Times, Feb 16, 2008

THE Novena medical hub is taking shape, with the Parkway group emerging yesterday as the top bidder for a 1.7 ha site on Irrawaddy Road to build a new private hospital.

The $1.2 billion bid by its wholly-owned subsidiaries Parkway Novena and Parkway Irrawaddy, was nearly five times that of Raffles Medical's and more than double the offer from Napier Medical, run by former Parkway Holdings boss Tony Tan and the founder of Penang's Island Hospital Mark Wee Keng Hong.

At close to $1,600 per sq ft per plot ratio, it is potentially the most expensive commercial land sale in recent years, said Knight Frank's director of research and consultancy Nicholas Mak.

Parkway said the bid price reflects its plans to build a hospital of the future using eco-friendly technologies.

Alongside the wards, medical facilities and suites for specialists' outpatient care in cancer, cardiac and orthopaedic services, there will be retail and public spaces as well, including aerial gardens.

The Urban Redevelopment Authority tender closed yesterday and it usually takes under a week for the results to be released, which is when Parkway will reveal more details about the project.

The sale of the site, the first private hospital since Raffles Hospital was built in 2001, is part of a plan to beef up medical infrastructure here to attract one million foreign patients a year by 2012.

Anchor tenants in the Novena neighbourhood are Tan Tock Seng Hospital and several other public institutions.

Private institutions like Johns Hopkins International Medical Centre and newly launched Novena Medical Centre complete the family of about 10 health-care providers in the area.

Coming up alongside the new hospital is a Far East Organization hotel, Frasers Centrepoint's Soleil condominium and SC Global Developments' Newton 200 office building, all eyeing 'medical' guests and tenants.

Far East, which owns Novena Medical Centre, is building the 28-storey hotel next to Novena Square. To be completed by 2010, the hotel will have 432 rooms and 64 medical suites, said the group's executive director of property services, Mr G.L. Yap.

A proposed underpass will connect the hotel with the medical centre. 'We are even willing to build a bridge linking the new hospital if they want to,' said Mr Yap.

At the 36-storey twin tower Soleil condominium, several of its 417 units were sold to buyers like project director Kellie Liew, who is looking to rent out her two-bedroom unit, possibly to medical tourists seeking treatment in the neighbourhood.

Parkway Top Bidder For Private Hospital Site

Source : The Straits Times, Feb 15, 2008

$1.2b bid seals Novena's reputation as medical hub

THE Parkway group has emerged the top bidder for the new Novena medical hub, a private hospital which will be built on a 1.7 ha plot along Irrawaddy Road.

Its $1.2 billion bid was was higher than that put in by Raffles Medical and a consortium backed by developer Far East.

At about $1,600 per sq ft per plot ratio, the private hospital will stand alongside a hotel, condominium and an office building, all eyeing 'medical' guests and tenants.

The sale of site, the first private hospital since Raffles Hospital was built in 2001, is part of the plan to build up more facilities here by 2012, when one million foreign patients are expected to arrive a year for treatment.

Already in the neighbourhood are Tan Tock Seng Hospital (TTSH), the National Neuroscience Institute and National Skin Centre.

Upcoming Renci hospital and private institutions like Johns Hopkins International Medical Centre and newly launched Novena Medical Centre (NMC) complete the family of healthcare providers located within walking distance to each other.

If Parkway is awarded the site, it will have a presence in the two medical hubs - Novena and the existing cluster in Orchard, with Mount Elizabeth Hospital and medical centre as well as medical suites in Lucky Plaza and Paragon.

Read the full story in Saturday's edition of The Straits Times.

Estate Duty R.I.P.

Source : The Straits Times, Feb 16, 2008

Death tax removal makes S'pore an attractive place for wealth to be built up, says Tharman

IN A LONG awaited move, the Government yesterday read the last rites for the death tax here.

The tax, known as estate duty, had been imposed if the assets of a person who died exceeded certain limits.

It was abolished with immediate effect yesterday.

The Government believes the move will boost the wealth management industry by encouraging both foreigners and Singaporeans to base their assets here.

Although the move had been keenly awaited, it drew gasps of surprise when announced by Finance Minister Tharman Shanmugaratnam in Parliament yesterday.

Calls to abolish the tax had grown more frequent in recent years as growing affluence meant that even the middle classes were caught by it.

A key grouse was that the exemption limits were lopsided. An estate could, for example, own up to $9 million worth of residential property and not pay the duty.

But everything above $600,000 in cash, shares and other non-residential assets was subject to the duty.

Mr Tharman said the exemption limits tended to 'affect the middle- and upper-middle-income estates disproportionately compared to wealthier ones'.

The intended target of the tax - the super rich - had been able to set up trusts and other legal arrangements that allow them to minimise the duty.

Estate duty was taxed at 5 per cent on the first $12 million of applicable assets and 10 per cent on amounts above. Assets of $1 million, for example, incurred duty of $50,000.

The duty had been whittled down considerably over the years. In 1984, the top rate was a hefty 60 per cent.

Mr Tharman said that removing the duty was not just a practical and expedient measure but also in Singapore's collective interest.

'If we make Singapore an attractive place for wealth to be invested and built up, whether by Singaporeans or foreigners who bring their assets here, it will benefit our whole economy and society, not just the individuals who build up their wealth.'

This will be a boost to the wealth management industry here, said KPMG Tax Services executive director Ooi Boon Jin. 'It will encourage the inflow of foreign talent. People will bring money here, sink their roots here and invest here,' he added.

On average, the Government collected about $75 million a year in estate duty.

Mr Tharman is encouraging people with accumulated wealth to think of how they can use the savings from the scrapping of the tax to make a contribution to society.

Already, one foreigner living here is making such plans after learning of the move.

Mr Iain Ewing, 62, founder of management training consultancy Ewing Communications, plans to channel half of the estate duty savings to fund university scholarships and other causes. The rest will go to his son, Tejas, 27.

Mr Ewing, a Canadian with permanent residence here, has worked here for 23 years and expects the savings to be millions of dollars.

Two likely recipients are Singapore Polytechnic - where he previously worked as a media producer - and his alma mater, the University of British Columbia in Canada.

'It's great that some of my money can do more for other people after I've gone,' he added.

A Plus For Wealth Management Sector

Source : The Business Times, February 16, 2008

Removal of estate duty enhances Singapore's appeal as wealth management centre

THE scrapping of the estate or death duty comes as no surprise. It is yet one more flourish in a series of moves designed to boost Singapore's attractiveness as a wealth management centre - and it is long overdue. Financial advisers and Singaporeans alike will heave a collective sigh of relief.

For wealth management, the scorecard looks good: No capital gains tax. No tax on interest and investment income, and on foreign sourced income. And now no estate duty.

In the past few years, individuals and lawyers have written columns on why estate duty should be abolished. One of the most convincing was by lawyer Goh Kok Yeow, published in The Business Times in 2002. Mr Goh, who advises on estate matters, called estate duty an 'anachronism and unfair form of taxation', from which the amount of collection was tiny.

Based on the inland Revenue Authority of Singapore's annual report for FY2006/07, the number of cases assessed for estate duty has remained fairly steady at more than 1,300.

Collections, as Finance Minister Tharman Shanmugaratnam said in his Budget speech, averaged $70 million through the years. This would be less than half a per cent of the total tax collection of $22.8 billion in 2006/07.

The move should be a plus for the wealth management sector, even though foreigners have already enjoyed favourable tax treatment on their wealth for a few years. Certainly, it results in an even more simplified tax planning process - always a boon for those mulling a move to Singapore for work or as a primary residence.

Equitable wealth redistribution

But it is the issue of the equitable redistribution of wealth that is intriguing. Proponents of estate duty argue that it is a means to effect this redistribution. Inherited wealth, after all, was not earned. Mr Tharman alluded to this in his speech: 'Estate duty,' he said, 'is a means to rebalance opportunities with each new generation and prevent wealth from being concentrated in fewer and fewer hands over time.'

Estate duty, he added, was relevant at a time when the bulk of wealth comprised land.

Today, financial assets are mobile and can easily be moved to the most tax-friendly locations. Singapore definitely qualifies as one.

But what of the redistribution of wealth? Mr Tharman encouraged individuals to give to society. Interestingly, the wealthiest tycoons in the US - Warren Buffett, in particular, Bill Gates and George Soros among other business luminaries - are lobbying the US government not to repeal the estate tax.

In 2001, 120 wealthy Americans published a petition in The New York Times arguing that a repeal would 'enrich the heirs of America's millionaires and billionaires while hurting families who struggle to make ends meet'. The billions of dollars of lost revenue will result in higher taxes on those less able to pay or in cutting benefits like Social Security and Medicare. Most of all, the petition said the repeal would hurt charities. 'The estate tax exerts a powerful and positive effect on charitable giving. Repeal would have a devastating effect on public charities.'

In the US, under a 2001 law, estate tax is to be gradually reduced until 2010, when it is suspended for one year. Then in 2011, the tax returns in full force.

In Singapore, advisers believe the relatively modest rates of estate duty are unlikely to have played a big role in incentivising the wealthy to structure their assets for philanthropic giving. If that is so, charitable giving and philanthropy should flourish alongside the upward trajectory of wealth creation. That will be a win-win scenario for all.

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Guest comment, CEO Simon Cheong

'The removal of estate duty clearly shows this Government is steadfast and determined to make Singapore a global wealth management centre attracting the high net worth community. Investment in transport and infrastructure to the tune of $50 billion to what is already a world-class transport system will give investors and Singaporeans confidence that Singapore is positioned for the long term for a 6.5 million population. This is absolutely a pro-growth Budget, indeed a tough-to-beat Budget.'

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Guest comment David Lawrence

'I'm pleased the government has gone down the route of helping lower-income Singaporeans. In a lot of countries, there's a widening gap between the wealthy/middle classes and the lower-income people. This causes a lot of social problems. I'm pleased Singapore is preserving social harmony (by addressing this issue). It's a very difficult thing for the government to do. You don't want to create dependency, but at the same time, you don't want disharmony. The Singapore government is treading this difficult path, but so far they've done it really well.

'The move to relocate government agencies out of the CBD and free up 20,000 sq metres for the private sector is better for the development of the Singapore economy, because office space is becoming too expensive for some companies. And although this is only a short-term supply problem, this action will address that situation until the new supply comes on-stream.

'Delaying construction of a further $1 billion of public-sector projects will also provide some breather to the tight construction market, which is experiencing supply shortages and high costs. Contractors are now very choosy about the jobs they take because there's a shortage of materials, staff, etc, caused mainly by the two integrated resort projects. It's good that the government is delaying their projects till after the IRs are completed as that will help smoothen demand for contractors.'

Analysts Hail Scrapping Of Estate Duty

Source : The Business Times, February 16, 2008

BUDGET 2008: ESTATE DUTY

Move will boost S'pore's economic competitiveness

ESTATE duty is finally dead. Tax consultants and financial advisers yesterday hailed the scrapping of the tax - denounced as 'death duty' by its opponents - saying that the move would boost the wealth management industry and Singapore's overall economic competitiveness.

Eliminating the tax on a person's assets at death puts Singapore on par with rival Hong Kong, which abolished estate duties two years ago, and would make Singapore a more attractive place in which to live, they said.

'It's been a long time coming,' said Ooi Boon Jin, executive director of tax services at KPMG. 'It'll be a boost to the wealth management industry, and it'll also encourage families to come and sink their roots here.'

Peter Tan, tax partner at PricewaterhouseCoopers Singapore, said that it was right for the government to remove the 'archaic' tax and 'keep up with countries that have already seen the light'.

Other countries such as Malaysia, India, New Zealand and Australia have already done away with estate duties. But there are countries that still retain an inheritance tax, such as the US and the UK.

'It's a misconception that estate duty only applies to the super-wealthy. It applies to middle-income people as well,' said Mr Ooi.

Here, estate duty was previously payable on all assets of an individual upon death, subject to various exemptions, including the first $9 million of residential property and the first $600,000 for non-residential assets. The tax rate was 5 per cent on the first $12 million of taxable assets and 10 per cent for assets in excess of $12 million.

'If you had $600,000 in your Central Provident Fund (CPF) accounts, that would have soaked up your $600,000 exemption,' said Mr Ooi. 'Anything else outside CPF you left behind would be subject to estate duty.'

Finance Minister Tharman Shanmugaratnam yesterday said that Singapore's estate duty - inherited from the British when the island was a colony - would be removed with immediate effect, including for people who died yesterday.

He acknowledged that Singaporeans who had built up their savings from a lifetime of work wanted to pass on their wealth to their families. Some people became liable for estate duty when their estates received large cash payouts from life insurance policies.

Roy Varghese, director of financial planning practice at financial advisory firm ipac Singapore, said: 'Wealth redistribution should not be at the expense of those who accumulate assets legitimately and diligently.'

Critics of estate duty have long pointed out that the tax generates insignificant revenue for the government and that wealthy people can avoid it by transferring their assets into offshore trusts.

The Inland Revenue Authority of Singapore's latest annual report for the fiscal year to last March-end shows that it collected just $98 million in estate duties, or 0.4 per cent of the total $22.9 billion in tax collections for that year.

In contrast, corporate income tax and personal income tax collections were $8.5 billion and $4.7 billion respectively.

Removing estate duty could also give a boost to the budding philanthropic sector in Singapore, as rich individuals who had already planned for estate duty may give the money to a worthy cause, said Terry Farris, Asia-Pacific head of philanthropy services at private bank UBS. 'It may be an opportunity to give that directly to a philanthropic initiative.'

In his Budget speech, Mr Tharman also urged wealthy individuals to make a contribution to society.

With estate duty gone, the government's remaining tax on individual wealth is property tax, which Mr Tharman said would stay. Unlike estate duty, property tax 'does not affect our middle and upper-middle-income estates disproportionately compared to wealthier ones', he said.