Offset on Stamp Duty is “not wrong”

The following article highlights the promotion by Far East Organisation for some “freebies” to offset the Additional Buyer Stamp Duty imposed as a cooling measure by our Government. It does not always come in the form of a cash discount. Some projects may see a direct discount, some may enjoy food/furniture vouchers. From a business perspective as a business person (not a real estate consultant), its just FEO’s way of getting more sales. If you see that its just a promotion, a way to encourage clients to buy their property instead of buying property from other developers, do you still think that it is wrong?

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PROPERTY consultants say there is nothing wrong with a promotion by developer Far East Organization in which it offers buyers a ‘reimbursement’ of stamp duty.

The developer has mounted several marketing promotions since the latest batch of property measures came into effect early last December, which included a hefty 10 per cent extra stamp duty on foreign buyers.

The promotions included furniture vouchers and the offer to reimburse stamp duty.

However, some buyers such as Straits Times reader Samuel Tan questioned whether such tactics were legal. In a letter to the Forum page, he said it was ‘a blatant attempt by the property developer to dilute the effect of the cooling measure’.

The Straits Times understands that the Far East promotion is intended as a price discount rather than a total reimbursement of stamp duty. It is not meant to offset the additional stamp duty that applies to some buyers.

It is also understood that the subsidy rate differs among the various Far East projects, but that at each project, it applies at the same rate to all buyers across the board. It can take the form of furniture vouchers or cash, both of which are typically given to buyers when a project attains its Temporary Occupancy Permit.

But the amount of discount a buyer may get also depends on how negotiations with the project’s selling agent pan out.

Property experts also say that while this tactic is essentially a price cut, some developers may be reluctant to cut prices directly or use such a label, as it may seem unfair to those who bought units during earlier phases of a project’s launch.

Market watchers say the use of such promotions is an industry-wide practice, highlighting similar cases in 1998 and in the early 2000s.

Such tactics are not illegal, say property consultants, adding that the private residential property segment is a free market. The use of such tactics is probably one way the market is dealing with the recently announced measures, they say.

Adopting these kinds of tactics gives developers more flexibility in their price strategies.

If developers give an outright discount of 5 per cent, people will think the government measures are working. But at the back of their minds, buyers will also be thinking of the additional stamp duties they will have to pay.

So in a way, it also helps developers show that they are addressing the needs of their buyers.

But industry experts add that it is ultimately up to individual developers to decide if, and how, they want to cushion the effects of any new government policies and measures.

Other developers have also been rushing to push out their residential projects in order to avoid any further uncertainty.

Source: The Straits Times – 1 February 2012

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