PROPERTY TAX (SURCHARGE) BILL

Order for Second Reading read.

5.15 p.m.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time,"

The Bill proposes to impose with effect from 1st January, 1974, a surcharge of 10 per cent on the annual values of real estate, other than industrial and commercial properties, not owned by citizens of Singapore or permanent residents. The Bill has arisen from Government's concern with the speculation on residential properties and vacant land and the consequent escalation in their prices. The steep rise in prices is attributable to, among other factors, purchases by non-residents. Those of our local citizens and permanent residents who do not qualify for Housing Board flats, therefore, find their hope of purchasing their own homes from private housing estates frustrated by prices beyond their means to pay.

It is the objective of the Government to realise a scheme for widespread home ownership amongst its citizens and permanent residents. To ensure the success of such a scheme, Government announced in September last year that only Singapore citizens would be eligible to purchase residential properties and vacant land with effect from September, 1973. Permanent residents, non-citizens and others may be allowed to purchase residential properties or vacant lands only with the approval of the Government. The imposition of a property tax surcharge, equal to 10 per cent of the annual values of properties and land, was also announced as a further measure aimed at curbing excessive speculation in real estate and stabilising prices of residential properties and vacant land. Both these measures are designed to assist the many young executives, professionals, etc, among its citizens ineligible for Housing Board units to purchase their own homes.

The present Bill is, therefore, to give effect to the second of these measures in Government's stated policy.

Clause 4 enables rules to be published in the Gazette to exempt certain classes of persons or categories from payment of the surcharge. Exemption of the surcharge will be granted to the following categories of properties:

(a) Properties owned by a Singapore citizen or a permanent resident of Singapore including all owner-occupied HDB fiats and temporary structures;

(b) Properties owned by a company registered in Singapore and carrying on business in Singapore;

(c) Properties owned by an association, club, society or an approved body registered in Singapore; and

(d) Industrial and commercial built-up properties irrespective of ownership.

Clause 5 vests in the President the power to vary the rate of surcharge.

Clause 6 provides for the situation where a residential property is jointly owned by either a Singapore citizen or a permanent resident and a non-citizen. In such cases, the Comptroller is given discretionary power to remit wholly or in part the property tax surcharge payable, if he is satisfied that the property is occupied by the joint owners and that payment of the surcharge will result in hardship.

Clauses 8, 9 and 11 make provisions for the Comptroller of Property Tax to seek information and prescribe forms or returns for effective enforcement and collection of the surcharge.

Clause 10 provides that if an offence is committed to evade the surcharge, any person on conviction is liable to a fine not exceeding $1,000. When fraud is involved, the penalty will be five times the surcharge not including a further fine of $5,000 or a term of imprisonment not exceeding six months or both fine and imprisonment.

Sir, I beg to move.

Question proposed.

Dr Ong Leong Boon: Mr Speaker, Sir, I rise to support this Bill in its spirit. I think it is a laudable Bill in that the intentions as expressed in September last year were to have a stabilising effect upon the rising cost of land and private property. What I would like to know from the Minister, however, is: what has been the actual effect of this Bill on the state of things today, whether the announcement in September last year has produced any decline or stabilising effect on the prices of land and private property in this country?

The Minister has quite rightly pointed out the plight of the middle income wage earners. As it is today, I think even with a knowledge of the present inflationary trend, private property and land are well beyond the reach of the middle income wage earner. To my mind, the proposition that the Government has made and the measures it has taken to build more flats and also the intention to build condominium type of terrace houses for this middle income group is something worth pursuing. What I feel is that the Government should step up the construction of these flats and houses. This will probably contribute more towards the welfare of the middle income wage earner than the Bill as such, although in principle and in spirit, it has laudable objectives.

May I ask the Hon. Minister if he could explain to this House whether this Bill has or will have any real effect upon the state of property and land values today?

5.20 p.m.

Mr Sim Boon Woo (Changi): Sir, I share the sentiments expressed by the Member for Kim Seng. The Minister has said just now that the intention of this Bill is to help the young executives who do not qualify for Housing and Development Board fiats. I wonder whether these young executives are in a position to purchase flats built by private developers. Sir, I saw an advertisement only about a week ago on the sale of flats in the Cairnhill Plaza. The price of each flat ranges from $200,000 to $300,500. If someone takes a housing loan amounting to 80 per cent of the price of the flat, payable in 15 years, he would have to pay a monthly instalment of over $1,000. I wonder whether a young executive or a young professional person, like a doctor, who earns about $1,200 a month can afford to buy that sort of a house.

Sir, my suggestion is this: with the increasing cost of building materials, cement and other things, perhaps the Government could allow development of certain places at a higher density than the present. This will help to lower the prices of land, and at the same time since more flats could be built this will naturally reduce the price of houses. I think this is much better than depending only on the Housing and Development Board flats. Even the HDB project in Ulu Pandan has to be stopped for the time being because of price increases in building materials. I wonder if this project is going to materialise and whether these young executives will be able to purchase those flats.

5.23 p.m.

Mr Hon Sui Sen: Sir, on the questions which have been raised, it is possible to give answers on a very general basis. My Ministry of Finance has monitored the prices of houses since we announced the Government policy on this matter. We notice, first of all, a tendency for prices to remain relatively stable. In the few cases that we have monitored in different housing estates, we have noticed a fall in prices of 10-20 per cent. In other cases, of course, we have seen that there was a sort of stabilisation in the price. In certain cases, however, some flats have even gone up in price, hut this may be due perhaps to furniture and furnishings, air-conditioning, and so on, which we do not know very much about. The data I have are not sufficiently detailed for an analysis to be made, but I am quite sure that there has been some effect upon the announcement of Government's policy since last September.

The Member for Kim Seng was quite right in saying that we should also build more flats in condominium type units for the middle income group. We certainly are going to do this. I believe my colleague here has announced that even the Housing and Development Board is going to build some flats for people who do not qualify now as they are above the $1,500 per month household income.

While I agree that we should build these units, I think we must tackle the problem from as many fronts as possible, and the Bill which I am taking through all its stages here today will help to reduce or stabilise prices of the kind of housing which the middle income groups may be able to purchase.

I agree with the Member for Changi that when it comes to flats costing $200,000 and over, or detached houses of the same value, it is very unlikely that an executive drawing $1,500 a month will be able to afford the instalments, which he will be required to pay for the flat. But there are other types of housing, like the terrace houses, semi-detached houses and flats which are not in the $200,000 class. I think there are flats costing around $100,000 or even less.

Mr Sim Boon Woo: Even then they have to pay an instalment of about $900 per month.

Mr Hon Sui Sen: That depends also on the interest rate which is charged, and I think many employers and certainly the Government and the statutory boards have given housing loans at lower interest rates.

Dr Ong Leong Boon: On a point of clarification, Sir,I am sure the Hon. Minister is aware that the credit squeeze has resulted in very high interest rates and difficulty in getting loans. Even if we work on the basis of a $100,000 flat, payable in 10 years at 10 per cent interest per annum, we have got to pay $200,000 in 10 years, which means $20,000 per year or about $2,000 a month. Can a wage earner earning $1,500 to $2,000 afford this kind of housing? If my figures are correct, then it is not possible for him to purchase such a flat. I think there is a strong case for the Government to step up its building programme for the middle income wage earners. Priority, of course, must be given to those in the civil service.

Mr Hon Sui Sen: Sir, I have already said that I fully agree there is a need for more housing to be constructed, whether by the Housing Board, statutory boards, JTC, or by firms. I am sure the executive housing in Jurong is within the means of the junior executives in Jurong. If any of our Members of Parliament wish to buy the kind of executive flats that are being put up in Jurong, I think we can easily build quite a lot more in addition to what my colleague has been building.

With regard to the credit squeeze, I think that is generally applicable to purchases of luxury-type apartments and housing, and it is not intended for the kind of loans which companies make to their employees. If, in fact, the credit squeeze is being operated in a way which has prevented this, I am sure my Ministry and the Monetary Authority of Singapore will be prepared to consider a relaxation of this kind of credit control to the benefit of the middle income group.

Mr Sim Boon Woo: Hear, hear!

Mr Barker: Sir, I had no intention of joining in this debate. I am sure my colleague can look after himself very well. But there was a point raised by the Member for Changi that if population densities were higher, plot ratios increase and on a given plot of, say, one acre, if a building goes higher, then the total cost will be cheaper. I agree with that. In fact, it has been the practice of my Ministry to relax and increase plot ratios, especially in the heart of the City. That is why we see the high buildings that are being erected, some of which have been completed. But obviously there is a limit beyond which we cannot go, and the density aspect, of course, is just one part of the cost. Costs have gone up because building materials have gone up, and I have spelt out the details earlier on.

I thought I should clarify to the Member on this point which has not been answered by my colleague.

Mr N. Govindasamy (Telok Blangah): Sir, neither did I intend to take part in this debate. But I think the density ratio plays an important part. I have some experience in this. Perhaps there has been some relaxation within the City area. But in the periphery, the Building Control Division, or the approving authority, is still very strict on allowing a relaxation of density in certain areas. This applies not only to developments of private developers but also to statutory boards wanting to build houses for their employees. In the Minister's constituency, Tanglin, certainly nobody can put up houses more than 4-storeys high. Sir, I know of a statutory board which planned to build blocks of houses 8-storeys high. There was a tremendous response from the employees. But planning approval was not given, and modifications had to be made, after which the cost of each unit went up by about 25-30 per cent, making it beyond the means of the junior executive to purchase. Perhaps what the Member for Changi said has more value than it really appears. I think the Building Control Division and the Planning Office could also assist junior executives to purchase flats and bring down the cost by relaxing the density ratio.

Mr Barker: Sir, I think that point deserves a reply. Firstly, I think the hon. Member does not know exactly the boundaries of my constituency when he said that housing development is confined to 4-storey flats. To give him an example, he will find that flats opposite the Botanic Gardens have gone far, far beyond the 4-storey height which he has referred to. And that is not the only place in Tanglin. Tanglin stretches from Lido Theatre to the MacRitchie Reservoir.

Regarding densities, we have been allowing developers to build higher and higher. But if a developer had bought a piece of land knowing that the plot ratio is 3:1, and then having bought it expect to get a plot ratio of 10:1, it means he is going to make a lot of money, and the prices of land will still go much higher. But there have been many cases where the ratios have been relaxed, especially in town where the plot ratio is now 10:1. It used to be 3:1 before. That is why there are buildings going up to 50 storeys. There is one developer who wanted to go up to 100. Every developer in Singapore wants to go higher and higher. He builds 36, I go 37. Someone else goes 50. They all want to go the highest. So there must be some planning control.

I do not know the particular statutory board that the Member has referred to, but statutory boards are given special attention by my Ministry. Obviously we cannot favour statutory boards and give them high plot ratios when perhaps next door we have confined a private developer to a certain plot ratio. But I agree with Members that the price of land bears an important part to the total price. Hence Government's measures to try and bring down the price of land, and this Bill helps to further stabilise the price of land. We have succeeded to some extent, as my colleague has pointed out, in bringing down the prices of land by about 20 per cent in some cases. We hope it will stay that way, and does not rocket to the skies again.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Hon Sui Sen].

Bill considered in Committee; reported without amendment; read a Third time and passed.