No further help for landlords but combined measures could soften blow on real estate market

/ EdgeProp Singapore |

April 6, 2020 6:34 PM SGT

SINGAPORE (EDGEPROP) - The new “Solidarity Budget”, announced on April 6, in essence supplements and expands on the Resilience Budget announced on March 26, and is the second supplementary budget following the Unity Budget announced on Feb 18.

The measures introduced in the Solidarity Budget include enhancing the Jobs Support Scheme and the Self-Employed Person Income Relief Scheme.(Photo: Albert Chua/EdgeProp Singapore)

“The most significant parts of the Solidarity Budget are assistance schemes that would strengthen the job security of employees and the self-employed in Singapore,” says Nicholas Mak, head of research & consultancy for ERA Realty.

The measures include enhancing the Jobs Support Scheme and the Self-Employed Person (SEP) Income Relief Scheme. It is also targeted at providing immediate or short-term relief, for instance, the increase in wage credits and waiver of foreign worker levy to help businesses keep workers. It will also bring forward, and increase, cash handouts to Singaporean households.

The Ministry of Law will introduce a Bill on April 7 to let businesses and individuals defer certain contractual obligations such as rent payment, loan repayment or work completion, for a period. The Bill will also ensure that property owners pass on the property tax rebate in full to tenants. The earlier-announced 30-100% property tax rebates could amount to 3% to 10% of annual rent for tenants, says Tricia Song, Colliers International head of research for Singapore.

Selected measures

Measures	3rd support Budget on 6 April	Supplementary Budget on 26 March	Budget on 18 Feb	Beneficiaries

Property tax rebates for qualifying commercial properties including shops and restaurants		100%	15%	Retail malls
Property tax rebate for hotels, serviced apartments, tourist attractions, MICE venues		100%	30%	Hospitality
Property tax rebate for Integrated Resorts		60%	10%	Integrated Resorts operators
Property tax rebate for non-residential properties		30%	None	Industrial, warehouse, office landlords
Rental waivers for non-residential tenants of state properties such as hawker centres, JTC, SLA, HDB, URA, BCA, NParks and PA	+0.5 month for industrial, office and agricultural tenants; rest remained same	0.5 to 3 months	0 to 1 month	Non-residential tenants of government agencies
Deferment of income tax payments for companies and self-employed persons		3 months	None	Industry-wide
Jobs Support Scheme	75% of monthly wages for every local worker in employment, capped at SGD4,600, for month of April	25% of monthly wages for every local worker in employment, capped at $4,600 for 9 months until end-2020	None	Industry-wide
Enhanced Jobs Support Scheme for Aviation, Tourism, Food Services, Land Transport, Arts & Culture sector		50- 75% wage offset, capped at monthly wage of $4,600 for 9 months until end-2020	None	Industry-wide
Foreign worker levy waiver/ rebate	The monthly foreign worker levy due in April will be waived.	None	None	Industry-wide
As early as Apr 21, employers will also receive a foreign worker levy rebate of SGD750 for each work permit or S- pass holder.
Cash payout and grocery vouchers to households	Additional $300 cash payout for every Singaporean adult, and one-off payment of $600 by 30 April	$300-900	$100-$300	Industry-wide
Source: Colliers International, Ministry of Finance

Meanwhile, government agencies will increase the rental waiver for industrial, office and agricultural tenants to one month, from 0.5 month before, notes Song. Stall owners under hawker centres managed by National Environment Agency (NEA) will enjoy three months of rental waivers, while retail tenants will receive two months of rental waivers.

“This Bill favours predominantly tenants as well as contracted service providers, and gives them much-needed reprieve from contractual obligations,” says Desmond Sim, CBRE head of research for Southeast Asia. “In particular, the new Bill will likely see commercial landlords bearing the brunt with premature deferments of rental income.”

In addition, the proposed new Bill will offer respite for businesses under contract but faced with cashflow and manpower crunch, adds Sim.

"Retailers, especially those in the F&B trade, will welcome the enhanced jobs support scheme and the waiver of foreigner worker levy for April,” says Wong Xian Yang, Cushman & Wakefield associate director of research for Singapore and Southeast Asia. “Labour costs make up almost half of business costs. Retailers can draw on the various financing schemes to support their working capital needs."

Retailers, especially those in the F&B trade, will welcome the enhanced jobs support scheme and the waiver of foreigner worker levy for April (Photo: Albert Chua/EdgeProp Singapore)

The Solidarity Budget does not offer additional assistance for private landlords or developers, points out Colliers’ Song.

If anything, landlords seem to be getting the short end of the stick, notes Cushman & Wakefield’s Wong. “Landlords still need to service their mortgage loans, which consist of interest costs and principal repayments. Unless landlords are also getting a reprieve from the banks, their short-term cashflow would also be impacted.”

(Read more at Covid-19 Solidarity Budget: What about the landlords? and Small businesses whipsawed by Covid-19 crisis get some financial relief)

Wong also points out that repayment schedules would also need to be fleshed out clearly under the Covid-19 (Temporary Measures) Bill that was announced on April 1. “It is unlikely that tenants would be able to pay back the deferred rents at one go after a break of six months or even longer,” he says. “In light of the upcoming new bill, some landlords may even choose to commit to more rental rebates, provided that tenants do not defer their rental payments. This would be a win-win situation.”

Residential development timelines are also likely to be delayed with the temporary suspension of construction and closure of show suites, says CBRE’s Sim. “Moving forward, we could see more developers engage in the use of technology to ensure businesses continuity.”

Residential development timelines are also likely to be delayed with the temporary suspension of construction and closure of show suites (Photo: Albert Chua/EdgeProp Singapore)

By keeping the unemployment rate low, the risks of property foreclosures due to borrowers unable to meet their mortgage obligations would also be lowered, notes ERA’s Mak. “In the past major economic downturns, foreclosed properties that were subsequently sold at lower prices contributed to downward pressure on real estate price trends,” he explains.

Furthermore, the weak employment market would also “suppress real estate demand and values in a few ways”, says Mak. First, most potential buyers are unlikely to invest in real estate or upgrade to a more expensive home if their job security is in question. Second, credit for real estate purchases could be tightened as banks become more stringent in granting mortgages, he explains.

Therefore, the Solidarity Budget, together with the Resilience Budget, “could soften the adverse impact of the Covid-19 outbreak on the real estate market”, adds Mak.

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