BT, APR 27, 2023
Property investment demand fell back in the last two years but is rising again and adding stress to the local housing market. As such, the government has moved to crimp investment demand – from both local and foreign buyers – to proritise Singaporeans looking to buy homes for their own occupation.
Minister for National Development Desmond Lee said on Apr 27, 2023 that the increase in additional buyer’s stamp duty (ABSD) rates for residential properties is an early “pre-emptive measure” put in place to curb the renewed interest in property investment.
The Minister said that as a proportion of total property transactions, foreign investment has fallen from some 20% in 2011 to about 3-4% over the last few years.
Between 2017 and 2019, the average proportion was about 6%, as a result of a few factors including the economic environment, property cooling measures and border closures. In the first quarter of 2023, foreign investment made up 7% of all residential transactions. If no action is taken, the growing investment demand from both local and foreign buyers will add stress to Singaporeans who are looking to buy residential property principally for owner occupation.
From Apr 27, 2023:
- Singapore citizens buying their second residential property will pay 20% ABSD, up from 17%. They will pay 30% ABSD, an increase from 25% , for their third and subsequent properties.
- Singapore permanent residents (PRs) will see ABSD raised from 25% to 30% on their second property and from 30 per cent to 35 per cent for their third and subsequent properties.
- Foreigners bear the brunt of the increases, with ABSD on any property purchase doubled from 30% to 60%.
- Residential properties bought by entities or in trust will be subject to 65% ABSD, up from 35%.
The new measures are expected to impact about 10% of all residential property transactions, based on 2022 data. There were signs that the number is likely to rise for both local investors and foreign investors.
According to Minister Lee, the vast majority of foreigners who come to Singapore to work and study rent property instead of buying and are “largely not affected” by the measures.
When asked whether there would be a chance of ABSD rates being lowered in the future, Minister Lee said that these measures are “cooling measures meant to manage overall demand.”
He said the government had to take a series of measures on both the supply and demand side to make sure the market does not run ahead of economic fundamentals because if they do, they will hurt Singaporeans. The government is also keeping a close eye on the rental market, where rents have spiked in the last two years.
It is foreseeable that investment demand by Singaporeans and PRs will moderate to some extent. Foreigners will seriously reconsider buying residential property in Singapore because they do have options in many other liveable cities around the world.
While developers were spared any increase in ABSD rates this round, they are likely to rethink their land bidding strategy. The latest cooling measures will dampen bids for sites, particularly in the prime districts 9, 10 and 11, where new private residential launches typically target a higher proportion of foreign buyers, who are most impacted by the higher ABSD.