Last week, the government announced that foreigners that are buying any residential property in Singapore will now have to pay an increased amount of additional buyer’s stamp duty (ABSD) of 60 per cent, a double from the previous 30 per cent.
This would be the most drastic increase among the cooling measures recently announced. Others include a 3 per cent increase in ABSD rate for Singaporeans, from 17 percent to 20 percent. Evidently, this is a much more muted increase for locals. Those that are buying their third and subsequent residential property will now have to pay an ABSD rate of 30 percent, which is another 5 per cent increase from 25 per cent.
As for Permanent Residents, they face a an increase of ABSD rate of 5 per cent from 30 percent to 35 per cent. The 35 percent applies to PRs buying their third and subsequent residential property.
As quoted from Ministry of Finance (MOF), the increase in ABSD rates would be an effort to “promote a sustainable property market and prioritise housing for owner-occupation"promote a sustainable property market and prioritise housing for owner-occupation”.
With the renewed surge in interest from local and foreign investors in Singapore’s residential property market, the latest slew of property cooling measures serves to dampen the speculations and “run ahead of economic fundamentals, with the risk of a sustained increase in prices relative to incomes.”.
This latest move from the government to double the ABSD rate to 60 per cent for foreigners may deter some of the foreign investors from purchasing Singapore properties, but it will eventually not discourage those that are keen to relocate here and set up family offices here for the long term.
Others that are waiting to apply for permanent residency may now choose to rent first before purchasing a residential property to enjoy a lower ABSD rate. This will in turn channel the demand to the rental market, fuelling further increases in the rental property market due to the new stream of demand.
In the short run, it is expected that the private home sales that would be affected are the higher-end luxury property projects in the core central region (CCR). The most immediate impact would the drop in sales volume. But genuine home buying and upgrading sentiments will still be there, so it is unlikely that the prices will drop anytime soon. In the next few months, Singaporeans and permanent residents will still drive the demand in residential properties.
In addition, prices of homes may not see a fall as the supply for residential properties remains low in the market. Sellers in the property market still have “holding power”, and given the low number of unsold units in the market, the property prices are expected to be resilient.
Want to know how to recalibrate your finances and reassess what are the residential properties you can invest or upgrade to? Do not hesitate to reach out for a detailed financial analysis and most up to date property market report to help you narrow down to the choices you should make.