Just earlier this month, it was 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.
As previously analysed, this would be the most drastic increase among the cooling measures recently announced:
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.”.
However, we take a closer look at the property measures to better assess the actual impact on the property market. For one, property investors that are of specific nationalities are actually exempt from the latest tax hike for foreigners.
Some of the nationalities that are subjected to the same stamp duty rates as Singaporean citizens due to the existing free trade agreements established 10 years ago:
That being said, the general demand from foreigners remains strong even among nationalities that are directly affect. Demand did not cease mainly because foreigners still see the investment potential in Singapore. This is due to the stable politics, strong infrastructure and good education system. Coupled with a strong economy with good foundation, many of them remain interested in settling down or investing in Singapore. As a result, a good number of them will choose to absorb the increase in investment cost and proceed with their commitments.
Property prices are also rapidly increasing in foreign markets. Upon comparison, foreigners may not see the recent increase in ABSD rates as drastic enough for them to want to pull out.
Even for nationalities that are affected by the property measures, sales has persisted. With the recent launch of Blossoms by the Park condominium 2 days after the newly announced property measures, four units were sold to US buyers. Another four units were transacted and sold to Chinese buyers. Genuine home buying and upgrading sentiments will still be there, so it is unlikely that the prices will drop anytime soon.
In addition, the property measures will also have a muted effect on commercial property market as well, since the drivers for commercial property markets are vastly different. As explained by National Development Minister Desmond Lee, “Demand for commercial properties tends to be driven by business considerations, and commercial property transactions are generally of much higher value than for residential properties. Individual buyers make up nearly all of the residential property market but only about 10 per cent of the commercial property market. Historically, commercial property prices and transaction volumes have also remained stable in the period following past increases to the ABSD rates.”.
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.