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The Singapore government raised the Additional Buyer's Stamp Duty (ABSD) rates with immediate effect from Apr. 27, 2023.
The specific ABSD rates increases are as follows:
- Raise ABSD rate from 17 per cent to 20 per cent for Singapore citizens purchasing their second residential property
- Raise ABSD rate from 25 per cent to 30 per cent for Singapore citizens purchasing their third and subsequent residential property, and Singapore permanent residents purchasing their second residential property
- Raise ABSD rate from 30 per cent to 35 per cent for PRs purchasing their third and subsequent residential property
- Raise ABSD rate from 30 per cent to 60 per cent for foreigners purchasing any residential property
- Raise ABSD rate from 35 per cent to 65 per cent for entities or trusts purchasing any residential property, except for housing developers
The ABSD rates for Singapore citizens and PRs purchasing their first residential property will remain unchanged, at 0 per cent and 5 per cent respectively.
Why were these measures implemented?
Speaking to the media at HDB Hub on Apr. 27 morning, National Development Minister Desmond Lee said there were two considerations when deciding to raise the ABSD rates.
Lee said the government wanted to ensure a stable and sustainable property market, and provide greater priority and support to Singaporeans who are buying homes for owner-occupation.
He added that the increase in ABSD rates is a "pre-emptive measure" to dampen local and foreign investment demand for residential properties.
He explained:
"The measures that we have taken are calibrated. For example, we look at locals right now. Past experience has shown that local Singaporeans and PRs are very sensitive to changes in ABSD. Therefore, for Singaporeans and PRs, [for] second and subsequent purchases of residential property, we have made increases of ABSD percentage of between three to five per cent.
Second, [for] foreign investors, we have decided to raise [the ABSD rates] in order to dampen demand as well, not just from locals but also from foreign investors. These measures, all in, will impact, based on 2022 data, about 10 per cent of transactions."
"You may say why is it just 10 per cent? But actually, [we] want to make sure that this does not grow significantly," Lee added.
Singapore property market remains resilient despite moderations
Lee said the government has been monitoring the effect of the last two rounds of property cooling measures in December 2021 and September 2022.
"These measures, the last two rounds of property cooling measures, together with the global economic environment, the uncertainty in the environment, as well as the high mortgage interest rates, have had some moderating effect on our property market. And we've started to see some early signs of price moderation."
Despite the moderations, the property market in Singapore "continues to be resilient".
This resilience, explained Lee, is driven by two key factors, the first being a strong demand from Singaporeans to buy homes for owner-occupation.
This is partly a result of construction delays due to the Covid-19 pandemic, said Lee.
Additionally, there have been more nuclear families and individuals moving out and living on their own.
The second key factor is a renewed local and foreign interest in investing in residential properties.
"You start to see interest by investors, both local as well as foreign, starting to come back into our residential market," said Lee.
Why is the rate hike for foreigners higher than for locals?
When asked why the rate hike for foreigners is higher than that for locals, Lee replied:
"We had to calibrate these measures to ensure that we achieve the two goals that we set out to achieve— one being to prioritise Singaporeans or locals who are looking to buy homes for owner-occupation.
Two, in order to achieve that, you do a pre-emptive move as you start to see investment interest both by locals and foreigners start to grow. And in deciding how to achieve this, we had to calibrate."
Lee said for locals, data has shown that they are "very price sensitive to ABSD moves", and thus the adjustment of between 3 to 5 per cent in rates "should suffice to dampen local investment demand".
Lee added:
"When you talk about foreign investment demand, you're talking about people who, from overseas, see Singapore residential property as an attractive investment class. And therefore, we've had to calibrate the ABSD rate in order to have an effective dampener on investment from abroad.
But all in, these measures tackle both local and foreign investment. The rates are calibrated to address the two categories of market."
Top image via Mothership & Unsplash.