Photo by Albert Chua for The Edge Singapore
In an effort to reduce investment demand, the Singaporean government has implemented new cooling measures by increasing the Additional Buyer Stamp Duty (ABSD) rates for residential properties.
Singapore citizens will now face a 20% ABSD for their second property and a 30% ABSD for their third and subsequent properties, up from 17% and 25%, respectively. Permanent residents (PR) will also see increases from 25% to 30% for their second property, and from 30% to 35% for their third and subsequent properties.
Foreign buyers will face a significant increase, with ABSD on any property purchase doubling from 30% to 60%, and a 65% rate will apply to residential properties bought by entities or in trust, up from 35%. These changes are effective as of April 27th.
Comparison of old and new ABSD rates
Around 10% of residential property transactions are expected to be affected by the new measures, which are aimed at proactively managing investment demand, according to a joint press statement from the Ministry of Finance, Ministry of National Development, and the Monetary Authority of Singapore.
While previous measures implemented in December 2021 and September 2022 have had a moderating effect, property prices have shown renewed signs of acceleration in Q1 2023, particularly due to strong demand from locals purchasing homes for owner-occupation, and renewed interest from local and foreign investors in the residential property market.
Official data reveals that private home prices increased by 3.2% in Q1 2023, despite lower sales volume, following a 0.4% increase in Q4 of the previous year.
ABSD was first introduced as part of a series of measures to cool the property market in December 2011. Since then, rates have been increased in 2013, 2018, and 2021. The most recent round of cooling measures follows those implemented in September 2022, which saw borrowing limits for all property loans tightened, and a 15-month waiting period for private property sellers before they could buy a Housing and Development Board (HDB) resale flat.
Around 30 new residential projects were scheduled to launch this year, with some waiting to be marketed in the coming weeks. However, these launches may be delayed as the latest ABSD hikes are likely to impact sentiment, especially after higher interest rates have already reduced gains.
Some exemptions to the ABSD increases still apply, such as a refund option for married couples with one Singaporean spouse who jointly purchase a second property, subject to selling their first property within six months of the purchase. The ABSD hikes also do not affect purchases of HDB and executive condominiums from developers with upfront remission if the spouse is a Singapore citizen.
The Singapore government has introduced a transitional provision for ABSD rates. For transactions that meet specific conditions, ABSD rates on or before April 26 will apply. These conditions are:
The sellers granted the option to purchase (OTP) on or before April 26, 2023.
The OTP is exercised on or before May 17, 2023, or earlier if it falls within the validity period.
The OTP has not been modified on or after April 27, 2023.
The revised ABSD rates are anticipated to temper demand while the government bolsters the supply of housing to alleviate the constrained market. The supply of private housing on the Confirmed List has been increased to 4,100 units in H1 2023, up from 3,500 units in H2 2022.
In the realm of public housing, over 23,000 flats were launched in 2022 and an additional 23,000 flats are projected to be introduced in 2023. The government has expressed its readiness to launch up to 100,000 new flats from 2021 to 2025, ensuring a steady pipeline to meet demand.
Although pandemic-related setbacks have delayed property completions, the government believes that the housing supply coming onto the market will be sizable enough to meet the demand. There will be approximately 40,000 completions of public and private residential properties in 2023, with around 100,000 units scheduled for completion by 2025.
"The measures outlined above have been carefully calibrated to moderate housing demand while prioritizing owner-occupation and providing sufficient housing supply. The government will continue to adjust our policies as necessary to ensure that they remain relevant and promote a sustainable property market," the ministries stated in a press release.
How Will it Affect You?
1. Singaporean Citizens
2. Permanent Residents
3. Foreigners / Entities / Trustees / Housing Developers