These changes, which take effect from Thursday, April 27, 2023, will require Singaporeans buying their second residential property to pay an Additional Buyer’s Stamp Duty (ABSD) of 20%, up from the previous 17%.
- Data shows that local property investors are “very sensitive” to adjustments in the Additional Buyer’s Stamp Duty (ABSD).
- Therefore, a smaller increment is sufficient to curb their demand compared to overseas investors, who are expected to pay double the previous ABSD rate when purchasing local property.
- Minister for National Development Desmond Lee spoke about the latest round of property market cooling measures in his comments to the media on Thursday (April 27).
- Minister Lee stated that these measures were designed to achieve two goals: prioritizing locals buying homes for their own occupation and curbing the growth of property investors.
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Minister for National Development Desmond Lee said on Thursday (April 27) that raising the Additional Buyer’s Stamp Duty (ABSD) from 30% to 60% was necessary to effectively curb investment from overseas, as this demand comes from foreigners who see Singapore residential property as an “attractive asset class”.
However, he added that data shows local property investors are “very sensitive” to ABSD adjustments, so a smaller increment is sufficient to curb their demand compared to overseas investors.
Speaking to the media after the announcement of the latest market control measures that took effect on Thursday, Mr Lee said the Government has to calibrate the measures to ensure it achieves its two set goals. “One is to prioritise Singaporeans or locals who want to buy a home to live in. The second goal is to take pre-emptive moves when you start to see investment interest, both local and foreign, starting to grow,” he said.
These changes will see Singaporeans buying their second residential property having to pay an ABSD of 20%, up from 17% previously, while Singaporeans buying their third and subsequent properties, as well as permanent residents (PRs) buying their second property, will have to pay an ABSD of 30%, up from 25%.
However, the ABSD rate for foreigners will be increased from 30% to 60%. In response to a media question about the difference in ABSD increases, Minister Lee said: “For locals, the data shows that they are very sensitive to ABSD adjustments, so we make adjustments of three to five percentage points.”
He said these increases “should be sufficient” to curb local investment demand. In a joint statement on Wednesday night, the authorities said that based on 2022 data, about 10% of residential transactions will be affected by the ABSD rate hike.
When asked if this 10% of transactions is large enough to affect the entire market, Minister Lee stated that this number could rise as the number of local and foreign buyers purchasing properties for investment purposes might increase further. “Therefore, this is a pre-emptive measure to contain it, to bring it down, to make sure that the market remains stable and we prioritise Singaporeans buying homes for their own occupation,” he said.
The media requested a breakdown of data on property purchases by locals and foreigners, the demographic characteristics of foreign buyers, and the types of properties transacted. Minister Lee added that past rounds of property market cooling measures have already had an impact on the market, with foreign investment as a proportion of property transactions falling from 20% in 2011 to an average of 6% between 2017 and 2019.
Minister Lee said that in the past few years, this proportion has been between 3% and 4%, and these figures were also affected by the broader economic environment. Nevertheless, he said, interest from foreign investors in the market has picked up in the first quarter of this year. “For example, in the first quarter of 2023, foreign purchases of residential properties accounted for about 7% of all transactions,” he said. “Property investment interest, both local and foreign, continues to be strong because of the fundamentals of our economy and our property market.”
Impact on Working Foreigners and Local Upgraders
Regarding how the jump in ABSD will affect foreigners interested in working in Singapore, Minister Lee stated that they will not be affected as the “vast majority” of foreigners choose to rent rather than buy property.
On how the recent moves will affect locals wishing to upgrade their properties and property prices, Minister Lee said the government “continues to see Singaporeans upgrading” and “selling their first property to get the resources they need to buy their second property.”
Minister Lee also said that he does not believe the latest ABSD adjustments will have a significant spillover effect on the rental market. He noted that the expected increase in residential supply will reduce demand, as some tenants are expected to exit the rental market to purchase their own properties.
The Monetary Authority of Singapore (MAS) had said in its semi-annual macroeconomic review on Wednesday that the pace of residential rent increases should slow in the second half of this year as 40,000 new public and private homes are due for completion. This figure is the highest in five years, the central bank said in its report.
When asked if a reduction in ABSD rates could be expected in the future when the market returns to normal, Minister Lee stated that the consideration for implementing any measure is to ensure the market does not outpace economic fundamentals and “hurt Singaporeans”. “As for whether these measures can be lifted, relaxed, or even strengthened, I think that is something we keep a very close watch on. It really depends on the market environment.”
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