Will the 60% ABSD Discourage Foreign Property Investment in Singapore?

The recent announcement of the 60% Additional Buyer's Stamp Duty (ABSD) for foreigners buying residential properties in Singapore has raised concerns over the impact it may have on the property market. The new measure, which came into effect in April 2023, has doubled the previous ABSD rate for foreign buyers, making it significantly more expensive for them to invest in Singapore's property market.

Many experts believe that the new ABSD rate will deter foreign buyers from investing in Singapore's property market. With the increase in costs, foreign investors may choose to invest elsewhere, leading to a decline in demand for properties in Singapore. This could, in turn, lead to a drop in property prices, making it more affordable for locals to buy properties. However, some experts argue that the impact of the new ABSD rate may not be as significant as predicted, as foreign buyers may still find Singapore's property market attractive due to its stability and potential for long-term growth.

Developments like Corals At Keppel Bay (pictured above) still have developer units remaining, and may now find it tougher to sell with reduced foreign interest caused by the ABSD hike

Understanding ABSD in Singapore

The Additional Buyer’s Stamp Duty (ABSD) is a tax imposed on individuals or entities who purchase any residential property in Singapore. It was introduced in 2011 by the Singapore Government to cool the property market and prevent excessive speculation.

The ABSD rates vary depending on the buyer’s profile and the number of residential properties they own. Singapore citizens and Permanent Residents (PRs) are subject to lower ABSD rates compared to foreigners. The Ministry of Finance reviews and adjusts the ABSD rates periodically to ensure that the property market remains stable.

The ABSD rates for Singaporeans buying their second residential property have recently been increased from 17% to 20%, while those buying their third and subsequent residential property will now have to pay 30% ABSD. For PRs, the ABSD rates for the second and third or subsequent residential property are 30% and 35%, respectively. Foreigners who buy any residential property in Singapore will have to pay double the prevailing ABSD rates, which is now at 60%.

It is important to note that the ABSD is payable in addition to the Buyer’s Stamp Duty (BSD) and the Additional Conveyance Duty (ACD), which are also taxes imposed on property purchases in Singapore. The BSD is a tax imposed on the purchase price or market value of the property, whichever is higher, while the ACD is imposed on the transfer of ownership of shares in a company that owns residential properties in Singapore.

In summary, the ABSD is a tax imposed on individuals or entities who purchase residential properties in Singapore, with rates varying depending on the buyer’s profile and the number of residential properties they own. The Singapore Government reviews and adjusts the ABSD rates periodically to ensure that the property market remains stable.

Impact of ABSD on Foreigners

The new 60% ABSD rate for foreigners buying residential properties in Singapore is expected to have a significant impact on their purchasing decisions. The ABSD is a tax that is levied on top of the existing Buyer's Stamp Duty (BSD) for certain property transactions.

Foreigners who are not permanent residents (PRs) of Singapore are now required to pay a 60% ABSD on top of the existing BSD rates when buying residential properties in the country. This is a significant increase from the previous ABSD rate of 20%.

The impact of this new measure on foreign buyers is expected to be significant. The increase in ABSD rates is likely to deter many foreigners from investing in the Singapore property market. This is especially true for those who are looking to buy high-end properties, as the ABSD rates for such properties are already very high.

Foreigners from countries that have free trade agreements (FTAs) with Singapore, such as the United States, Iceland, Liechtenstein, Norway, and Switzerland, are eligible for ABSD remission. However, they will still be required to pay the BSD, similar to any Singapore Citizens.

Overall, the new ABSD rates are expected to have a significant impact on the Singapore property market, particularly on foreign buyers. While the ABSD rates for PRs and Singaporeans have remained unchanged, the increase in ABSD rates for foreigners is likely to reduce the number of foreign property buyers in the country.

The Singapore Property Market

The Singapore property market has been subject to various cooling measures over the years to maintain a sustainable property market. One such measure is the Additional Buyer's Stamp Duty (ABSD), which is a tax levied on property buyers in addition to the Buyer's Stamp Duty (BSD). The ABSD rates were recently raised on 27 April 2023, with the ABSD for foreigners doubled to 60% for any residential property purchase.

These measures were introduced to curb the demand for properties and to keep property prices affordable for Singaporeans. The government has also been increasing housing supply through the Government Land Sales (GLS) programme and other initiatives to meet the demand for housing.

Despite the cooling measures, the Singapore property market has remained attractive to investors due to its stability and potential for capital appreciation. The investment demand for properties from foreign buyers has been a significant contributor to the property market in recent years.

However, the recent increase in ABSD rates for foreigners may deter some foreign buyers from investing in the Singapore property market. The higher ABSD rates may make it less attractive for foreign buyers to purchase properties in Singapore, which may lead to a decrease in demand for properties.

Overall, the Singapore property market remains stable and attractive to investors due to its strong fundamentals. The government's efforts to increase housing supply and maintain a sustainable property market have contributed to the stability of the market. However, the recent increase in ABSD rates may have an impact on the demand for properties from foreign buyers.

ABSD Rates and Remissions

The Additional Buyer's Stamp Duty (ABSD) is a tax imposed on top of the Buyer's Stamp Duty (BSD) when purchasing a residential property in Singapore. The ABSD was introduced in 2011 to cool the property market and curb demand from foreign buyers.

As of 27 April 2023, the ABSD rates have been increased to 60% for foreigners and 65% for entities or trusts purchasing any residential property, except for housing developers. For Permanent Residents, ABSD for a second property is 30%, and 35% for a third or subsequent property. Singapore citizens are exempted from ABSD.

ABSD (Trust) of 65% is to be paid upfront, and an application for the refund must be made to the Inland Revenue Authority of Singapore (IRAS) within six months after the date of execution of the instrument. The remission of ABSD (Trust) is subject to certain conditions, such as the trust being irrevocable and the beneficiaries being Singapore citizens or Permanent Residents.

The e-Stamping portal provides a convenient way for buyers to pay for stamp duties and conveyance duties online. The portal also offers a stamp duty calculator to help buyers estimate the amount of stamp duty payable for their property purchase.

It is important to note that ABSD rates and remissions are subject to change and should be verified with the relevant authorities before making any property purchase.

Role of Housing Developers

Housing developers play a crucial role in the property market in Singapore. They are responsible for developing and constructing new properties, which are then sold to buyers. In recent years, the government has implemented several cooling measures to curb the rising property prices in Singapore. One of the measures is the Additional Buyer's Stamp Duty (ABSD), which is a tax levied on certain property transactions.

Housing developers are not exempt from the ABSD. In fact, they are subject to a higher ABSD rate of 25% for all residential properties acquired and sold within the first year of acquisition. This is to discourage property holding entities from buying and holding on to properties for speculative purposes.

However, there are certain exemptions to the ABSD for housing developers. For example, residential properties transferred into trusts for housing developers are subject to an ABSD rate of 40% (5% non-remittable; plus 35% remitted upfront subject to conditions). This exemption is only applicable if the housing developer meets certain conditions, such as completing the development of the property within a specified period.

Despite the ABSD, housing developers continue to play a significant role in the property market in Singapore. They are major players in the business of developing and selling properties, and are often the first to introduce new projects to the market. Housing developers also have a vested interest in the property market, as they have a significant equity interest in the properties they develop.

In conclusion, while the ABSD has impacted the property market in Singapore, housing developers continue to play a crucial role in the industry. The ABSD has not deterred them from developing and selling properties, and they remain an important entity in the business of property development in Singapore.

Impact on Different Types of Properties

The 60% ABSD has a varying impact on different types of properties.

For public housing, Singaporean and PR buyers are not affected by the ABSD increase when purchasing a Build-to-Order (BTO) flat or a resale HDB flat. As foreigners are not permitted to purchase HDB flats (unless purchased as a matrimonial home with a Singapore Citizen spouse, with no ABSD payable), the ABSD increment doesn't impact the HDB market. 

For private properties, the ABSD increase affects all buyers, including Singaporeans and PRs. The ABSD rate for Singaporeans and PRs purchasing their second or more properties has been increased from 7% to 12%. Foreign buyers purchasing private properties will have to pay an additional 60% ABSD on top of the existing 20% ABSD.

According to a report by PropertyGuru, the ABSD increase is likely to have a greater impact on the high-end market, which is more popular among foreign buyers. For example, foreign buyers who purchase a luxury apartment or condominium unit worth $5 million will have to pay an additional $3 million in ABSD.

On the other hand, the impact of the ABSD increase on mid-tier properties may be relatively small. For example, a foreign buyer who purchases a terrace house worth $2 million will have to pay an additional $1.2 million in ABSD. While this is a significant amount, it may not be enough to deter foreign buyers who are looking for a long-term investment in Singapore's property market.

Overall, the 60% ABSD increase is expected to have a significant impact on foreign buyers purchasing private properties in Singapore. However, the impact on different types of properties varies, and foreign buyers may still be interested in purchasing mid-tier properties despite the ABSD increase.

Government Policies and Measures

The Singapore government has implemented several measures to cool down the property market and prevent it from overheating. These measures are aimed at making properties more affordable for Singaporeans and preventing foreigners from driving up prices.

The Monetary Authority of Singapore (MAS) and the Ministry of National Development (MND) are the two main entities responsible for implementing these policies. Some of the measures they have introduced include:

• Additional Buyer's Stamp Duty (ABSD): This is a tax on property purchases that is paid in addition to the standard stamp duty. The ABSD rates have been increased for foreigners, Permanent Residents, and Singaporeans buying second or subsequent properties. From April 27, 2023, foreigners buying any residential property in Singapore will have to pay an ABSD of 60%, up from the previous rate of 30%.
• Seller's Stamp Duty (SSD): This is a tax on the sale of a property within a certain period of time. The SSD rates have been increased for all sellers, with higher rates for those selling within the first year of purchase.
• Loan-to-Value (LTV) limits: This is the amount of money a bank is willing to lend a buyer as a percentage of the property's value. The LTV limits have been lowered for all buyers, with lower limits for those buying second or subsequent properties.
• Total Debt Servicing Ratio (TDSR): This is a measure of a borrower's ability to repay a loan, taking into account all their other debts and expenses. The TDSR limits have been tightened for all borrowers, with lower limits for those buying second or subsequent properties.

These measures have been introduced gradually over the years, with transitional provisions to help buyers adjust. The latest round of measures, which includes the increase in ABSD rates for foreigners, was announced in April 2023 and is expected to have a significant impact on the property market.

Overall, the government's policies and measures are aimed at promoting a sustainable property market that is affordable for Singaporeans and not driven by speculation or foreign investment. While they may deter some foreigners from buying properties in Singapore, they are necessary to ensure the long-term stability of the market.

Market Trends Amidst Covid-19

The Covid-19 pandemic has had a significant impact on the property market in Singapore. In the initial stages of the pandemic, the market experienced a slowdown as buyers adopted a wait-and-see approach. However, the market has since rebounded, with the government introducing a series of measures to support the economy and the property market.

Despite the pandemic, the housing demand in Singapore remains strong. This is due to several factors, including low-interest rates, government incentives, and a stable political environment. Additionally, Singapore's status as a safe haven for investment has attracted foreign buyers, particularly from China and Hong Kong.

The rental market in Singapore has also been affected by the pandemic. With the rise of remote work and online learning, there has been a higher demand for rental properties. Tenants are now looking for larger spaces with home offices and outdoor areas. As a result, landlords have had to adjust their rental prices and offerings to meet the changing demands of tenants.

In light of the recent increase in ABSD rates for foreigners, it remains to be seen how this will impact the property market in Singapore. While some experts predict that the increase may deter foreign buyers, others believe that the impact will be minimal. Foreign buyers may still be attracted to Singapore's stable political environment, strong economy, and high-quality properties.

Overall, the property market in Singapore has shown resilience amidst the pandemic. While there have been challenges, the government's measures and Singapore's reputation as a safe haven for investment have helped to maintain the market's stability.

Conclusion

The 60% ABSD for foreign property buyers in Singapore has raised concerns about the impact it will have on the property market. While some predict a slowdown in foreign investment, others argue that it is a necessary measure to prioritise housing for owner-occupation.

The government's plan to double the ABSD rate for foreigners is a clear indication of their commitment to ensuring that Singaporeans have access to affordable housing. The increase in ABSD rates for foreigners is expected to deter foreign investors from purchasing properties in Singapore, thereby reducing demand and stabilising property prices.

For those looking to invest in Singapore's property market, the 60% ABSD rate may make investment properties less attractive. However, for those looking to upgrade their homes or purchase a primary residence, the ABSD rates remain unchanged for Singaporeans and permanent residents buying their first property.

Foreign investors may also consider investing in other sites or sectors in Singapore, such as commercial or industrial real estate, where ABSD rates are lower or non-existent.

Overall, the 60% ABSD rate for foreign property buyers is a significant measure that is expected to have a significant impact on Singapore's property market. While it may deter some foreign investors, it is a necessary step towards prioritising housing for owner-occupation and ensuring that Singaporeans have access to affordable housing.