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The Singapore property market has been buzzing with activity, attracting both local and international investors alike. As time passed, industry experts were already anticipating whether there will be a new round of cooling measures that will be implemented to rein in the red-hot market. Alas, the news came on 27th April 2023.
For the 4th time in Singapore’s history, the Additional Buyers Stamp Duty (ABSD) was raised. For the uninitiated, ABSD is a type of property tax that is taxable for property owners who own more than one property or for property owners who are non-Singaporean/PR.
Profile of the Buyer |
Additional Buyer’s Stamp Duty (ABSD)Before 27th April 2023 |
Additional Buyer’s Stamp Duty (ABSD)After 27th April 2023 |
Change in Additional Buyer’s Stamp Duty (ABSD) |
|
| Singapore Citizens | ||||
| 1st residential property | No ABSD | No ABSD | – | |
| 2nd residential property | 17% | 20% | 3% | |
| 3rd and subsequent residential property | 25% | 30% | 5% | |
| Singapore Permanent Residents | ||||
| Singapore Permanent Resident buying 1st residential property | 5% | 5% | – | |
| Singapore Permanent Resident buying 2nd residential property | 25% | 30% | 5% | |
| Singapore Permanent Resident buying 3rd and subsequent residential property | 30% | 35% | 5% | |
| Foreigners | ||||
| Foreigners buying any residential property | 30% | 60% | 30% | |
| Entities | 35% | 65% | 30% | |
| Housing Developers | 35% + Additional 5% for Housing Developers | 35% + Additional 5% for Housing Developers | – | |
The new ABSD rates were targeted at two main groups of buyers.
The first group is those who own multiple properties. We think that this is driven by the current shortage in housing supply. The government has to step in to discourage homebuyers from owning too many properties. Otherwise, there won’t be enough properties for Singaporeans/PRs who are looking to buy their first property.
The other group is foreigners and entities that are buying properties in Singapore for investment purpose. News such as this of Chinese buyers snapping up properties in the private condo market has certainly pushed the government to reconsider their stance on home ownership by foreigners at a time when the property market is heating up. As such, the government has doubled the ABSD for foreign buyers in this new round of cooling measure.
In 2023 alone, close to 40,000 properties will be completed. This will be the highest rate of completion since pre-Covid in 2018. By 2025, a total of 100,000 homes will be completed, according to recently conducted research by Monetary Authority of Singapore (MAS). With a bump up in housing supply, MAS is expecting the property market to ease with supply-side pressure coming down.
That said, the big question is when. Housing prices has always been a lagging indicator. It will take a while for the market to digest the new incoming supply. For now, it seems like home prices will still be stable. But there might be chance that home prices will come down in 2024.
The other market that is impacted by housing supply is the rental market. As completion of new homes ramp up, existing tenants who are just temporarily staying in rented places will be moving out. This will help to ease the shortage in supply for homes that are being rented out.
There are already early signs of rental market softening, according to property agents and analysts. But MAS does foresee rental prices coming down in the next couple of quarters. MAS also quoted that real estate agencies are reporting decline in viewings for rental units and leasing inquiries since the start of 2023.
With rental surging 38-43% since 2021 for both public and private housing, the cool down in rental prices would be welcomed by tenants.
With home prices expected to come down, there may be an influx of buyers who are ready to buy their first home.
If you are in the market for a new property, it is important to consider your affordability. This is especially with the current interest rate environment where the cost of financing is upwards of 3.50%.
You want to make sure that you don’t overleverage and end up taxing yourself with the home financing. Therefore, make sure to connect with Moneyline.SG today to get a comprehensive financial health check to determine your housing affordability so that you are ready to house hunt when it becomes a buyer’s market.
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