The Additional Buyer’s Stamp Duty (ABSD) rate hike last week was perhaps the most punitive for foreigners planning to buy a home in Singapore.
Among the rate increases announced late Wednesday night on 26 April 2023, the hike for foreigners was among the highest at 100%, doubling from 30% to 60% on any residential property purchase from 27 April 2023 onwards.
Foreigners accounted for 7% of private home sales in Q1 2023
According to Minister for National Development Desmond Lee, the ABSD increases were aimed at dampening investment demand. This is especially as home prices have been at an all-time high for the past couple of years, with private home prices up by 3.3% in the first quarter of 2023, after a 0.4% increase in the previous quarter.
The minister also noted that while the proportion of private property transactions by foreigners has fallen from 20% in 2011 to 3% to 4% in the last few years after cooling measures were introduced, it has started increasing again to 7% in the first quarter of 2023.
Property analysts have also highlighted the increase in foreign buyers recently, with Lee Sze Teck, Senior Director of Research at Huttons Asia, adding that foreigners made up 3.1% of private home sales in the first quarter of 2022.
60% ABSD for foreigners buying residential properties in Singapore
The ABSD was first introduced in 2011 to cool down the property market, with foreigners slapped with a 10% rate on any residential property purchases.
Since then, there have been four hikes, with the latest one the highest, increasing from 30% to 60%.
This stamp duty is paid on top of the Buyer’s Stamp Duty (BSD), which is payable on any property purchases, regardless of nationality and residency status. The government also raised the BSD earlier in February for homes above S$1.5 million.
With the 60% ABSD and the BSD, Singapore now ranks the highest in the world for total stamp duty for foreigners buying a home, according to Savills.
For a USD$2 million property purchase in Singapore, the total stamp duty rate will come up to around 64% of the purchase price.
The study assumes that the property will be used as a second home for less than nine months of the year over a five-year hold. No capital growth has been applied to avoid the complication of having to forecast that for each city.
In fact, this is double the total stamp duty rate payable by a foreigner for a similarly priced property in Hong Kong (31.3%), notorious for its sky-high home prices.
Savills noted that the prime residential prices in Singapore have remained strong, supported by the strong Singapore dollar and inflow of high-net-worth individuals setting up companies and family offices.
“Although Singapore has the highest stamp duty payable by foreigners buying private residential properties, it is a testament of Singapore’s attractiveness as a safe haven pad for ultra-high-net-worth individuals,” says Alan Cheong, Executive Director of Research & Consultancy, Savills Singapore.
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