On 26 April 2023, the Government of Singapore announced an increase in the Additional Buyer’s Stamp Duty (ABSD) rates as a means to encourage a sustainable property market. The revised rates will be effective starting from 27 April 2023.

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WHO IS AFFECTED?

Investors, Foreign Buyers and Developers are the largely affected by the increase in ABSD. With an increase of 30% for Foreign Buyers and Entities, we can expect the demand for High-end luxury markets to be muted for the upcoming quarters. Developers that are reaching their ABSD deadline are also being pressured to clear their inventory as soon as they can.

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First-Time Home Buyers and Upgraders remain unaffected. Those that are looking for a suitable home, have more options to choose from, as a result from fewer competition. 

 

PREVIOUS COOLING MEASURES

The property market measures implemented in December 2021 and September 2022 have had a moderating effect. However, in the first quarter of 2023, property prices have shown signs of renewed acceleration, largely due to renewed interest from local and foreign investors in Singapore's residential property market. If left unchecked, there is a risk that prices may exceed economic fundamentals, resulting in sustained price increases relative to incomes.

 

ADDITIONAL BUYER'S STAMP DUTY (ABSD)

Additional Buyer's Stamp Duty (ABSD) is a precautionary measure that raises obstacles for investors and speculators. In the absence of ABSD, a buyer with a $50 million budget could potentially purchase twenty-five $2 million properties instead of a single $50 million property. This behavior would drive up prices at the lower end of the market and simultaneously reduce prices at the upper end of the market. However, ABSD serves as a deterrent for such behavior by encouraging buyers to purchase property more cautiously and in line with their net worth.

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MAKING SENSE OF ABSD

Singapore has long been regarded as a safe country that continuously strives to improve the quality of life for its residents. In line with this, the government has set a goal of increasing the population by attracting wealthy individuals to become permanent residents or citizens.

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The recent increase in Additional Buyer's Stamp Duty (ABSD) rates has made the option of becoming a permanent resident or citizen even more attractive. For those who are still foreigners, there is still a need for a place to reside in, and that can only be achieved via renting. With the influx of new residents, there will be an even larger supply gap for residential properties.

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Rather than being seen as a hindrance, this presents an opportunity for potential property buyers to invest now before the demand for property further increases. In response to this, developers will likely become more aware of the need to be competitive in pricing their properties.

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Overall, the increase in ABSD rates is a preventive policy that will encourage a sustainable property market and provide opportunities for potential Home Buyers.