Just when you think the property market cannot be "cooler"...

By The Folks @PropTalk - December 7, 2011 9 Comments

The government has imposed an Additional Buyer's Stamp Duty (ABSD) for private property of between 3% and 10% for Singaporeans, Permanent Residents and foreigners to moderate investment demand for private residential property and promote a more stable and sustainable market.
The changes take effect on December 8.

Foreigners will pay 10% Additional Buyer's Stamp Duty (ABSD) for any residential property.

Permanent Residents owning one and buying second and subsequent properties will pay 3% ABSD.

Singaporeans owning two and buying a third and subsequent residential properties will pay 3% Additional Buyer's Stamp Duty.

The ABSD will be imposed over and above the current Buyer's Stamp Duty, which are 1% on the first $180,000 of purchase consideration or market value of the property (whichever is higher), 2% on the next $180,000 and 3% for the remainder.

In a joint statement on Wednesday, the Finance and National Development ministries say the government's objective is to promote a sustainable residential property market where prices move in line with economic fundamentals.

They said prices of private residential properties have continued to rise, albeit more slowly in the last two quarters.

Prices are now 13% above the peak in the second quarter of 1996, and 16% above the more recent peak in the second quarter of 2008.

They said that even with the current economic uncertainties, the demand for private residential property remains firm.

Given the uncertainty in stock markets and with interest rates remaining low, private property in Singapore continues to attract local and foreign investors.

They added that excessive investment demand will make the property cycle more volatile, and thus increase the risks to Singapore's economy and banking system.

The government said the higher ABSD rate for foreign buyers in particular is necessary, in view of the large pool of external liquidity and strong buying interest from abroad, and the relatively small size of the Singapore market.

The government said foreign purchases account for 19% of all private residential property purchases in the second half of 2011, up from 7% in the first half of 2009.

For purchases made jointly by two or more parties (eg a Singaporean with a PR, or a PR with a foreigner), the higher applicable ABSD rate will be imposed.

For example, if a citizen purchases a property with a foreigner, the ABSD of 10% will apply.

In the case of a joint purchase by Singaporeans, who each already owns properties, the ABSD of 3% will apply as long as one of the purchasers already owns two properties.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam, said: "We have always had open markets and must keep them that way. However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low.

"The additional buyer's stamp duty should help cool investment demand, and avoid the prospect of a major, destabilising correction further down the road."

Nicholas Mak, Executive Director of Research and Consultancy at SLP International, said: "It will curb investment demand for private residential properties quite drastically, especially demand from non-resident foreigners. And I think in the next one to two months or so, demand from non-resident foreigners will almost dry-up."

Home buyers are mixed in their views.

One Indian foreigner said: "I know there is a stamp duty, but any increase in that will probably take it out of my level where I want to buy."

An Indian who is a Permanent Resident said: "Nowadays, HDB properties are also difficult to buy, because of more conditions. So they have to buy property here. Definitely they'll keep buying more irrespective of whether the stamp duty is increased or not."

One Singaporean said: "It probably wouldn't have an effect in the short-term, because the property market prices are still rising, people are still speculating."

Minister for National Development Khaw Boon Wan said: "We are ramping up the supply of new Executive Condominium units through the Government Land Sales Programme.

"This will help higher-income Singaporeans own private condominium units in an affordable way, as the sale of new EC units is restricted to Singaporean households only."

Singaporean first-time buyers and upgraders, and buyers of HDB flats will not be affected by the new measure.

Certain reliefs will be provided so that the measure will not impact home occupation demand by residents.

For example, relief will be provided for Singaporean-foreigner/PR married couples buying their homes.

Reliefs will also be provided for qualifying developers and for purchases falling within the scope of Singapore's international trade agreements.

The government will continue to ensure an adequate supply of private housing to meet-medium term demand.

There are 41,000 unsold private housing units in the pipeline.

The government will inject sites that can potentially yield a total of 14,100 units in the 1H2012 Government Land Sales (GLS) Programme, similar to the supply in previous GLS programmes.

Of these, about 7,000 units will be from sites on the Confirmed List.

These numbers take into account the ample pipeline supply and the dampening effect of the ABSD.

The government will also expand the supply of executive condominiums (ECs) in 2012 and is prepared to release sites that can potentially yield 5,000 EC units for the entire year.

Sites for 3,500 EC units will be made available in 1H2012, including 3,000 EC units on the Confirmed List.

The Confirmed List quantum is comparable to the 3,000 EC units from five sites sold for the whole of 2011. More details will be provided in the press release for the 1H2012 GLS Programme on MND's website.

The Government will continue to monitor the property market and adjust its property policies in step with changes in the market and the economy.
Source: Channel News Asia

The wife and I have just returned from our short family vacation (literally that is, since we have only touched down like two hours ago) and this is the first piece of property news we happened to chance upon. 

The Additional Buyer's Stamp Duty (ABSD) should appease (somewhat) those who are worried by the increasing number of private home purchases by foreigners, which they claimed have driven up property prices. It will also help to dampen the flow of "hot money" into our private property sector (which is probably the larger factor in driving up prices), given the current double-whammy of much higher buying and selling stamp duties. 

And for Singaporeans that already own two private residential properties and wanting to buy a third, we reckon they should not complaint (too much) about the ABSD.

So maybe the government is finally listening, as they said they would...  


9 comments to ''Just when you think the property market cannot be "cooler"..."

  1. finally a more pro residence policy.

    to make Singapore more attractive we need to keep the basic cost affordable and housing is a fundamental requirement.

    Currently the cost of living had overtake Hong Kong, if it continues to raise we will loose our competitive in attracting talent.

    The next step now is to increase foreign property tax. We cannot allow valuable resources to be left empty like china ghost town.

  2. My thoughts ...the Government's action is not to crash the property market. That would be de-stabilising.

    However, would the quantum of additional stamp duty suffice as a deterrent? Hardly (?) I think, if a person has the resources to buy multi million homes...

    The majority of Singaporeans will not be affected for their second home purchase.

    And if the market really crashes, will the Singaporeans point fingers (all five now / together) at Govt for not protecting their interests again?

  3. Hi

    I disagree that "if the market really crashes, will the Singaporeans point fingers (all five now / together) at Govt for not protecting their interests again?"

    My view is that, about 80+ % Owns HDB. and HDB will never crash.(GOV controlled) only private property will crash and maybe resell HDB market will be cheaper. won't that benefit the average Singaporeans and PR. The only one that have slight disadvantage are rich Singapore and PR.

    If the market really crash. It the time for Singaporean and PR to buy property cheaply and achieve the Swiss standard of living that our GOV is trying to promote. Less $$$ spend on housing will mean more $$$ to spend on other stuff.

  4. We are talking about private properties here, not the resale flats nor primary flats that Minister Khaw is selling.

  5. I think you have miss the point.

    I am talking about private properties.

    I am saying that if the market really crashes (that include private property)

    My view is that the AVERAGE Singaporean and PR will benefit. only those RICH Singaporean and PR will blame the Govt for not protecting their interests if the property crashes.

    I just include HDB owner % to strengthen my view.

  6. Kudos to new ABSD which will put an immediate halt to the ever increasing speculation on Spore Pvt property mkt.

    I do believe the policy is not targeted at any speculative groups but to protect the interest of the Spore economy in general as a whole as our financial system are indeed vulnerable being an open economy.

  7. The Folks @ProptalkDecember 8, 2011 at 4:22 PM

    Hi Anonymous (8/12/11, 9:59AM):
    We agree that the quantum of the Additional Buyer's Stamp Duty (ABSD) alone may not be a big deterrent especially for those with financial muscles to buy multi million-dollar homes.

    However, we do believe that a combination of the Seller's Stamp Duty (SSD) and the ABSD will curb speculative and investment purchases, e.g. the price of an investment property will now have to appreciate by more than 26% for foreign speculators/investors to make money within the first year of their purchases. And with the slew of new projects coming on-stream in 2012 - 2015, the rental market is expected to soften as more apartments will be available for lease.

    All the above factors make speculating/investing in private property in Singapore (whether by foreigners, PR or even locals) a less attractive option than before. This is due to the longer holding period expected (making the investment less liquid) and the higher capital appreciation needed to make a profit. And once the speculators/short-term investors/"hot money" from overseas start retreating from the market, it should reduce overall demand and cause the market to "cool" significantly.

    Going into 2012, we reckon the rich and those who "buy for own stay" will continue to purchase private homes. But the SSD/ABSD will help ensure that there be more of the pie left for potential buyers to chew on... and possibly at lower prices too.

  8. I certainly hope so.

    I am now going back to my economics lecture notes 101 - on hot moneys (capital inflows) to understand this topic better. However, the Economics lessons of yesterdays did not include the dynamics of a Socio-Political discussion of a collasping Eurozone and the awakening of the Chinese Gulliver. That makes the equation much more difficult.

  9. I dont think it will crash. Remember the year of 2 halves? what happened? It came to past...nothing.... Remember past cooling measures? what happened?

    I know of a few cases...One sold District 4 condo and has waited one year already...to enter again.

    Another one has more than 1.5 cash waiting like a hawk, by the sidelines...to invest in landed ...

    Another super couple studying the China market and extra-polating it to the Singapore market. Husband and wife has plenty of in the money stock options (altho gains lesser now), also waiting.

    Another is collecting $$$...ready ....

    Another strike en bloc lottery (twice) in 2008 / 2009 run up...plenty of cash. Spends time collecting pens and watches and collecting PhDs...

    Another (analyst) tells of the foreign talents coming in (real life)...Tampines hub (research the news I tell u)... One manages India Indian computer people and tells of the many that will relocate into Singapore ...

    And this is real life....so...will the market ever????