Singapore Hikes Property Taxes
Monday, December 12, 2011
Singapore’s government has announced an Additional Buyer’s Stamp
Duty (ABSD) to be imposed on certain categories of residential property purchases,
in addition to the current buyer’s stamp duty.
The ABSD applies, at a rate of 10% on the purchase price or market value
of the property (whichever is higher), for purchases by foreigners and non-individuals
(including corporate, trusts and collective investment schemes, amongst others)
of any residential property.
Permanent residents owning one and buying a second and subsequent residential
property pay an ABSD of 3%; and Singaporeans owning two and buying the
third and subsequent residential property also pay an ABSD of 3%.
The ABSD took effect on December 8, 2011. Remission of ABSD will be given
for options granted on or before December 7, 2011 and exercised within three weeks
(that is, on or before December 28) or the option validity period, whichever
is the earlier.
The ABSD applies in addition to the existing buyer’s stamp duty on property
purchases, which is charged at the following rates: 1% on first SGD180,000 (USD140,000)
of the purchase consideration or market value of the property (whichever is
higher), 2% on the next SGD180,000 and 3% for the remainder.
It was explained that the government's objective is to promote a sustainable
residential property market where prices move in line with economic fundamentals.
Prices of private residential properties have continued to rise lately, albeit
more slowly in the last two quarters. Prices are now 13% above their peak in
the second quarter of 1996 and 16% above the more recent peak in the second
quarter of 2008.
However, it has been noticed that, even with the current economic uncertainties,
the demand for private residential property remains firm. Private property in
Singapore continues to attract investors, local and foreign. Concern is expressed
that excessive investment demand will make the property cycle more volatile,
and thus increase the risks to Singapore’s economy and its banking system.
The government has therefore decided to impose the ABSD to moderate investment
demand for private residential property and promote a more stable and sustainable
market. A higher ABSD rate for foreign buyers in particular is felt to be 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. Foreign purchases
accounted for 19% of all private residential property purchases in the second
half of 2011.
Tharman Shanmugaratnam, Deputy Prime Minister and Minister for Finance, confirmed
that the government will continue to monitor the property market and adjust
its property policies in step with changes in the market and the economy.
He added that “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, destabilizing correction further
down the road.”