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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.”

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