On 26 April 2023, an increase in Additional Buyer’s Stamp Duty (ABSD) rates was announced in a joint statement from the Monetary Authority of Singapore (MAS), the Ministry of National Development (MND), and the Ministry of Finance (MOF). The increased ABSD rates aim “to promote a sustainable property market and prioritise housing for owner-occupation” in a bid to pre-emptively manage investment demand. Based on 2022 data, the government estimates that the latest increase in ABSD rates will affect approximately 10% of residential property transactions.
“The prompt behind this round of cooling measures is the renewed signs of acceleration amid resilient demand. Demand from locals purchasing homes for owner-occupation has been especially strong, and there has also been renewed interest from local and foreign investors in our residential property market. If left unchecked, prices could run ahead of economic fundamentals, with the risk of a sustained increase in prices relative to incomes.” – MAS, April 2023
In this article, we summarise the changes and analyse the impact on (potential) property owners in Singapore.
What is ABSD?
ABSD is a property tax on the purchase of a residential property in Singapore that affects Foreigners, Singapore Citizens, and Permanent Residents. ABSD has to be paid in cash upfront.
Summary of the latest cooling measures (27 April 2023)
ABSD rates have increased across the board except for first-time homebuyers who are Singapore Citizens (SCs) and Permanent Residents (PRs). This move will affect approximately 10%* of the residential private property transactions based on 2022 data.
The table below shows the ABSD rates before and after the latest round of changes:
Who is affected?
The revised ABSD rates will apply to all residential properties acquired on or after 27 April 2023.
Who is not affected?
The previous ABSD rates (on or before 26 April 2023) will apply to cases that meet all the conditions below:
- The Option to Purchase (OTP) was granted by sellers to potential buyers on or before 26 April 2023;
- This OTP has not been varied on or after 27 April 2023;
- This OTP is exercised on or before 17 May 2023, or within the OTP validity period, whichever is earlier.
Married couples with at least one SC spouse, who jointly purchase a second residential property, can continue to apply for a refund in ABSD, subject to selling their first residential property within 6 months after:
- The date of purchase of the second residential property if it is a completed property; or
- The issue date of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) of the second residential property, whichever is earlier if the second property is not completed at the time of purchase.
Purchasers of HDB flats or Executive Condominium from housing developers who meet all the conditions below:
- Any of the joint acquirers is a SC;
- Purchase is granted with an upfront remission.
Potential impact in the short-term
We are likely to see a drop in resale transaction volumes of non-landed private properties in the short-term.
In the last 4 rounds of ABSD increases:
- Transaction volumes were reduced by 20% to 60%;
- Transaction prices did not see a marked reduction. In fact, they continued to rise in 2 out of 4 rounds of ABSD increases (back in 8 Dec 2011, and 16 Dec 2021).
What it means if you are purchasing a $2M private property
For a $2 million unit, this is the additional upfront cash outlay that applies to each type of buyer profile after the new cooling measures that came into effect on 27 April 2023:
With the potential softening of transaction volumes and an increase in ABSD, it may be more prudent for property owners to sell before making their next purchase.
Need professional advice on managing your sale and purchase timeline? Contact us for a free consultation.
*Reference: Official Press Release of the Increased ABSD