Latest Cooling Measures – Increase in Additional Buyer’s Stamp Duty (ABSD) What is the Impact?

In a fresh round of cooling measures, being the third in the past 16 months, the Singapore Government announced on 27 April 2023 that the ABSD rates will be increased across the board for all profiles of prospective purchasers.

While both Singapore Citizens and Permanent Residents acquiring multiple ownership will be affected by the upward revision in ABSD, the largest impact, however, will be felt by foreigners and entities (including trustees) who intends to purchase any residential property in Singapore.

Depending on the profile of the buyer as at the date of purchase or acquisition of the residential property, the ABSD payable by buyers now range from 20% to 60% of the value or price of the residential property, depending on the citizenship and residency profile of the individual owners. For entities and trusts, the ABSD is 65%. This is in addition to the basic buyers stamp duty, which ranges from 4% to 6% depending on the value/price of the property.

For ease of reference, the new ABSD rates are set out below.

Prior to the new rates, the ABSD payable by foreigners is 30%. The latest round of increase was announced with a view of prioritising “Singaporeans who are buying for owner occupation” and as a “pre-emptive measure” to dampen “demand by investors, both local and foreign, for residential property”. A significant factor contributing to the increase may be the demand from foreign investors which view Singapore, which is said to command a “stability premium”, as an attractive destination for investments. It remains to be seen whether this increase will stem the increase in prices in the residential market.

This increase may also spark some interest in certain groups of foreigners, who under the Stamp Duties (Free Trade Agreements) (Remission of ABSD) Rules 2013 and the FTAs between Singapore and the respective countries, are accorded the same stamp duty treatment as Singapore Citizens when acquiring Singapore residential property. These groups of individuals are:

• Nationals of the United States of America
• Nationals and Permanent Residents of Iceland
• Nationals and Permanent Residents of Liechtenstein
• Nationals and Permanent Residents of Norway
• Nationals and Permanent Residents of SwitzerlandSuch qualifying individual(s) who buys a first residential property in Singapore will not have to pay the ABSD on that purchase. For such individuals considering diversifying their global real estate investment portfolio, investing in a Singapore residential may provide an interesting option.

  Restrictions in Acquiring Landed Property, Vacant Land or Entire Building with Land

  Where the foreign individual is acquiring a restricted residential property (for example, landed property, or entire buildings of residential property or land slated for residential property development), such individual will need to apply to the Land Dealings Approval Unit to buy the restricted residential property. Such approvals are generally considered for Singapore permanent residents of at least five (5) years and have made an adequate contribution to Singapore. However, there is a restricted residential property development in Sentosa where foreign buyers are generally allowed to buy such restricted residential properties without meeting these criteria.

Conclusion

With its reputation as a country that is generally stable and safe to live in, it is expected that Singapore will generally keep its value in the medium and long term.

If you wish to know more about buying a property in Singapore, please contact us.