According to a study released by global real estate services provider Savills on 5 May 2023, Singapore ranks highest in the world for total stamp duty rates for a foreigner looking to buy a residential property, clocking in at about 64% of the selling price.
This follows the Singapore government’s announcement on 26 April 2023 of the 100% increase in Additional Buyer’s Stamp Duty (ABSD) rate for foreigners purchasing residential property from 30 per cent to 60%. This was the third round of cooling measures since December 2021.
Wait, 3 times in 2 years? Why did the Singapore government raise ABSD again?
According to a joint statement issued by the Ministry of Finance and the Ministry of National Development and Monetary Authority of Singapore on 26 April 2023, the cooling measures implemented in December 2021 and September 2022 have had “a moderating effect”. However, in the first quarter of 2023, “property prices showed renewed signs of acceleration amid resilient demand.”
In addition, “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.”
Will raising ABSD rates for foreigners actually help the Singapore property market?
Analysts have bought into question whether the dramatic ABSD hike for foreigners will impact the overall property market given that foreigners only make up a small share of private home sales in Singapore.
Savills’ study notes that while foreign property purchases account for 5-7% of the total sales with the investment value for residential sites and properties amounting to S$1.58 billion ($1.18bn USD) in the first quarter of 2023, this made up for 28% of overall investment sales.
The Singapore residential sector also recorded a quarterly growth of 12.5% from S$1.40 billion ($1.05bn USD) in the fourth quarter of 2022, despite no Government Land Sales sites being awarded in that quarter.
Will foreigners still want to buy property in Singapore then?
While 2022’s transaction volumes in the luxury market in the first quarter were lower than in 2021 when the market was seeing the results of pent-up demand, it is still relatively higher than pre-pandemic levels. The strong sales in the luxury market in the first half of 2022 showed signs of slowing down in the second half of the year, which was largely driven by rising interest rates.
The prime residential prices have, however, remained strong. This resilience is supported by the strong Singapore dollar and inflow of high net worth individuals setting up companies and family offices in Singapore.
“Although Singapore has the highest stamp duty payable by foreigners buying private residential properties, it is a testament of Singapore’s attractiveness as a safe haven pad for the ultra-high-net worth individuals,” says Alan Cheong, Executive Director of Research & Consultancy, Savills Singapore.
Over the course of 2023, prices are still expected to grow between 6-7.9%.
How high are stamp duty rates in other countries?
According to the same study by Savills, Hong Kong is coming in at second place with 31.3% followed by Cape Town at 13.5%. The American cities of New York, Los Angeles, San Francisco and Miami are all at the lowest end of the chart with the stamp duties for property purchase at 4%, 1.1%, 0.9% and 0.5% respectively.
However, these cities aren’t free from property cooling measures. Los Angeles had started enforcing a 4% tax since 1 April this year on all residential and commercial properties that are transferred or sold for more than $5 million USD and a 5.5% tax for all properties transferred or sold for US$10 million or more.
Even stricter, Canada has recently announced a ban on foreign buyers from buying property for 2 years with some exceptions. In Europe, Ireland and Portugal have ended their golden visa programmes citing direct and indirect consequences that the scheme had on the property markets. The golden visa programme granted the option of relocating and becoming residents to high-net-worth individuals.
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