ABSD hikes a pre-emptive move to dampen property investment demand, prioritise Singaporeans, says Desmond Lee

SINGAPORE - The new round of increases in Additional Buyer’s Stamp Duty (ABSD) rates are aimed at preemptively dampening investment demand and prioritising Singaporeans buying homes for owner-occupation, said National Development Minister Desmond Lee on Thursday (April 27).

Speaking to reporters, he also flagged the Monetary Authority of Singapore’s (MAS) latest warning of the impact of heightened global macro economic uncertainty on Singapore’s growth prospects amid higher interest rates and the reconfiguration of supply chains in the face of US-China trade tension.

In a joint statement late Wednesday, the Finance Ministry, National Development Ministry and MAS said the ABSD rate for foreigners buying any residential property will be raised from 30 per cent to 60 per cent - the highest increase.

The rate will be raised from 17 per cent to 20 per cent for Singapore citizens buying their second residential property, and from 25 per cent to 30 per cent for those buying their third and subsequent property.

Singapore permanent residents (PRs) buying their second residential property will see the rate rise from 25 per cent to 30 per cent, and from 30 per cent to 35 per cent for third and subsequent properties.

Mr Lee noted that despite signs of moderation in private property prices in the fourth quarter 2022, prices jumped by 3.3 per cent in the first quarter of 2023 due to continued robust local demand and renewed local and foreign investment interest.

“Over successive rounds of property-related measures, you’ve seen foreign investment, as a proportion of property transactions fall from some 20 per cent in 2011, to about 3 to 4 per cent over the last few years. The average from 2017 to 2019 was around 6 per cent,” he said.

But interest from foreigners has risen, he added, citing how foreign purchases of residential property made up about 7 per cent of all transactions in the first quarter of 2023.

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“Foreign interest in residential property in Singapore, as an asset class, continues to be strong. And therefore, if we don’t take early preventive measures, we may see investment numbers both by locals and by foreigners grow, and that will add stress to Singaporeans who are looking to buy residential property principally for own occupation,” he said.

Asked why the rate hike for foreigners was much larger than that for locals, Mr Lee said the Government had to “calibrate the ABSD rate in order to have an effective dampener on investments from abroad”.

He added that as Singaporeans and PRs are “very sensitive to changes in ABSD ”, the increase of between 3 per cent and 5 per cent in rates should be sufficient to dampen investment demand from this group.

Based on 2022 data, the ABSD rate hikes will affect about 10 per cent of all private residential property transactions - involving foreign investors as well as those buying their second and subsequent property.

“You may say why is it just 10 per cent, but actually you want to make sure that this does not grow significantly,” Mr Lee said.

“We are taking calibrated steps (to ensure) that the property market remains resilient at a time of significant economic uncertainty and high interest rate environment. It is quite different from after the Global Financial Crisis where you had a V-shaped economic recovery and a very bullish property market, (and) interest rates were at historic lows. I think we’re dealing with different situation,” he said.

“Moreover, because of Covid-19, there’s a significant impact to construction that still linger, and therefore an impact to supply. So that is an added double whammy.”

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