SINGAPORE – With the renewed interest in home buying recently, property agents are seeing more and more Singaporeans buying their second or third homes, despite having to incur the Additional Buyer’s Stamp Duty (ABSD).
ABSD was first introduced in 2011 to cool the residential market. Currently first-time Singaporean buyers do not pay ABSD, while second-time and third-time Singaporean buyers pay 7% and 10% respectively.
Permanent residents (PRs) pay 5% and 10% for their first and second (and subsequent) properties respectively.
Foreigners pay an ABSD of 15% regardless of how many properties they already own in Singapore.
Here is why it is unlikely ABSD will be removed any time soon.
1. Demand for housing remains strong
The hefty stamp duties have not been able to deter many Singaporeans or foreigners who still continue to purchase properties in Singapore. At the moment, buying sentiment is very strong. If ABSD were to be removed, all the second-timers waiting at the sidelines would pounce on the market and cause a spike in housing prices.
2. Significant source of tax revenue
ABSD has become a significant source of tax revenue for Singapore, with $948 million collected in 2016 alone (source: IRAS). This makes up almost a quarter of all property taxes paid. Hence, it is unlikely that this source of tax revenue would be foregone in the near future.
3. Overseas markets just keep on rising
China, Hong Kong and other Asian property markets have been on the rise for the past few years, with Singapore bucking the trend completely. If the ABSD were to be removed, foreign buyers would surely rush in again and cause property prices to soar, which is what the government is trying to prevent from happening.
4. SSD more likely first to go
The tax revenue from Seller’s Stamp Duty (SSD) is only $18 million in 2016. This is because most buyers today buy with the intention to hold the property for at least a few years to prevent incurring SSD. In March this year, the Monetary Authority of Singapore (MAS) reduced the minimum holding period from 4 years to 3 years, within which SSD would be payable. Hence, it is very likely that SSD will be reduced gradually to test market reaction first, with a minimal impact on tax revenues. If the market becomes over-exuberant again, MAS may well decide to raise ABSD instead.
With these reasons, it is not very likely that ABSD will be removed any time soon. In fact, if the market gets too frothy, the ABSD may even be raised, like how the authorities have tightened policy in China recently.