SINGAPORE – Many of us are familiar with the term Additional Buyer Stamp Duty (ABSD) and most property purchasers in Singapore lament this regulation that has been put in place since December 2011. The ABSD was then revised and increased further in January 2013. While many average Singaporeans have been complaining about the regulation, let us examine what would happen if the government decides to remove the rule entirely.

Additional Buyer’s Stamp Duty

The ABSD acts as a cooling measure that soothes the overheated property market in Singapore. For a better understanding, a foreigner who wishes to purchase a $1M property in Singapore would now have to pay an additional $150,000 as ABSD. Similarly, a Singaporean who wishes to invest in a 2nd property that costs $1M will now have to foot an additional$70,000.

Hence the aftermath of the implementation of this regulation saw a huge drop in the volume of property transactions as well as a fall in property prices. Other cooling measures also include the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR).

However, Singaporeans should be grateful that the ABSD does not affect the affordability of their first property. The PRs would also only need to fork up just an additional 5% charge for their first property.

Having said that, the government has recently stressed that property curbs are here to stay.

But Just What If ABSD Were Removed

If the ABSD were to be removed today, a pool of cash-rich Singaporeans would flock to purchase multiple properties in one shot. Similarly, the PRs and foreigners would rush to park their money in Singapore properties. Demand for properties will sky-rocket immediately.

If you have studied basic economics, you would know that when demand is high and supply remain unchanged, the price will rise. Moreover, developers who have been cutting the prices of their units would no longer have to factor in the ABSD, and would stop absorbing the impact of the ruling. Property prices would shoot up.

Sounds ideal right? Your property now worth more, and the market is hyper-active once again.

BUT, what if you happen to be the 80% of Singaporeans that are actually not cash-rich. In fact, many of us average Singaporeans have to cross our fingers that we would meet the TDSR requirements when applying for our bank loan.

As conclusion:

If you’re RICH: Pray that the ABSD will be lifted and removed soon.

If you’re AVERAGE: Embrace the ABSD while you accumulate your wealth in other ways, and when you’re rich, pray for the ABSD to be removed.

Read More: Singapore property blog