In what appears to be the toughest round of curbs yet, the Singapore Government unveiled an unparalleled set of stamp duty taxes on the private property market.
(Experts anticipate a sharp drop in foreign demand with the new 10% buyer's stamp duty. Image courtesy of Thinkstock.)
The changes take effect today, and options granted yesterday and earlier, exercised within three weeks, will not be subjected to the new regulations.
Foreign buyers will receive the biggest blow in this bold move. In recent years, this group has been taking up homes in the non-landed private property sector to the dismay of Singaporeans, who fear that these more affluent buyers are further driving prices up.
These buyers now have to fork out a 10% buyer’s stamp duty on any residential property purchase, not inclusive of the pre-existing buyer’s stamp duty of around 3%, applied to either the home’s purchase price or market value, whichever is higher.
Corporate entities—including companies, trusts, and collective investment schemes—are also subject to the new 10% tax henceforth. According to The Straits Times, this second group of buyers were noticeably active in the most recent property boom in 2007 and 2008.
Not surprisingly, Singaporean homebuyers welcome this move. One of them is first-time buyer Yang Sue Ann, a 25-year old civil servant, who told The Straits Times that she had been waiting for prices to fall to buy a home with her fiancé. “These measures will help us greatly in getting our first home. We were thinking of buying at the end of next year but hopefully if prices drop, we can get something by early next year before we get married in June.”
While genuine local home-seekers are pleased, the same cannot be said for Singaporean and permanent resident (PR) property investors who are also affected by the new rules. PRs buying their second home onwards (excluding overseas properties) will face an additional 3% stamp duty. The same goes for Singaporeans who already own two residential properties and are buying their third (and subsequent) homes.
This is the first time in 15 years that foreigners are specifically targeted by cooling measures implemented by the government, which has been accused by some of being partial towards this group. Previously, foreign homebuyers only faced restrictions for landed homes.
Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam assured in a statement that Singapore’s markets have always been open to foreign investment, and will remain this way. “However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low. The additional buyer's stamp duty should help cool investment demand, and avoid the prospect of a major destabilising correction further down the road.”
Indeed, the past two years have seen private housing prices continually climbing despite four previous rounds of cooling measures. The measures managed to tame price growths to 1.3% in the three months to September. Yet prices, currently a whopping 13% above 1996’s peak, and 16% above 2008’s, remain out of hand.
A record-breaking 16,292 private homes were sold in 2010, while 13,688 such units were moved in the first ten months of 2011. Foreigners (excluding PRs) constitute 19% of all private home purchases for the second half of this year. They only made up 7% in the first half of 2009.
Analysts told The Straits Times they expect the new measures to reduce private housing demand by up to 25%. Said SLP International head of research Nicholas Mak, “In the next one to two months, the home-buying demand from non-resident foreigners will almost dry up.” Credo Real Estate research and consultancy head Ong Teck Hui felt the measures will have a more severe impact on the “prime and mid-prime” markets, where foreign buyers made up almost 25% of transactions in Q3 this year.
Yesterday, the Real Estate Developers’ Association of Singapore (Redas) also released a statement, expressing its surprise at the measures and its disappointment at “the lack of consultation” from the government. It said the measures were “untimely”, in light of next year’s foreseeable economic slowdown.
Said Redas, “The good take-up rate in the primary market is driven by the increased number of new launches and unique selling points of certain projects. It is not indicative of a return to a speculative market.”
Yesterday the government also released 41 more sites for the first half of 2012, in popular areas like Farrer Road, Tiong Bahru and Tampines. The sites can potentially yield 14,100 private houses. Six of them are for executive condominiums—a private-public housing hybrid that foreigners and PRs cannot buy.
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Related Categories: Daily Property News and Updates, Legal Matters, General, General, Buying Guide - Singapore, Private Residential
Tags: ABSD, Additional Buyer Stamp Duty, buyer's stamp duty, government property cooling measure, new stamp duty, private property market, property investment, property taxes, property taxes Singapore, stamp duty, stamp duty singapore
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anonymous said...
The Finance Minister is doing the right thing. Precaution is always better cure.
December 10, 2011 9:24:00 PM
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