Given the increase in the Additional Buyer’s Stamp Duty (ABSD) after the introduction of the seventh round of cooling measures, the number of foreigners purchasing private homes is likely to fall in the first half of this year, say industry insiders.
In 2012, only 6.3% of private home purchases were by foreigners without permanent residency, markedly lower than the 17.6% recorded in 2011, and the lowest since 2003.
Analysts believe the falling numbers in 2012 were due to the 10% ABSD enforced on non-PR foreigners in December 2011. With the ABSD increased to 15% this year, the number of transactions by foreigners is likely to see an even larger decrease to about 5% of the total.
The affected foreigners might choose to shift to the more affordable suburban areas, or the outside central region. This is a trend that has already taken root in 2012, and which is predicted to continue this year.
In 2012, 55% of the 7124 private homes bought by non-PR foreigners were in the suburbs, up from 49% in 2011 and 39% in 2010. This year, the numbers are expected to go up by 5% more. Following the increase in demand, property developers are also rolling out more developments in the suburbs.
Conversely, private home purchases by PRs increased from 13.4% in 2011 to 15.8% in 2012. This was because first-time PR buyers were spared the increase in ABSD last year. However, the new cooling measures this year stipulate that they would now have to pay 5% ABSD on their first home purchase, and 10% on their next purchases. Consequently, the share of transactions by PRs this year may fall in the first 6 months to about 12 to 15% as a conservative estimate.
Analysts believe that the increased ABSD may also cause PRs to hold off upgrading to private properties as they would also have to sell their HDB flat.
Some believe the cooling measures to be a risky move, noting that economies in the region are growing quickly. Since many foreigners who invest in Singaporean properties are from these neighbouring countries, they may decide to remove their investments here and move back to the property markets in their home countries. and should the foreigners from these If the neighbouring countries around Singapore are seen to have better prospects than Singapore, they may turn to these economies instead.