Starting 20 Feb, buyers’ stamp duty rate will rise from 3% to 4%. This only applies to properties worth more than $1 million.
Will this pique buyers’ interest for residential properties below the $1 million mark?
Tiered stamp duty structure will affect residential properties priced above $1 million
In the previous tax scheme, buyers had to pay stamp duty rates of between 1% and 3%. Implemented in 1996, the taxation structure has been around for more than 20 years. The authorities consider it a timely change.
The old scheme only had 3 tiers where buyers had to pay 1% tax on the first $180,000, 2% tax on the next amount between $180,000 and $360,000 and 3% tax on the amount above $360,000.
With the next scheme, the first 2 tiers remain unchanged. But the 3% tax is now applicable to the amount between $360,000 and $1 million. And in an added tier, amounts above the $1 million mark will have a 4% tax implementation.
For example, for a $1.2 million property:
- The first $180,000 will be charged a 1% buyers’ stamp duty.
- The following $180,000 will be charged a 2% buyers’ stamp duty.
- The next $640,000 will be charged a 3% buyers’ stamp duty.
- The remaining $200,000 will be charged the new 4% buyers’ stamp duty rate.
New tax rate may invigorate market
Announced at 2.50pm, the news came as a surprise to many show flat goers, some who may have been caught unaware in the middle of closing a transaction.
Will this new move affect buyers’ interest just as property prices are rising and more new launches are planned for the year? The government has said that this new move is not a cooling measure and merely a realignment with the new tax system.
In the current market, about 36% of residential property transactions close below $1 million. And this adjustment may really only affect the private property market as very few resale HDB flats exceed the $1 million.
Property analysts do not consider this a huge threat to the market as prices are expected to rise 5% to 7% this year. In fact, this move may push up demand for suburban homes or smaller units and invigorate the market even further.