Earlier this year, the Singapore government raised its Additional Buyer Stamp Duty (ABSD) rates in a bid to cool down the overheated property market amid tight housing supply for both ownership and rental, as well as curb investment from foreigners and local investors.
Today, we examine how the new property cooling measures have affected the property market across public and private housing markets for both home sales and rentals.
ABSD Hike Ripple Effect on HDB Resale Market
While the main impact of the ABSD hike targets foreigners, Singaporean citizens purchasing their 2nd property also face a 3% rise, going from 17-20%. The rate has increased from 25% to 30% percent for 3rd and subsequent properties. Permanent residents now face a 30% ABSD for their second property and 35% for third and any subsequent properties.
These new ABSD Rates will apply to cases where the OTP is granted from 27 Apr onwards:
|Citizen||Buying 1st Residential Property||Buying 2nd Residential Property||Buying 3rd and Subsequent Residential Property|
|Singapore Citizen (SC)||0% (no change)||20% (up from 17%)||30% (up from 25%)|
|Singapore Permanent Resident (SPR)||5% (no change)||30% (up from 25%)||35% (up from 30%)|
|Foreigners buying any residential properties||60% (up from 30%)||60% (up from 30%)||60% (up from 30%)|
|Entities buying any residential properties||65% (up from 35%)||65% (up from 35%)||65% (up from 35%)|
With the increase, the costs of buying private properties for both Singaporeans and permanent residents have risen, reducing their attractiveness compared to public housing. This may drive more buyers towards purchasing HDB resale flats.
Analyzing the statistics after the property cooling measures, HDB resale transactions saw a dip in sales volume by 6.7% while prices rose 1.5% over the same period. The Q2 2022 resale volume marks the lowest quarterly sales figure in the preceding three years.
The sales volume decline likely stems from several factors, including price mismatches between sellers and buyers, the 15-month wait-out period deterring private homeowners from selling and buying an HDB resale replacement, and increased supply of new BTO flats with shorter waiting times attracting buyers. High borrowing costs may have also discouraged upgrading to resale private homes.
Meanwhile, HDB resale prices continue rising for the 13th consecutive quarter, with 1% growth from Q1 2022 to Q2 2022. At 1.5%, this is still below the 2.3% average quarterly increase from Q1 2020 to Q4 2021, showing signs of slowing.
With declining sales volume, sellers may adjust their price expectations, benefitting new homebuyers seeking resale HDBs.
ABSD Impact On Private Property Market Varies Across Regions
In comparison, private property sales transactions saw a 40.9% increase in sales volume and a 4.6% decrease in average unit prices. Notably, CCR sales volumes have steadily declined since the ABSD doubling. Meanwhile, sales are increasing in RCR and OCR.
This could be due to new project launches, especially in July when developers launched 2,500 new homes, mostly in RCR and OCR. Prospective buyers now have more options with these new launches.
Amongst foreign buyers in Singapore, Americans have now surpassed Chinese as the top investors in condominiums. Despite the ABSD hike, Americans get the same stamp duty as Singapore citizens under the Singapore-US free trade agreement.
The government appears to be tightening rules against foreign buyers, attempting to safeguard residential land for Singaporeans. In July, MinLaw and SLA refined the Residential Property Act to classify mixed commercial-residential land as residential, requiring foreigners to seek approval for purchases.
Although minimal impact is expected, this could temporarily lead to uncertainty in investment, collective sales, and shophouse markets as foreign buyers understand the implications.
With more condo completions in H2 2022, we can expect higher private property sales volume, especially in the more affordable OCR and RCR regions.
HDB Rental Market Sees Slight Growth in Rental Volume
In the HDB rental market, approved rental applications increased 1.9% from Q1 2022 to Q2 2022 and 5.7% year-on-year.
HDB rental volume also rose 0.4% quarter-on-quarter in Q2 2022, highlighting increased demand. With new housing supply efforts, rental rates are showing signs of steadying.
Private Rental Growth Slows Despite Predictions
Despite predictions of rental surges from the ABSD hike pressuring foreigners towards rentals, non-landed private property rentals increased just 2.3% in Q2 2022, down from 6.2% previously.
This slowdown could be due to new property completions enabling renters to become owners. Fewer foreigners arriving in Singapore and departing at the end of school terms also contributed.
While the ABSD hike has impacted foreigners, they comprise less than 10% of residential buyers. With Singapore’s reputation as a safe haven, both local and foreign investors remain keen on residential properties here as safe, long-term investments.
Early indications suggest a property market slowdown, but more time is required to fully gauge the cooling measures’ impact.
Should you buy, sell, or rent out your property now?
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