Will the 2023 ABSD Rate Hikes Be Effective?

Maelyn Lagman

While foreigners are hit the hardest by the latest cooling measures, which saw ABSD rates doubling to 60% from 30% when buying any residential property, those with deep pockets are still biting the bullet:

China buyers have snapped up about 4 units at Blossoms by the Park, the first development to be launched post-ABSD hike, despite the 60% ABSD. 

Another 4 units were bought by American citizens, but they enjoy the same ABSD rates as Singapore Citizens under the Singapore-US FTA. That means they are unaffected by the cooling measures if they are first-time buyers and won’t have to pay as much in ABSD for their 2nd, 3rd or subsequent property as other foreigners.

Blossoms by the Park sold 87% of its units at launch, despite higher ABSD rates.

The other 90% of units were reported to be purchased by either Singaporeans or PRs, and some analysts have pointed out that it’s the 1 and 2-bedroom units they snapped up, indicating that they may be investors and not owner-occupiers.

New ABSD rates effective from 27 April 2023

While earlier property cooling measures in Dec 2021 and Sep 2022 had a “moderating effect” on the market, property prices in Q12023 still showed renewed signs of acceleration amid resilient demand from locals buying homes for owner-occupation.

So on 26 April 2023, the government announced that it is raising ABSD rates as a preemptive measure to alleviate the tight housing market for both owner-occupation and rental, as well as curb investment demand from foreigners and local investors.

These new ABSD Rates will apply to cases where the OTP is granted from 27 Apr onwards:

CitizenBuying 1st Residential PropertyBuying 2nd Residential PropertyBuying 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 properties60% (up from 30%)60% (up from 30%)60% (up from 30%)
Entities buying any residential properties65% (up from 35%)65% (up from 35%)65% (up from 35%)
Source: IRAS

Singaporeans buying a 2nd residential property will now have to pay 20% ABSD, and 30% for their 3rd or subsequent property.

The ABSD for Permanent Residents is 30% for the purchase of their 2nd residential property, and 35% for their 3rd or subsequent property.

Will the ABSD rate hikes be effective?

With the success of Blossoms by the Park, many have called into question how effective the latest property cooling measures really are in dampening investment demand from local and foreign investors for private properties.  

However, Blossoms by the Park is just the first of several other developments set to launch this year after ABSD rates were increased, so we still have not seen the full effect of the latest cooling measures. (It has only been a few weeks since the government made the announcement, and the higher rates took effect.) A neighbouring project, The Hill@One-North, will be launching in the 2nd half of the year.  

While there may be a dip in demand for luxury properties, HNWIs will continue buying the properties they want in Singapore.

Also, foreigners make up a small percentage of property buyers here in Singapore, and they usually buy high-end private property. So, while the recent curbs may discourage some foreign buyers from snapping up the more premium units at luxury new launches like, say, a penthouse in the heart of the CBD, there’s not much impact on Singaporeans looking to sell their existing homes and buy their 1st private property. 

Other foreigners may also defer their purchase until they have obtained permanent residency or citizenship, so they are only subjected to pay a much lower ABSD.

When the previous cooling measures were announced in 2021 and the ABSD for foreigners was doubled from 15% to 30%, luxury property sales dropped but rebounded in about 4 months. Similarly, for the recent round of cooling measures, analysts say we may see a knee-jerk reaction and demand for higher-end or luxury properties may dip in the next 3 months, but high-net-worth individuals will remain undeterred by the 60% ABSD and continue buying the properties they want in Singapore.

Foreign buyers may also start shifting their attention to commercial properties, which include office, retail, industrial developments and shophouses. These non-residential properties are ABSD-free and SSD-free (if sold after 3 years) and have the potential for higher rental yield and capital gains. We talk more about this here.

Whether you’re a foreign property investor looking for the next best investment or a Singapore citizen ready to buy your 1st private property, let our Super Agents assist you. 

You’ll be in great hands with our agents, who are among the Top 1% in Singapore. We’ve served over 8,000 happy customers and have garnered 5-star ratings on both Facebook and Google. 

When you’re ready, drop us a message on WhatsApp!

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