Will the 2023 ABSD Rate Hikes Be Effective?

While foreigners are hit the hardest by the latest cooling measures, which saw Additional Buyers’ Stamp Duty (ABSD) rates doubling to 60% from 30% when buying any residential property, those with deep pockets are still biting the bullet.

The Singapore property market post-ABSD rate hike

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, which 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.

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.

Current ABSD rates in Singapore (2024)

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

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

Will the ABSD rate hike 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.  

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.

Frequently Asked Questions about Additional Buyer’s Stamp Duty (ABSD)

What is Additional Buyer’s Stamp Duty?

The Additional Buyer’s Stamp Duty (ABSD) was imposed on top of the Buyer’s Stamp Duty (BSD) and is applied to the purchase price, or the current market value of the property, whichever is higher.

Why was ABSD introduced?

The ABSD was introduced by the Singapore government to cool down the property market and curb speculation, particularly by foreign buyers. It was first introduced in December 2011 and has been adjusted several times since then.

ABSD definition of ‘Residential Property’ in Singapore

The Inland Revenue Authority of Singapore (IRAS) defines a “Residential Property”, with regards to ABSD, as any property that is primarily used for residential purposes. This includes:

1. Housing units such as apartments, condominiums, and landed houses.
2. Residential components of mixed-use properties, where at least one component is designated for residential use.
3. Vacant residential land intended for residential development.

Commercial and industrial properties are typically excluded from the definition of residential property for ABSD purposes.

ABSD definition of ‘Entity’ in Singapore

An entity that may incur ABSD refers to any of the following:

• An unincorporated association
• A trustee for a collective investment scheme when acting in that capacity
• A trustee-manager for a business trust when acting in that capacity
• The partners of the partnership whether or not any of them is an individual, where the property conveyed, transferred or assigned is to be held as partnership property

ABSD exemptions in Singapore

There are several exemptions from the ABSD for certain types of property transactions, including:

1. Singaporean Citizens: Singaporean citizens buying their first residential property may be eligible for ABSD remission. Additionally, married couples with at least one Singaporean spouse are exempt from ABSD for their first residential property.
2. Permanent Residents: Permanent residents purchasing their first residential property may be eligible for ABSD remission.
3. Public Housing Schemes: Buyers of certain public housing schemes, such as Build-To-Order (BTO) flats and Executive Condominiums (ECs), may be exempt from or eligible for partial remission of ABSD.
4. Marriage: Couples who get married after purchasing residential property separately may be eligible for ABSD remission if they subsequently purchase a residential property together.
5. Change in Ownership: Transfers of residential properties between family members, such as parents to children or vice versa, may be eligible for ABSD remission under certain conditions.
6. Joint Ventures: Certain joint venture arrangements for property development projects may be eligible for ABSD remission.

These exemptions are subject to specific eligibility criteria and conditions, and individuals or entities seeking exemption should refer to the latest regulations and guidelines provided by the Singaporean authorities.

ABSD remission for foreigners married to Singaporeans

Foreigners married to Singapore citizens are not automatically eligible for ABSD remission when purchasing residential property in Singapore. However, they may qualify for remission under certain conditions, such as if the foreign spouse is granted Singapore permanent residency (PR) at the time of the property purchase. In this case, the foreign spouse may be eligible for ABSD remission as a Singapore PR.

How to pay ABSD in Singapore

You have several options to pay your ABSD conveniently. You can settle it online via the e-Stamping Portal using NETS, a cheque, or a cashier’s order. Another option is to make payment in person at IRAS Surf Centre e-Terminals or SingPost Service Bureaus, available at locations such as Chinatown, Novena, Raffles Place, and Shenton Way.

Penalties for late ABSD payment

If the ABSD is not paid by the due date, IRAS may impose a late payment penalty, which is usually calculated based on the outstanding ABSD amount and the number of days the payment is overdue. The late payment penalty is typically charged at a specified interest rate per annum. Additionally, if the ABSD remains unpaid for an extended period, IRAS may compound the penalty, which means that the penalty amount increases over time.

Should you sell, buy, or rent now?

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