Higher property taxes designed to moderate growth in the price of homes
Singapore is raising taxes on property purchases to temper its overheated housing market, amid growing concern that an influx of wealth into the city-state is harming affordability for locals and its competitiveness as a financial hub.
The government is increasing stamp duties for second-home buyers and foreigners purchasing private property. For foreigners buying any home, the tax rate, known as Additional Buyers Stamp Duty (ABSD), has doubled to 60% from 30%.
Singaporeans purchasing their second residential property will now face an ABSD rate of 20%, increased from 17%, while those acquiring their third or subsequent residential properties will be subject to a raised rate of 30%, up from 25%.
Despite global slowdowns due to higher interest rates and inflation, the city-state’s property sector remains buoyant, partly owing to an inflow of money, particularly from wealthy Chinese individuals. A scarcity of supply and escalating construction costs during the pandemic have also driven up home prices and rents.
Singapore’s latest measures follow tax increases implemented in December 2021 and a tightening of home-loan limits in September 2022. While those moves had some effect, property prices have continued to rise due to more demand from locals as well as foreign investors.
Following this announcement, financial experts expect the increased tax to moderate the growth in home prices – though many don’t anticipate prices to drop. However, the share prices of major developers have declined.
The buoyant property market has also contributed to a surge in rents, with Singapore overtaking New York as the city with the strongest growth in residential rents in the final quarter of 2022, according to a report by Knight Frank.
Both public and private residential rental costs have skyrocketed since 2021, by 38% and 43% respectively. However, authorities have stated that increased post-Covid housing construction should help to lower rental costs.