New Reporter
03-05-23, 12:14
Private home prices look set for a welcome correction amid higher ABSD rates
Apr 27, 2023
Leslie Yee
IS THERE a crazy rich foreigner who will pay 60 per cent Additional Buyer’s Stamp Duty (ABSD) to buy a home in safe haven Singapore? It will take about 12 years of price growth at 4 per cent per annum just to recoup the ABSD payable.
With effect from Apr 27, Singapore citizens and permanent residents (PRs) buying second and subsequent homes will pay higher ABSD rates. The increase will also apply to foreigners as well as entities or trusts – except for housing developers – buying any home.
For foreigners, ABSD rates will be doubled from 30 per cent to 60 per cent. Citizens and PRs buying second homes will pay ABSD of 20 per cent and 30 per cent respectively, up from 17 per cent and 25 per cent.
Based on 2022 data, the latest hikes will affect about 10 per cent of private-home transactions. The rates for citizens and PRs buying their first home, who account for about 90 per cent of transactions based on 2022 data, remain at 0 per cent and 5 per cent respectively.
Market impact
With the latest property cooling measures, odds are private home prices may be headed for correction.
Sure, many home buyers are not seeing higher ABSD rates. Still, significant pockets of demand may disappear, such as foreigners as well as local investors.
The absence of foreigners can hurt the prime segment acutely. Non-PR foreigners accounted for about 17 per cent of new sales of condominiums and apartments in the Core Central Region in the first quarter of 2023.
Married couples with at least one citizen who jointly buy a home, can continue to apply for a refund of ABSD, if they meet certain conditions. Still, for local couples, paying more upfront before getting a refund subsequently may dent their buying power.
Critically, the latest cooling measures come amid higher interest rates, heightened uncertainties in the global economy, and some moderation in take-up at new home launches.
Thus, a further blow to demand with the higher ABSD rates for some buyers will likely be keenly felt.
At the same time, developers with new launches lined up will be fighting over a smaller pool of demand. This could mean some tempering in prices to ensure good take-up, which matters given that developers are experiencing higher debt costs, and have tight timelines to clear inventories or face paying hefty ABSD sums.
Also, developers, who are already cautious in buying housing sites, may hold back further in buying land as worries rise over sales take-up. Lower bid prices for land can in turn dampen price expectations of home buyers.
Indeed, if first-time local buyers become more cautious, given rising expectations that prices may moderate, developers as well as sellers of resale units may need to lower prices to close deals.
Adjusting behaviour
Certainly, higher ABSD rates raise the need for careful planning on home purchases.
Should a married local couple with dual income, who aspire to own two private homes, buy their first home for their own stay under the husband’s name, so the wife can buy an investment home in future without incurring ABSD? Yet, access to bank financing for buying a home is less favourable when buying under a sole name versus buying under two names.
For some foreigners who are drawn to Singapore homes because of the country’s stability and high quality of life, the challenge could be to secure PR or even citizenship status here expeditiously.
As for other foreigners who want to own physical property here, they may flock to non-residential properties such as office buildings, strata office spaces, commercial shophouses or hotels.
Some office assets, with yields that are below borrowing costs, could see prices rise to frothy levels.
Through ABSD on homes, which was first introduced in 2011, the government collects a fair amount of taxes. Maybe going forward, foreigners buying non-residential properties can be hit with higher taxes on such purchases.
With rising life expectancies, many locals are also planning for retirement adequacy. Owning more than one home here may be prioritised in retirement plans.
After all, homes can hedge against rising inflation and can be used to generate recurrent rental income. By buying Singapore homes, citizens are investing in an asset class that they are familiar with, and there is no currency risk involved.
However, investors in homes are fighting an ever rougher policy environment. Perhaps, locals may need to put aside aspirations to buy homes for investment, and consider alternatives such as listed real estate investment trusts or blue-chip Singapore stocks. Concurrently, businesses and policymakers may work to offer more investment choices, such as growing a build-to-rent residential segment.
Singaporeans are rather spoiled when it comes to homeownership. Many locals can buy a high-quality Housing and Development Board flat at subsidised prices when they get married.
Still, many people desire to live in a condominium. Meeting such aspirations matters, as this helps anchor driven and ambitious young citizens here, as well as encourages them to build families.
Could ever more swingeing taxes be on the cards for foreigners and local investors buying homes, to ensure that private homes are affordable to some young locals? If the effects of higher taxes are muted, could there be outright restrictions on foreigners and local investors buying certain categories of homes?
Land is a scarce resource, and the private home market here is relatively small with developers selling possibly 8,000 to 9,000 new non-landed homes a year. Government efforts to tilt the playing field in favour of locals buying their first private property are needed.
Nonetheless, a private home is a nice-to-have. While many locals may be unable to live the condo lifestyle, they enjoy good-quality public housing and the chance to build their lives in a city that is good for living, work and play.
https://www.businesstimes.com.sg/opinion-features/private-home-prices-look-set-welcome-correction-amid-higher-absd-rates
Apr 27, 2023
Leslie Yee
IS THERE a crazy rich foreigner who will pay 60 per cent Additional Buyer’s Stamp Duty (ABSD) to buy a home in safe haven Singapore? It will take about 12 years of price growth at 4 per cent per annum just to recoup the ABSD payable.
With effect from Apr 27, Singapore citizens and permanent residents (PRs) buying second and subsequent homes will pay higher ABSD rates. The increase will also apply to foreigners as well as entities or trusts – except for housing developers – buying any home.
For foreigners, ABSD rates will be doubled from 30 per cent to 60 per cent. Citizens and PRs buying second homes will pay ABSD of 20 per cent and 30 per cent respectively, up from 17 per cent and 25 per cent.
Based on 2022 data, the latest hikes will affect about 10 per cent of private-home transactions. The rates for citizens and PRs buying their first home, who account for about 90 per cent of transactions based on 2022 data, remain at 0 per cent and 5 per cent respectively.
Market impact
With the latest property cooling measures, odds are private home prices may be headed for correction.
Sure, many home buyers are not seeing higher ABSD rates. Still, significant pockets of demand may disappear, such as foreigners as well as local investors.
The absence of foreigners can hurt the prime segment acutely. Non-PR foreigners accounted for about 17 per cent of new sales of condominiums and apartments in the Core Central Region in the first quarter of 2023.
Married couples with at least one citizen who jointly buy a home, can continue to apply for a refund of ABSD, if they meet certain conditions. Still, for local couples, paying more upfront before getting a refund subsequently may dent their buying power.
Critically, the latest cooling measures come amid higher interest rates, heightened uncertainties in the global economy, and some moderation in take-up at new home launches.
Thus, a further blow to demand with the higher ABSD rates for some buyers will likely be keenly felt.
At the same time, developers with new launches lined up will be fighting over a smaller pool of demand. This could mean some tempering in prices to ensure good take-up, which matters given that developers are experiencing higher debt costs, and have tight timelines to clear inventories or face paying hefty ABSD sums.
Also, developers, who are already cautious in buying housing sites, may hold back further in buying land as worries rise over sales take-up. Lower bid prices for land can in turn dampen price expectations of home buyers.
Indeed, if first-time local buyers become more cautious, given rising expectations that prices may moderate, developers as well as sellers of resale units may need to lower prices to close deals.
Adjusting behaviour
Certainly, higher ABSD rates raise the need for careful planning on home purchases.
Should a married local couple with dual income, who aspire to own two private homes, buy their first home for their own stay under the husband’s name, so the wife can buy an investment home in future without incurring ABSD? Yet, access to bank financing for buying a home is less favourable when buying under a sole name versus buying under two names.
For some foreigners who are drawn to Singapore homes because of the country’s stability and high quality of life, the challenge could be to secure PR or even citizenship status here expeditiously.
As for other foreigners who want to own physical property here, they may flock to non-residential properties such as office buildings, strata office spaces, commercial shophouses or hotels.
Some office assets, with yields that are below borrowing costs, could see prices rise to frothy levels.
Through ABSD on homes, which was first introduced in 2011, the government collects a fair amount of taxes. Maybe going forward, foreigners buying non-residential properties can be hit with higher taxes on such purchases.
With rising life expectancies, many locals are also planning for retirement adequacy. Owning more than one home here may be prioritised in retirement plans.
After all, homes can hedge against rising inflation and can be used to generate recurrent rental income. By buying Singapore homes, citizens are investing in an asset class that they are familiar with, and there is no currency risk involved.
However, investors in homes are fighting an ever rougher policy environment. Perhaps, locals may need to put aside aspirations to buy homes for investment, and consider alternatives such as listed real estate investment trusts or blue-chip Singapore stocks. Concurrently, businesses and policymakers may work to offer more investment choices, such as growing a build-to-rent residential segment.
Singaporeans are rather spoiled when it comes to homeownership. Many locals can buy a high-quality Housing and Development Board flat at subsidised prices when they get married.
Still, many people desire to live in a condominium. Meeting such aspirations matters, as this helps anchor driven and ambitious young citizens here, as well as encourages them to build families.
Could ever more swingeing taxes be on the cards for foreigners and local investors buying homes, to ensure that private homes are affordable to some young locals? If the effects of higher taxes are muted, could there be outright restrictions on foreigners and local investors buying certain categories of homes?
Land is a scarce resource, and the private home market here is relatively small with developers selling possibly 8,000 to 9,000 new non-landed homes a year. Government efforts to tilt the playing field in favour of locals buying their first private property are needed.
Nonetheless, a private home is a nice-to-have. While many locals may be unable to live the condo lifestyle, they enjoy good-quality public housing and the chance to build their lives in a city that is good for living, work and play.
https://www.businesstimes.com.sg/opinion-features/private-home-prices-look-set-welcome-correction-amid-higher-absd-rates