New Reporter
03-05-23, 12:55
ABSD shock seen hitting prime housing market hardest, could drive away foreign investors
Apr 27, 2023
VIEWS are mixed on the direction of private home prices following the latest market cooling measures, but the impact on demand and hence prices will be felt most acutely in the Core Central Region (CCR) or prime areas, property consultants said.
Foreigners, who typically account for a bigger share of sales in the CCR compared with the city fringe and suburban areas, will now have to pay 60 per cent Additional Buyer’s Stamp Duty (ABSD) for any residential property purchase, double the previous rate.
Investment demand by Singaporeans and permanent residents (PRs) will also moderate to some extent, given the more palatable 3-5 percentage point hikes in ABSD rates, said Edmund Tie’s head of research and consulting, Lam Chern Woon. The ABSD rates for Singapore citizens and permanent residents (PRs) buying their first residential property remain unchanged at 0 per cent and 5 per cent, respectively.
“Genuine homebuying and upgrading demand remains unscathed, and will likely benefit from a more gradual price trajectory going forward,” Lam added.
Following the latest measures, he has revised downwards his 2023 forecast for the Urban Redevelopment Authority (URA) private home price index from a 5 per cent to 7 per cent increase previously to a 4 per cent to 6 per cent increase. Last year, the index rose 8.6 per cent.
The URA’s flash estimate released earlier this month reflected a 3.2 per cent quarter-on-quarter rise in the index in Q1 2023.
Giving his take on the impetus for the sharp ABSD rate hike for foreigners, PropNex chief executive officer (CEO) Ismail Gafoor said: “If things are left unchecked, there will be concerns among Singaporeans and PRs about their aspirations to own a private home.” He pointed to the steady increase in foreign interest at new property launches.
The foreign buying share of new non-landed private homes (excluding executive condominium or EC units) has risen from 4.3 per cent in 2021 to 7.3 per cent in 2022, climbing further to 9.9 per cent from Jan 1 to Apr 18 this year. “The government is crystal clear. At the end of the day, if greater foreign interest is resulting in prices being pushed up, this is a no-go.”
That said, he agreed that the 60 per cent ABSD on foreign buyers is punitive. “I think foreigners will seriously reconsider buying residential property in Singapore because they do have options in many other liveable cities around the world.”
“Foreigners buying a S$20 million home here now have to pay S$12 million ABSD. For this amount, they can easily buy a luxury home in many other liveable cities such as Melbourne, London and in other mature markets.”
Suggestion for a tiered hike in ABSD on foreigners
Instead, Ismail suggested the authorities could have opted for a tiered increase in ABSD rates on foreigners. “If the government wants to protect Singaporeans’ aspirational housing needs, it could have imposed the 60 per cent rate on foreign purchases of properties below S$10 million. For properties above S$10 million - which are not within the range of the typical Singaporean first-time homebuyer - the ABSD could have been raised to, say, 40 per cent.”
This view is shared by Pua Seck Guan, chairman and CEO of Perennial Holdings, which leads a consortium that has teamed up with Alibaba to redevelop the former AXA Tower site on Shenton Way into an up to 200-unit luxury residential, hotel and office development.
“My concern is that having a flat 60 per cent ABSD rate on all Singapore residential property purchases by foreigners will chase away ultra-rich foreigners from Singapore. They are not buying mass-market condos, which remain the mainstay of Singaporeans and PRs. Furthermore, the doubling in ABSD comes at a time when Hong Kong is trying to draw back ultra-high-net-worth individuals (UHNWIs) and companies, having lost out to Singapore in the past couple of years,” said Pua.
“Often, when well-heeled foreigners buy a residential property in Singapore, this is a first step to having a stake here. It is soon followed by a desire to be based here for longer periods of time and wanting to set up businesses here, which can generate spinoffs for our business ecosystem. This is similar to the strategy adopted in the early years after Singapore’s independence, of encouraging its citizens to own the roof over their heads – for most, this would be an HDB flat – to foster rootedness and give them a stake in the country.”
“Unfortunately, the 60 per cent ABSD rate may send a message to foreign investors that they are not welcome in Singapore,” he added.
However, Jacqueline Wong, executive director of Savills Private Office, said the 60 per cent ABSD on foreigners is unlikely to take the shine off Singapore’s attraction as a wealth hub.
“Most UHNWIs who come to Singapore to set up a family office and be based here would eventually become a PR or Singapore citizen after having demonstrated their commitment to contribute to Singapore’s economy. In the interim, they will lease a home. So the 60 per cent ABSD on foreigners’ residential property purchase is not a consideration for those who can qualify to set up a family office,” she added.
While developers were spared any increase in ABSD rates this round, they are likely to rethink their land bidding strategy.
Jeremy Lake, managing director of investment sales and capital markets at Savills Singapore, said the latest cooling measures will dampen bids from developers for sites, particularly in the prime districts 9, 10 and 11, where new private residential launches typically target a higher percentage of foreign buyers, who are most impacted by the higher ABSD.
“The price gap which has hindered collective sales over the last 12 months or so just got bigger,” he added.
In similar vein, CBRE’s head of research for South-east Asia, Tricia Song, said: “While private-sector residential collective sales may continue to be challenging, we expect GLS (government land sales) to continue to be the favoured private housing land supply channel for developers. In the medium term, developers may prefer mass-market and even 99-year leasehold sites over prime and freehold locations, as these are more affordable and cater more to the owner-occupier market.”
Edmund Tie’s Lam said: “Interest will remain strong for sites with exceptional attributes in the mass-market and EC segments, which are relatively isolated from the latest ABSD hikes.”
The ABSD rates for Singapore citizens and PRs buying their first residential property remain unchanged at 0 per cent and 5 per cent, respectively. ABSD for Singaporeans on their second residential property purchase has gone up from 17 per cent previously to 20 per cent. On third and subsequent residential properties, the rate has been raised by five percentage points to 30 per cent. ABSD for PRs on their second property has gone up from 25 per cent to 30 per cent; on the third and subsequent properties, the rate has increased from 30 per cent to 35 per cent.
Property counters in Singapore started the morning largely in the red on the news. Developers City Developments Limited (CDL) and UOL Group, both constituents of the Straits Times Index (STI), led the STI’s decline during the day. CDL fell 5.6 per cent or S$0.41 to S$6.91, while UOL lost 4.7 per cent or S$0.34 to close at S$6.85.
https://www.businesstimes.com.sg/property/absd-shock-seen-hitting-prime-housing-market-hardest-could-drive-away-foreign-investors
Apr 27, 2023
VIEWS are mixed on the direction of private home prices following the latest market cooling measures, but the impact on demand and hence prices will be felt most acutely in the Core Central Region (CCR) or prime areas, property consultants said.
Foreigners, who typically account for a bigger share of sales in the CCR compared with the city fringe and suburban areas, will now have to pay 60 per cent Additional Buyer’s Stamp Duty (ABSD) for any residential property purchase, double the previous rate.
Investment demand by Singaporeans and permanent residents (PRs) will also moderate to some extent, given the more palatable 3-5 percentage point hikes in ABSD rates, said Edmund Tie’s head of research and consulting, Lam Chern Woon. The ABSD rates for Singapore citizens and permanent residents (PRs) buying their first residential property remain unchanged at 0 per cent and 5 per cent, respectively.
“Genuine homebuying and upgrading demand remains unscathed, and will likely benefit from a more gradual price trajectory going forward,” Lam added.
Following the latest measures, he has revised downwards his 2023 forecast for the Urban Redevelopment Authority (URA) private home price index from a 5 per cent to 7 per cent increase previously to a 4 per cent to 6 per cent increase. Last year, the index rose 8.6 per cent.
The URA’s flash estimate released earlier this month reflected a 3.2 per cent quarter-on-quarter rise in the index in Q1 2023.
Giving his take on the impetus for the sharp ABSD rate hike for foreigners, PropNex chief executive officer (CEO) Ismail Gafoor said: “If things are left unchecked, there will be concerns among Singaporeans and PRs about their aspirations to own a private home.” He pointed to the steady increase in foreign interest at new property launches.
The foreign buying share of new non-landed private homes (excluding executive condominium or EC units) has risen from 4.3 per cent in 2021 to 7.3 per cent in 2022, climbing further to 9.9 per cent from Jan 1 to Apr 18 this year. “The government is crystal clear. At the end of the day, if greater foreign interest is resulting in prices being pushed up, this is a no-go.”
That said, he agreed that the 60 per cent ABSD on foreign buyers is punitive. “I think foreigners will seriously reconsider buying residential property in Singapore because they do have options in many other liveable cities around the world.”
“Foreigners buying a S$20 million home here now have to pay S$12 million ABSD. For this amount, they can easily buy a luxury home in many other liveable cities such as Melbourne, London and in other mature markets.”
Suggestion for a tiered hike in ABSD on foreigners
Instead, Ismail suggested the authorities could have opted for a tiered increase in ABSD rates on foreigners. “If the government wants to protect Singaporeans’ aspirational housing needs, it could have imposed the 60 per cent rate on foreign purchases of properties below S$10 million. For properties above S$10 million - which are not within the range of the typical Singaporean first-time homebuyer - the ABSD could have been raised to, say, 40 per cent.”
This view is shared by Pua Seck Guan, chairman and CEO of Perennial Holdings, which leads a consortium that has teamed up with Alibaba to redevelop the former AXA Tower site on Shenton Way into an up to 200-unit luxury residential, hotel and office development.
“My concern is that having a flat 60 per cent ABSD rate on all Singapore residential property purchases by foreigners will chase away ultra-rich foreigners from Singapore. They are not buying mass-market condos, which remain the mainstay of Singaporeans and PRs. Furthermore, the doubling in ABSD comes at a time when Hong Kong is trying to draw back ultra-high-net-worth individuals (UHNWIs) and companies, having lost out to Singapore in the past couple of years,” said Pua.
“Often, when well-heeled foreigners buy a residential property in Singapore, this is a first step to having a stake here. It is soon followed by a desire to be based here for longer periods of time and wanting to set up businesses here, which can generate spinoffs for our business ecosystem. This is similar to the strategy adopted in the early years after Singapore’s independence, of encouraging its citizens to own the roof over their heads – for most, this would be an HDB flat – to foster rootedness and give them a stake in the country.”
“Unfortunately, the 60 per cent ABSD rate may send a message to foreign investors that they are not welcome in Singapore,” he added.
However, Jacqueline Wong, executive director of Savills Private Office, said the 60 per cent ABSD on foreigners is unlikely to take the shine off Singapore’s attraction as a wealth hub.
“Most UHNWIs who come to Singapore to set up a family office and be based here would eventually become a PR or Singapore citizen after having demonstrated their commitment to contribute to Singapore’s economy. In the interim, they will lease a home. So the 60 per cent ABSD on foreigners’ residential property purchase is not a consideration for those who can qualify to set up a family office,” she added.
While developers were spared any increase in ABSD rates this round, they are likely to rethink their land bidding strategy.
Jeremy Lake, managing director of investment sales and capital markets at Savills Singapore, said the latest cooling measures will dampen bids from developers for sites, particularly in the prime districts 9, 10 and 11, where new private residential launches typically target a higher percentage of foreign buyers, who are most impacted by the higher ABSD.
“The price gap which has hindered collective sales over the last 12 months or so just got bigger,” he added.
In similar vein, CBRE’s head of research for South-east Asia, Tricia Song, said: “While private-sector residential collective sales may continue to be challenging, we expect GLS (government land sales) to continue to be the favoured private housing land supply channel for developers. In the medium term, developers may prefer mass-market and even 99-year leasehold sites over prime and freehold locations, as these are more affordable and cater more to the owner-occupier market.”
Edmund Tie’s Lam said: “Interest will remain strong for sites with exceptional attributes in the mass-market and EC segments, which are relatively isolated from the latest ABSD hikes.”
The ABSD rates for Singapore citizens and PRs buying their first residential property remain unchanged at 0 per cent and 5 per cent, respectively. ABSD for Singaporeans on their second residential property purchase has gone up from 17 per cent previously to 20 per cent. On third and subsequent residential properties, the rate has been raised by five percentage points to 30 per cent. ABSD for PRs on their second property has gone up from 25 per cent to 30 per cent; on the third and subsequent properties, the rate has increased from 30 per cent to 35 per cent.
Property counters in Singapore started the morning largely in the red on the news. Developers City Developments Limited (CDL) and UOL Group, both constituents of the Straits Times Index (STI), led the STI’s decline during the day. CDL fell 5.6 per cent or S$0.41 to S$6.91, while UOL lost 4.7 per cent or S$0.34 to close at S$6.85.
https://www.businesstimes.com.sg/property/absd-shock-seen-hitting-prime-housing-market-hardest-could-drive-away-foreign-investors