Cooling Measure - 27 Apr 2023:
Late at night on the 26th of April 2023, the Government announced a hike in Additional Buyer Stamp Duty (ABSD) rates in order to promote a sustainable property market and prioritise owner-occupation. The revised rates will take effect starting from 27 April 2023.
This is the third round of cooling measures since Dec 2021, where previous measures included an earlier increase in ABSD and stricter borrowing criteria such as tightening the Total Debt Servicing Ratio (TDSR) and lowering the Loan-to-Value (LTV) limit for HDBs. These measures have had a moderate effect on the market, however in 1Q2023, the market has showed "renewed signs of acceleration amid resilient demand".
“Demand from locals purchasing homes for owner-occupation has been especially strong, and there has also been renewed interest from local and foreign investors in our residential property market," said the authorities. "If left unchecked, prices could run ahead of economic fundamentals, with the risk of a sustained increase in prices relative to incomes.”
How does this affect you?
It is evident from the increases that this move is targeted towards investors and foreigners. With an increase for both SC and SPR ABSD for 2nd and subsequent properties, investors will think twice before purchasing another residential property.
The most dramatic increase is in the sector concerning foreigners, entities and trustees. With an increase of almost double, we can expect demand for higher-end properties to be muted in the following months. The effect on the entire market remains to be seen in the coming year.
Genuine first-time homebuyers and upgraders remain unaffected and this in fact presents an opportunity as competition for existing supply will be reduced.
In Summary
This news comes at the end of the preview for Blossoms by the park, which saw a strong expression of interest with an estimated 724 cheques for a development with only 275 units - a subscription rate of 2.6%. We will be able to witness the effects of the latest cooling measures during the launch date on 29th April.
Developments targeting foreign buyers might also be inclined to give discounts so do look out for such opportunities for buyers who want to buy into the CCR. This move could spur local interest in the CCR again if price gap between the CCR and rest of the country continues to narrow.
It is important to note that based on 2022 data, 90% of residential transactions are from SCs and SPRs purchasing their first property, while foreigners make up another 4-6%. Hence, the property market is primarily being driven by strong demand from first-time homebuyers and ABSD serves more as a precautionary measure for investors and speculators.
The increase in ABSD will also make the option of applying for Citizenship or PR status here more attractive to foreigners, hence this might be a proactive response by our government to encourage foreigners to set up long term roots here instead of speculating in our property market.
We will likely see some moderation in prices and volume as historically buyers tend to adopt a wait-and-see approach. However, do note that this might not pay off as again historically, waiting out did not pay off during the last cooling measures back in 2018 as prices continue to trend upwards in the long run.
The Singapore property market has long been regarded as a safe and controlled environment that is continuously monitored by our government, therefore attracting many foreign buyers and investors. It is evident that the government is resolved in ensuring a sustainable property market by cooling investment demand and protecting the interests of owner-occupiers. Overall, ABSD increases serve as barriers of entry for speculators and this is a good move by our government to ensure that the market remains sustainable and within reach for HDB upgraders and first-time buyers.
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