The Impact on Second-Time Buyers
The implementation of additional buyer stamp duty (ABSD) for second properties has had a significant impact on the real estate market in Singapore. Introduced in December 2011, the ABSD is a progressive tax levied on buyers who purchase a second or subsequent residential property.
The current ABSD rates for second properties are as follows:
| Property Value | ABSD Rate | Additional ABSD for Entities |
|---|---|---|
| Less than S$1 million | 12% | 5% |
| S$1 million to S$2 million | 15% | 10% |
| S$2 million to S$3 million | 18% | 15% |
| Above S$3 million | 20% | 15% |
Rationale for the ABSD
The ABSD was introduced to curb speculation and excessive demand in the property market. By increasing the cost of acquiring a second or subsequent property, the government aims to:
- Cool down the property market and prevent a property bubble.
- Encourage first-time homebuyers to enter the market.
- Reduce the number of empty or underutilized properties.
Impact on Property Prices
Since its implementation, the ABSD has been a key factor in moderating property price growth in Singapore. The Urban Redevelopment Authority (URA) reported that private property prices declined by 4.7% in 2012, the first annual decline since 2009. In subsequent years, property prices have continued to fluctuate, but the overall trend has been towards stabilization.
Implications for Buyers
The ABSD has implications for both investors and homebuyers who are considering purchasing a second property.
Investors: The ABSD can significantly increase the cost of investment properties. Investors need to carefully consider the potential return on investment and the impact of the ABSD on their overall financial plan.
Homebuyers: The ABSD can make it more challenging for homebuyers to purchase a second property. However, there are several exemptions and cooling measures in place that can help to alleviate the burden.
Exceptions and Cooling Measures
The following exceptions and cooling measures are available to help buyers mitigate the impact of the ABSD:
- First-time homebuyers: First-time homebuyers are exempt from the ABSD.
- Upgraders: Homeowners who are upgrading to a bigger home can benefit from the Graduated Remission Scheme (GRS). The GRS provides a partial ABSD refund based on the value of the existing property sold.
- Couples: Married couples or couples who are purchasing a property together can share the ABSD liability.
- Singapore Citizens and Permanent Residents: Singapore Citizens (SCs) and Permanent Residents (PRs) are eligible for a one-time ABSD remission of 5%.
Conclusion
The ABSD is a key fiscal policy that has been used to moderate property price growth in Singapore. While it has implications for both investors and homebuyers, there are several exemptions and cooling measures in place to help alleviate the burden. Buyers who are considering purchasing a second property should carefully consider the impact of the ABSD on their financial plan and explore the available options to mitigate its impact.
Additional Resources
- Urban Redevelopment Authority (URA)
- Inland Revenue Authority of Singapore (IRAS)
- Singapore Property Market Report
Tables
Table 1: ABSD Rates for Second Properties
| Property Value | ABSD Rate | Additional ABSD for Entities |
|---|---|---|
| Less than S$1 million | 12% | 5% |
| S$1 million to S$2 million | 15% | 10% |
| S$2 million to S$3 million | 18% | 15% |
| Above S$3 million | 20% | 15% |
Table 2: ABSD Remission for Upgraders (GRS)
| Existing Property Value | ABSD Remission |
|---|---|
| Below S$500,000 | 100% |
| S$500,000 to S$1 million | 75% |
| S$1 million to S$2 million | 50% |
| Above S$2 million | 25% |
Table 3: ABSD Exemptions
- First-time homebuyers
- Marriage between Singapore Citizens or Permanent Residents
- Inheritance
- Court or temple orders
Table 4: Cooling Measures in Place
- Seller’s Stamp Duty (SSD)
- Loan-to-Value (LTV) Limits
- Mortgage Servicing Ratio (MSR)
- Total Debt Servicing Ratio (TDSR)
