Commercial property market unlikely to be affected by the latest ABSD hikes
Singapore -The Singapore government has recently announced a significant change in the Additional Buyer’s Stamp Duty (ABSD) rates which will affect non-individual entities and individuals planning to purchase second and subsequent residential properties as well as foreigners looking to buy one in Singapore. The ABSD rates for foreigners have now gone up to 60% from the previous 30% ABSD.
New ABSD rates meant to slow residential property market
Experts are of the opinion that while the new measures may lower property prices in the short term, it will ultimately have a positive impact on the overall real estate market as it encourages stability and growth over the long term.
The new policy is not expected to have any impact on commercial property buyers, particularly as there are no ABSD imposed on buyers purchasing commercial properties.
According to National Development Minister Desmond Lees he said that the demand for commercial properties is fuelled by business considerations and that the values for commercial transactions are of higher value compared to residential properties.
Individual purchasers makes up nearly all of the residential property market. 90 percent of the commercial property market are purchased by companies.
Commercial property prices and transactions have also remained stable in the period following past increment of the ABSD rates. The new rates announced on 26th April 2023 is aimed to slow down residential property markets from increasing by prioritising Singaporeans buying homes for owner occupation.
Rising rental market a concern
The new taxes for Singaporeans buying second property was raised to 20% from the previous 17% and from 25% to 30% for those buying their subsequent properties.
Singapore Permanent Residents (SPR) buying their 2nd properties will have their tax rates rise from 25% to 30%. and from 30% to 35% for subsequent properties.
The new cooling measures was rolled out also due to the private home prices jumping to 3.3 per cent in the 1st quarter compared to 2.9 per cent in the 4th quarter of 2022.
Foreigners interested in Singapore residential property as an asset class is rising again. Border closure due to Covid19 and earlier cooling measures which helped to moderate it.
During the written parliamentary questions reply to concerns on rising rental prices and the impact on business costs, Mr Lee said that they do not expect the recent ABSD change to have impact on rental market.
Most of the foreigners working in Singapore rent their accommodation and hence will not be affected by the change.
The tight supply conditions which is brought about by the Covid19 pandemic led to low supplies in the rental market due to construction delays. However we will soon see some relief as 40,000 homes are being completed this year and about 100,000 by 2025. Households that are currently renting will also move out of their rental units and freeing up space for more homes to be rented out.
Mr Lee said, “Therefore they will expect pressures in rental to ease with he coming supply of new homes completion. They are already seeing rental demand subside. This in turn will moderate rent increases in the coming quarter.