Is It Time for Singapore to Remove ABSD?

Eugenia Liew
Is It Time for Singapore to Remove ABSD?
The Additional Buyer’s Stamp Duty (ABSD) is a tax paid by property buyers in Singapore. Singaporean citizens only pay it on their second and subsequent property purchases. First introduced in 2011 as a “cooling measure” to slow down the then-red-hot property market together with a slew of other property cooling measures, the ABSD has played an important role in curbing soaring property prices.

For reference, here are the current ABSD rates:

Buyer profile
ABSD payable
Singapore Citizen buying first property
No need to pay ABSD
Singapore Citizen buying second property
Singapore Citizen buying third and subsequent properties
Singapore Permanent Resident (PR) buying first property
Singapore Permanent Resident (PR) buying second and subsequent properties
Foreigner buying any property
Entities (company or association) buying any property
25% (additional 5% if entity is housing developer)
While the ABSD is not paid by Singaporeans who only own one property as their home, it has been a hurdle for those looking to own multiple properties for investment purposes.
Hence, there have been calls from several quarters seeking the removal of the ABSD. Industry practitioners have written for the government to consider “recalibrating the ABSD”. At least one MP has called for the removal of the ABSD in 2016. This year, PropertyGuru’s consumer Sentiment Study found 65% of Singaporeans hopeful for lower ABSD fees.

ABSD yea or nay? The case for and against the Additional Buyer’s Stamp Duty

But is removing ABSD necessarily the way to go? Let us consider some of the major arguments for and against the ABSD:

Against: ABSD could potentially cause distortions in the broader market

Those in favour of removing the ABSD—at least for locals—have argued that the policy has created unintended outcomes, namely distortions in the property market and the way its participants behave. They have argued that these could have broader consequences on the country as a whole.

Investors may be incentivised to consider other property markets

The ABSD can have the effect of leading investors to look to other market segments such as commercial property, or even to look overseas in order to invest. In the case of local investors seeking opportunities overseas, this would be an outcome whereby their investments would then benefit other countries instead of remaining in Singapore.

Investors may consider riskier assets

The ABSD could have the effect of causing investors to move away from property, Singapore’s most popular type of investment asset, into different and potentially riskier asset classes, which could increase the chance of losses.

ABSD may lead to decoupling of property titles

The ABSD has led investment-minded couples to try avoiding the ABSD by decoupling their property titles—whereby their first (usually matrimonial) property is held under the name of just one spouse so that the other spouse can still enjoy a second “first purchase”. This diverges from the usual social practice of couples holding property under both their names.

For: ABSD is good for buyers of homes

Conversely, those in favour of the ABSD have pointed out that it, and its companion cooling measures, have had the intended stabilising effect on property prices, according to the DBS Market Outlook. In addition to this relative stability, the ABSD has also helped bring about a relative reduction in buying demand, with resale volume plummeting 57% from 2018 to 19, though new sales volume has remained relatively stable despite the cooling measures. This reduction has been a boon to Singaporeans just looking to purchase a single property to make a home out of—many of whom may not intend to participate actively in the property investment market.
Given that statistics suggest that some 7 in 10 Singaporeans are single property owners to whom the ABSD does not apply, this policy can be said to have brought clear benefits to a majority of Singaporeans.

For: The ABSD helps prevent a foreigner-heavy private property market

In countries around the world, private property markets that become too heavily populated by foreigners have been seen to result in domestic political tensions due to, among others, perceptions of heightened competition for property and locals being priced out of their own market as a result.
As a result of this, many countries have seen fit to implement their own property ownership controls in order to prevent foreigners from dominating the market. For example, Thailand restricts the proportion of each condo project that can be sold to foreigners. Australia reserves their property resale market for Australians alone, i.e. a foreigner who has bought property can only subsequently sell it to an Australian.
One of the ways Singapore likewise equalises the property ownership structure for all within our shores, is through the mechanism of the ABSD. The ABSD policy has a bias in favour of Singaporean buyers through duty rates that vary depending on nationality and residency. For example, foreigners pay 20% ABSD on any property purchase whereas citizens only pay 12% from the second property purchase onwards. In this perspective, the ABSD is a key instrument in managing the property market.

Conclusion: ABSD has a role to play

The ABSD clearly serves an important purpose in the current property market, though it is one that has led to much opposing debate depending on whose viewpoint it is.
In recent news, the Monetary Authority of Singapore (MAS) Managing Director Ravi Menon has stated that there is currently no need to ease existing cooling measures like the ABSD. Yet, like all policies, the ABSD can be adjusted, recalibrated or changed should the need arise. We can be sure that the situation will be monitored closely, and adjustments made as needed in future.
In the meantime, investors should keep themselves well-informed and up to date about the latest market developments, and where better than here at PropertyGuru?
If you’re thinking of buying a second (or subsequent) property and are fretting about ABSD and other financing restrictions, let PropertyGuru Finance help you out. Our Home Finance Advisors are experts in the field, well equipped to guide and advise you as you make these important property considerations and decisions.
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