Higher Stamp Duties Post-Budget 2023: Will More Singaporeans Set Their Sights Overseas?
The government has raised the tax on higher-value properties, the latest cooling measure to hit the property market.
Higher Buyer’s Stamp Duties (BSD) were announced at this year’s Budget. For residential properties, the portion of the property value in excess of $1.5 million and up to $3 million will be taxed at 5 per cent, while that in excess of $3 million will be taxed at 6 per cent.
This is up from the previous rate of 4 percent.
The measure is expected to stabilise the market amid a supply crunch. Due to pandemic-related construction delays, completion of both private and public housing projects slowed even as demand stayed strong.
In particular, more Singaporeans are seeking new homes because they want their own living space, boosting private property sales[1].
How will higher BSD affect property buyers?
The BSD hike is expected to generate an additional $500 million in tax revenue. As the measure affects residential properties priced $1.5 million and above, it is set to act as a “wealth tax” on those who can afford higher-value homes.
To put the measure in context, imagine you are a first-time property buyer purchasing a $2 million home. You will now have to pay $69,000 in BSD, up 8 per cent from $64,600 previously.
If you are buying a $10 million property, BSD will now be $539,600, up from $384,600 – a whopping 40.3 per cent jump[2].
For ultra-wealthy buyers, it is unlikely the hike will be much of a deterrence. But middle-income Singaporeans looking to upgrade their homes will likely be priced out of the market.
Those looking to invest in a second property must also pay Additional Buyer’s Stamp Duties (ABSD), which is 17 per cent of the property price.
These measures may contribute to a prevailing sentiment among Singaporeans that housing is becoming too expensive. Only 58 per cent of consumers surveyed by PropertyGuru indicated that they felt property was affordable in the second half of 2022, down 10 per cent from 68 per cent in the first half of 2021[3].
More buyers looking at overseas properties
High local property prices are boosting interest in overseas property markets, especially for those looking to retire or invest.
According to PropertyGuru’s consumer sentiment survey conducted in the first half of 2021, Australia, the United Kingdom and Malaysia are the top destinations for Singaporeans looking to retire overseas[4].
“Buyers looking to invest prefer international property over local property due to lower barriers to entry. They also want to diversify their portfolio,” said Winston Lee, Director of Special Projects at PropertyGuru.
As China’s border restrictions are lifted post-pandemic, Southeast Asia is expecting an influx of well-off Chinese emigrants, with Singapore, Malaysia, and Thailand among the most attractive destinations[5]. However, this is unlikely to push up property prices in Singapore, where purchases by Singaporeans still make up the bulk of transactions[6].
“Overseas Chinese see Singapore as a wealth hub,” said Winston Lee. “It signals that appetite for international properties is growing, not just in Singapore but overseas as well.”
Interested to reach Singapore-based investors with your projects? Be part of our upcoming Invest Asia Property Show, get in touch to find out more.
[1] DPM Wong confident ramped-up supply, cooling measures will stabilise the property market (Straits Times)
[2] Budget 2023 (Today)
[3] Source: PropertyGuru slides
[4] Source: PropertyGuru slides
[5] As China reopens, well-off citizens embrace ‘run’ culture (SCMP)
[6] Return of China property buyers unlikely to impact Singapore (CNA)
Get started with PropertyGuru For Business
