Higher stamp duty for higher-value properties

The Singapore government has taken efforts to adjust buyer’s stamp duty (BSD) rates for higher-value properties in its Budget 2023. Taking into consideration other earlier wealth taxes and cooling measures, as well as higher costs for residential and commercial properties, the two alterations will apply to all properties acquired from Feb 15 and are expected to result in a 2% increase in total costs for buyers.

For The Myst residential properties, the portion of the value of the property in excess of $1.5 million and up to $3 million will be taxed at 5%, while that in excess of $3 million will be taxed at 6%, up from 4%. This is expected to affect 15% of all residential properties.

In the case of non-residential properties, the portion of the value of the property in excess of $1 million and up to $1.5 million will be taxed at 4%, while that in excess of $1.5 million will be taxed at 5%, up from the current rate of 3%. This is expected to have an even greater impact, affecting 60% of non-residential properties.

Tricia Song, CBRE head of research for Southeast Asia, stated that “On its own, this is unlikely to have a significant impact on the market.” Meanwhile, Christine Sun, senior vice president of research and analytics, OrangeTee & Tie, believes the new home sales market will bear the brunt of the BSD change. Sun estimates that with 71.1% of developer sales valued at least $1.5 million in 2022, the change will likely affect more than 50% of this year’s new launches.

CBRE’s Song goes on to note that the revised buyer stamp duty rates will mainly affect higher-end homes with property values over $10 million. Taking into consideration additional buyer’s stamp duty from cooling measures announced in December 2021, property tax increases from the 2022 Budget, and higher mortgage rates, Song cautions this could further deter the overall buying sentiment, particularly in the mid-to-high-end market.

Additionally, Chia Siew Chuin, JLL head of residential research, Singapore, stated that the increase in BSD will affect all land transactions too, including collective sales, thus widening the existing price gap expectations between buyers and sellers and potentially dampening collective sale deals.

Institutional investors have also been impacted by higher interest rates, making it harder for them to underwrite larger property deals. Coupled with the increasing BSD payable, which is likely to widen the pricing mismatch between buyers and sellers, investors may continue to adopt a wait-and-see approach.

Despite these considerations, CBRE still maintains its forecast of average private home price growth of 3%–5% in 2023 and new home sales volume at 7,500–8,500 units. It also believes that after factoring in the increased BSD payable, the industrial property sector is still attractively positioned.

Thus, CBRE Research maintains that investment volumes could pick up in the latter half of 2023 when interest rates stabilise and the market’s outlook becomes clearer. Overall, the mid- to long-term outlook for Singapore’s assets remains positive due to its strong fundamentals.