SINGAPORE: The recent surge in the Additional Buyer’s Stamp Duty (ABSD) for property has dealt a significant blow to foreign demand, leading to a substantial decline in transactions, according to data from PropNex Research. Analysts anticipate a prolonged dampening effect on the market, as reported by The Straits Times.
Market observers suggest Singaporean buyers are poised to take centre stage in prime markets. The preview sale of Watten House in Bukit Timah on Nov 18 saw more than half of its 180 units sold, primarily to Singaporean buyers and permanent residents (PR), according to information gathered by PropNex agents. Mr Dominic Lee, the head of the luxury team at PropNex, mentioned that only one non-permanent resident foreign buyer from the US was recorded.
Based on URA Realis data, Mr Lee noted that transaction prices at Watten House ranged from S$3.06 million to around S$14.5 million. These transactions indicate that local buyers possess the financial capacity to acquire high-end luxury units. The impact of the ABSD on foreign buyers has been substantial, with historical data indicating a consistent decrease in foreign transactions following ABSD revisions.
“In 2024, we expect Singaporean buyers and Singapore permanent residents to continue to account for the majority of home sales across the different sub-markets,” Mr Lee added.
In Jan 2023, foreign buyers represented 5% of non-landed private resale home transactions. However, after the ABSD for foreigners was elevated from 30% to 60% on Apr 27, this figure plummeted to 3.7% in May. The decline continued, reaching 1.2% in September and hitting a new low of 1.1% in October, accounting for just nine transactions.
Wong Siew Ying, Head of Research and Content at PropNex, highlighted that of the nine transactions involving foreigners, seven were from the United States, with one each from Switzerland and Oman. She anticipates that Singaporean and Singapore permanent resident property buyers will maintain dominance in resale condo sales.
According to Urban Redevelopment Authority (URA) Realis data, buyers from non-exempted jurisdictions, such as the US, Iceland, Liechtenstein, Norway, and Switzerland, constituted 104 out of 165 resale condo transactions from January to April. This number dwindled to 42 transactions from May to Nov 24.
Under existing free trade agreements, buyers from the mentioned countries are exempt from paying ABSD for their first residential home in Singapore but are obligated to pay for subsequent properties.
Ms Wong remarked, “Overall, we would expect the punitive ABSD rate for foreigners to weigh on the sales of high-end homes.” Despite this, she noted that anecdotal feedback suggests potential big-ticket property purchases, particularly among foreigners holding a US passport or those considering long-term residency in Singapore.
The ABSD hike, introduced in April as part of measures to promote a sustainable property market, has led to fewer resale units being sold to foreigners, especially in the core central region (CCR). Tricia Song, CBRE Head of Research for Singapore and Southeast Asia, noted a substantial impact in the CCR segment, stating, “The largest impact obviously was in the CCR segment, given that traditionally it has the highest foreigner ratio.”
The CCR witnessed a decline in the number of foreign buyers, dropping from 162 units in the initial three months of 2023 to 39 units between July and September. Six luxury apartments priced at S$10 million and above were transacted during this period, compared to 19 in the previous three months. Ms Song anticipates a continued dampening effect on the luxury residential sector in the first half of 2024, citing macroeconomic uncertainties and elevated interest rates as additional factors. /TISG