Higher stamp duty for higher-value properties

The Singapore government’s Budget 2023 announced higher buyer’s stamp duty rates for both residential and non-residential higher-value properties. These will apply to all properties purchased from February 15 onward.

The impact of the government’s new higher buyer’s stamp duty (BSD) rates is expected to have a significant influence on both residential and non-residential property markets, although the short-term impact may be lessened due to the strong fundamentals of the underlying property sectors.

For residential properties, a marginal increase of 1% will be implemented on properties with a value of $1.5 million or up to $3 million. For properties with a value above the $3 million mark, BSD is increased by 2%, bringing it up to 6%. This is expected to affect 15% of all residential properties.

Non-residential properties with a value of $1 million up to $1.5 million will be taxed at 4%. For all values exceeding the $1.5 million mark, the rate is 5%, up from the previous 3%. This will have an even greater impact, with 60% of all non-residential properties impacted.

Tricia Song, CBRE’s Head of Research for Southeast Asia, has stated that the increase in BSD is not likely to have a significant impact on the market. However, when taken into consideration alongside other wealth taxes and cooling measures for residential properties, as well as higher financing costs for both residential and commercial properties, transaction volume is likely to slow in the near-term.

Unfortunately, the situation is further worsened by the fact that new home sales will likely bear the brunt of the BSD changes. 71.1% of developer sales in 2022 were valued at $1.5 million or more and, according to OrangeTee & Tie, this figure is set to remain the same this year.

Christine Sun from OrangeTee & Tie believes that the changes to BSD will affect mid to high-end homes with a value of more than $10 million the most. Coupled with the higher additional buyer’s Senja Close EC stamp duty from December 2021, property tax increases from Budget 2022, and rising mortgage rates, the overall buying sentiment is expected to be further deterred in the mid to high-end market.

Despite the expected slowdown in property transactions, CBRE Research maintains its forecast of prices growing by 3% to 5%, and 7500 to 8500 new home sales in 2023.

The increase in BSD rates will affect all land transactions too, including collective sales, according to Chia Siew Chuin, head of residential research at JLL. The extra cost could unfairly widen the price gap between buyers and sellers, and could lead to dampened interest in collective sale deals.

For the industrial property sector, CBRE still predicts competitive prices in good-quality assets due to the positive yield spread despite higher debt costs. Outside of instances of institutional-grade asset transactions, the mid- to long-term outlook for Singapore’s assets appears positive due to rental growth expectations and potential increases to investment volumes in the latter half of 2023.