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Singapore's real estate market heats up, doubles stamp duty for foreigners to 60 per cent

Squarefoot Editor  2023-05-23  #Wed Property Focus

To curb soaring property prices, the government has launched a number of cooling measures, including Special Stamp Duty and Buyer's Stamp Duty. These measures were introduced in 2010 – but now that market conditions have changed, there have been calls for the government to reduce or even remove them altogether to help the property market recover. Nonetheless, the government has no plans to do so for the time being. 

Meanwhile, Singapore, which is also an Asian financial centre and has long been regarded as Hong Kong's competitor, has decided to step up its property control measures by increasing the Special Stamp Duty, to significantly increase the cost of buying a property and reduce investment demand. 

According to reports, under the new measures, the Additional Buyer's Stamp Duty (ABSD) for foreigners buying a home in Singapore has been significantly increased from 30 per cent to 60 per cent. For non-developers buying a home as a company or trust, the ABSD has been increased from the original 35 per cent to 65 per cent, with effect from 27 April.

For Singapore residents, the SSD for second home purchases by Singapore citizens has been increased from 17 per cent to 20 per cent, and for citizens buying a third home or more, and permanent residents buying a second home, the SSD has been increased from 25 per cent to 30 per cent. 

Why did Singapore make such a decision? Singapore has introduced a number of policies to promote business development. As foreign investment continued to pour in, the property market continued to heat up, with private property prices rising by about nine per cent last year, forcing the authorities to take another step to cool the property market. 

The introduction of cooling measures comes as no surprise. What’s most shocking is that in this the critical period of attracting new talent, the ABSD that foreign buyers have to pay has doubled. Such a huge increase might greatly discourage foreigners from migrating to Singapore and buying their own homes. 

In view of this situation, some believe that the government should take the opportunity to recover lost ground by adjusting the BSD to attract more talent and capital. Under the current stamp duty rate in Hong Kong, the ad valorem stamp duty (AVD) is a flat 15 per cent of the property price for non-first-time buyers who are Hong Kong permanent residents, non-Hong Kong permanent residents, or who buy in the name of a company. 

All purchases of Hong Kong residential properties by non-HKPRs or in the name of a company, whether they are first or second homes, are subject to BSD at 15 per cent. This means that together with the ad valorem stamp duty, such buyers will have to pay a total of 30 per cent in stamp duty on their purchases.

It is undeniable that the current BSD in Hong Kong is much lighter than the 60 per cent in Singapore. But if the Hong Kong government is willing to make further adjustments, perhaps reducing stamp duty charges to 10 or 20 per cent, the reduced burden of buying a home in Hong Kong would be much more attractive to buyers, with opportunity for drawing investors back to Hong Kong.

Having said that, this is a sound idea. After all, property prices in Hong Kong are still high. In addition, given the economic downturn, investors are becoming more cautious. Even if the government reduced its spending, they may hold back from entering the market. Nonetheless, at the end of the day, it all depends on whether the government will adjust stamp duty rates. 

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