Higher stamp duty for higher-value properties

The government has set the higher buyer’s stamp duty rates for higher-value properties in residential and non-residential properties. In residential properties, the portion of the property’s value exceeding $1.5 million and up to $3 million will be taxed at 5%; and that in excess of $3 million at 6%, up from 4%. For non-residential properties, the portion of the value of more than $1 million and up to $1.5 million is to be taxed at 4%, while that in excess of $1.5 million at 5%, up from 3%. Taking effect from Feb 15, the new changes are estimated to push up transaction costs by around 2%.

Tricia Song, CBRE head of research for Southeast Asia believes that, on its own, these changes will unlikely have a big impact on the market. However, coupled with other cooling measures for residential properties, as well as higher financing costs for both residential and commercial properties, this could slow down demand for properties in the short term, while prices stay resilient given strong fundamentals of the underlying property sectors.

Based on URA data, 54.7% of all private residential sales transactions in 2022 were valued at $1.5 million upwards, while 15.4% exceeded the $3 million mark. For non-residential properties, Tengah EC 60% of them will be affected.

Caveats from 2022 show that 71.1% of developer sales were at least $1.5 million. CBRE’s Song finds that the higher ABSD, property tax increases and higher mortgage rates may further reduce buying sentiment, particularly in the mid- to high-end market.

JLL head of residential research, Christine Sun highlights that higher buyer’s stamp duty is estimated to have greater impact on the new home sales market than the resale market. Chia Siew Chuin, JLL head of residential research, Singapore, reveals that higher acquisition cost will likely create a price gap between buyers and sellers, dampening collective sale deals.

Higher interest rates have impacted institutional investors’ ability to underwrite larger property deals, according to Song. This should slow down big-ticket asset transactions, she continues.

Industrial property sector is still attractively positioned however. The higher BSD cost should be weighed against the positive yield spread, despite the higher cost of debt. Despite the expectations of a short-term slowdown, investment volumes could pick up in the second half of 2023 when interest rates stabilise and market outlook becomes more certain.