SINGAPORE — With the recent cooling measures doubling the Additional Buyer’s Stamp Duty (ABSD) for foreigners and increasing it for Singaporeans and permanent residents, property analysts predict a likely jump in rental prices.
Various factors contribute to this expectation, including foreigners choosing to rent instead of buying a home, and flat owners renting before upgrading to a private property to avoid paying the duty.
Close to midnight on Wednesday (April 26), the Government announced its highest ABSD rate increase since it was first introduced in 2011. Foreigners who buy any residential property here will have to pay 60 per cent of the property’s purchase price, up from 30 per cent. Singaporeans buying their second residential property pay 20 per cent, up from 17 per cent. The changes took effect on Thursday.
In a joint statement, the Ministry of National Development, Ministry of Finance, and Monetary Authority of Singapore (MAS) highlighted growing demand for property among investors locally and internationally, stating that the cooling measures aim to “promote a sustainable property market.”
Property analysts expect housing rental charges to spike. However, some believe the increase might be muted, in line with MAS’ forecast of the rental market released on Wednesday in its macroeconomic review. MAS mentioned in its bi-annual report that growth in rental prices would dampen in the second half of the year due to an influx of new residential units potentially slowing rental demand.
As for potential private property buyers, analysts said that the latest cooling measures would not affect the sale of mass market condominiums. Most housing hunters would be first-property buyers not affected by the higher ABSD. One analyst from real estate agency PropNex Realty mentioned that its internal data suggests that only 1.5 per cent of transactions involved foreigners.
Ms Christine Sun, OrangeTee and Tie’s senior vice-president of research and analytics, said: “(Private property) sales volume will usually drop for about three to six months (after a cooling measure), but it will rebound after that.” These market shifts will “take effect immediately” after the ABSD increase, alongside a slowing growth in property prices, she added.
Historically, prices have never fallen after an increase — only when the Total Debt Servicing Ratio was adjusted, she observed. Last revised in September 2022, the Total Debt Servicing Ratio stipulates that all debt obligations, including housing loans, cannot exceed 55 per cent of a person’s income.
The higher ABSD is expected to push up rental prices for various reasons. For instance, 60 per cent is likely too high for some foreigners who may choose to rent while waiting to obtain citizenship or permanent residency — allowing them to avoid the ABSD or pay a smaller amount. This increased demand for rental housing will then drive up prices.
Mr Lee Sze Teck, senior director of research at real estate firm Huttons Asia, said: “Anecdotally, there are foreigners who rent, with an option to purchase the home once they become a permanent resident or citizen.” He estimates that rental charges will grow around 10 per cent this year.
Ms Sun also mentioned that owners of Housing and Development Board (HDB) flats may rent short-term while waiting in the period between selling their flat and buying a private property, to avoid paying the ABSD. “Some may find the upfront ABSD payment to be too high. Therefore, those who wish to upgrade may need to sell their flat then rent somewhere first, resulting in higher costs incurred.”
Ms Tricia Song, head of research for Southeast Asia at real estate firm CBRE, said that the overall rental market may be further affected in the long run. “As investment demand is likely to be altered by (the cooling measures), there could be fewer private homes for rent in the longer term. Demand could then spill over to commercial operators such as co-living or serviced apartments,” she added.
Analysts who spoke to TODAY are not expecting the latest changes to significantly impact the demand or prices of mass market condominiums. Mr Ismail Gafoor, chief executive officer of PropNex Realty, said: “The impact of the latest measures will not be evenly felt, with foreign buyers in particular taking a bigger hit. We think the impact of the ABSD rate hike on the mass market will not be significant as foreigners accounted for only 1.5 per cent of the private home purchases in the mass market in the whole of 2022.”
Another analyst agreed, saying that unlike investors who may adopt a wait-and-see approach, buyers who are primarily getting a property for their own occupation may still be active in the mass market, especially first-time buyers.
Mr Mohan Sandrasegeran, senior analyst for research and content creation at One Global Property Services, said: “Overall, affordable private properties, such as condominium units that are priced within their budget and offer desirable amenities in accessible locations, may still be in demand, albeit at a slower pace.”
However, experts had mixed views on the impact on the HDB resale market, with some predicting that there may be no significant shifts. Mr Nicholas Mak, chief research officer at property technology company Mogul.sg, said that there may be higher demand for bigger or better-located HDB flats once people ditch their plans to own and live in private housing as a result of the new changes.
Alternatively, some of these “upgraders” may delay plans, which may lead to a lower resale volume of HDB flats “for a few months,” he added.
