Higher stamp duty for higher-value properties

Higher BSD rates for higher-value properties are expected to affect both residential and non-residential properties in Singapore. Effective from Feb 15, 2023, the portion of the value of the property in excess of $1.5 million and up to $3 million will be taxed at 5% for residential properties, while that in excess of $3 million will be taxed at 6%. As for non-residential properties, BSD will increase by one percentage point for the portion of the property’s value in excess of $1 million up to $1.5 million.CBRE Research maintains that while these changes are likely to have a marginal impact on the markets, taken together with the other rounds of cooling measures and higher financing costs, it could dampen the buying sentiments in both residential and non-residential properties. The industrial sector is positioned to remain competitive, however, because of its positive yield spread.In the mid- to long-term, the outlook for Singapore’s assets remains positive due to strong fundamentals and expected rental growth. CBRE Research notes that, when interest rates stabilise and market outlook becomes clearer, investment activity could pick up in the latter half of 2023.

The Singaporean government has introduced higher buyers stamp duty (BSD) rates for higher-value properties in residential and non-residential segments from February 15, 2023. The BSD for residential properties exceeding $1.5 million and up to $3 million is set at 5%, with a marginal increase of 6% for properties over $3 million. This is expected to affect 15% of all residential properties. For non-residential properties, the portion of the value of the property in excess of $1 million and up to $1.5 million are taxed at 4%, while that in excess of $1.5 million will be charged at 5%, up from the current rate of 3%. This could have a greater impact, with as much as 60% of non-residential properties affected.

Tricia Song, CBRE’s Head of Research for Southeast Asia, reveals that these new measures are expected to result in a increase of 2% in total costs for buyers. However, she believes that taking into consideration other earlier cooling measures and higher financing costs, it could slow down transaction volumes in both residential and non-residential.

Christine Sun, Senior VP of Research and Analytics with OrangeTee & Tie, believes that the BSD change will likely affect 50% of transactions in the private resale market, with the new sale market seeing a greater effect. CBRE Research, however, sees this higher BSD of 6% only affecting properties with values above $10 million, bringing the overall buying sentiment down – particularly in the mid- to high-end markets.

The higher BSD, coupled with other taxes and higher mortgage rates, will evidently widen the gap between the buyers’ and sellers’ expectations. This could potentially dampen any collective sale deals. Chia Siew Chuin, Head of Residential Research with JLL, Singapore, agrees – further adding that this will futher lead to a short-term slowdown of asset transactions at higher price points.

In spite of these changes, CBRE Research maintains a forecast of a 3-5% growth in average private home prices, along with an expected 7,500 – 8,500 unit sale volume. The outlook of Singapore’s assets remains positive in the longer run due to its strong fundamentals, rental growth Champions Way Condo and stabilised interest rates.

Overall, the higher BSD charges are expected to have a marginal impact on the Singaporean property markets, with effects being even at the higher price points. While it could affect buying sentiment in the short term, the market could look into recovery in the latter part of 2023 when the interest rates stabilise and there is more clarity on the market outlook.