Minister for National Development: New cooling measures will ease housing price pressures for owner-occupiers

Foreign buyers continue to show strong interest in Singapore residential property, and investment by both local and foreign buyers is expected to rise. The government therefore had to introduce property cooling measures pre-emptively to stabilise the market and ease price pressures on owner-occupiers before conditions worsen.

Minister for National Development Desmond Lee said that raising the Additional Buyer’s Stamp Duty (ABSD) aims to restore stability and resilience to the residential property market, while ensuring private housing remains affordable for owner-occupiers.

In a media interview, he noted that foreign investors accounted for 7% of total residential property transactions in the first quarter of this year.

This proportion stood at around 20% in 2011, before falling to 3% to 4% over the past few years. However, between 2017 and 2019, the share of foreign investors rose to around 6%. The further uptick in the first quarter of this year indicates that foreign buyers are beginning to return.

“We observed that foreign buyers continue to have a very strong interest in Singapore residential property as an asset class. If we did not take pre-emptive measures, residential property investment by both local and foreign buyers could increase, which would add pressure on Singaporeans looking to buy homes, especially owner-occupiers.

“Given this, the two key objectives of our cooling measures are to prioritise housing supply for Singaporeans buying for owner-occupation, and to pre-emptively dampen investment demand from both local and foreign buyers.”

In late April, the government announced a fresh round of property cooling measures late at night, raising the ABSD on residential property purchases by three to 30 percentage points. Among them, foreign buyers saw the steepest hike, with the ABSD rate doubling from 30% to 60%.

Inflow of Local and Foreign Investors Expected; Pre-emptive Move Needed to Dampen Investment Activity

Mr Lee said that the two rounds of property cooling measures rolled out in December 2021 and September last year, alongside an evolving global economy and rising interest rates over the past year and a half, have impacted demand, showing signs that private home price growth was moderating. However, private home prices rebounded in the first quarter of this year, climbing 3.3% quarter-on-quarter.

Strong demand has stemmed mainly from Singaporeans buying for owner-occupation, driven by factors such as construction delays caused by the Covid-19 pandemic and a post-pandemic preference for larger living spaces. Furthermore, both local and foreign buyers have been actively investing in the local property market, making it necessary for the government to cool the market.

Based on 2022 transaction data, this round of ABSD adjustments is expected to impact about 10% of residential property transactions. While this figure may appear modest, Mr Lee pointed out that 10% reflected last year’s figures, and with local and foreign investors expected to increase going forward, it was essential to rein in investment activity early.

Under this latest round of cooling measures, Singapore Citizens purchasing their second and third (or subsequent) residential properties face an ABSD hike of three to five percentage points. For Permanent Residents (PRs) buying their second and subsequent homes, ABSD rates have been raised across the board by five percentage points.

Mr Lee noted that Singaporeans and PRs are sensitive to ABSD adjustments, and this increase is believed to be sufficient to dampen local investment demand. He also dismissed concerns that this would hinder HDB upgraders from buying private property, as many sell their first home before purchasing the next, and thus are not subject to the higher ABSD.

Latest Cooling Measures Do Not Affect Property Developers

This round of cooling measures targets buyers and does not affect property developers. However, developers remain subject to a 40% ABSD rate, comprising a 35% remittable component subject to meeting specific conditions, and a 5% non-remittable component.

Mr Lee emphasised that it is crucial for developers to continue acquiring land and building homes to maintain housing supply for local owner-occupiers.

Since its introduction in 2011, ABSD has undergone four rounds of increases. Mr Lee said the government adopts a two-pronged approach by ramping up supply and curbing speculative demand to stabilise the market, preventing property prices from outpacing economic fundamentals and hurting Singaporeans' interests.

As for whether cooling measures will be eased or further tightened, the government will closely monitor market trends and prevailing demand conditions before deciding on subsequent moves.