If you believe that the amount you are paying for your home or flat is merely the price of that property, then you are wrong. There are various other aspects that add to the amount that we pay for the property. This amount includes home loan payments as well as Buyer’s Stamp Duty (BSD).
This does not end here. If you are a foreigner who is planning to buy a property in Singapore, then you have to pay Additional Buyer’s Stamp Duty (ABSD). This additional amount is always paid while purchasing property in Singapore.
What is Additional Buyer’s Stamp Duty (ABSD)? Why is this additional amount charged? Does it affect property market? This article will highlight all such details.
Additional Buyer’s Stamp Duty (ABSD) in Singapore — An Overview
As mentioned before, Buyer’s Stamp Duty (BSD) is paid while purchasing a property in Singapore. There is nothing buyers can do to avoid this tax. BSD rates are directly proportional to the value of the property. There is a slight difference between the BSD rates for residential and non-residential properties. Buying an expensive property will cause a surge in this tax.
But this tax increases for foreign buyers or Singaporean buyers with multiple properties as Additional Buyer’s Stamp Duty (ABSD).
According to this tax, Singapore citizens buying a second residential property have to pay an ABSD rate of 17%, Singapore citizens buying more than two residential properties have to pay an ABSD rate of 25%, and foreigners buying any property in Singapore have to pay an ABSD rate of 30%.
Only those Singaporean citizens are exempted from this tax who are buying their first property in Singapore. They don’t have to pay any ABSD at all.
Does ABSD Increase Property Price?
Make no mistake, ABSD is only meant for the buyers who fall under this category. All the ABSD rates are charged from the buyers without increasing any additional value of the property. If you are paying an ABSD of 25%, then this does not mean that this percentage of amount is adding to the value of your property.
This tax is not intended to prevent buyers from buying multiple properties in Singapore. This is the aspect that refrains most of the Singaporean buyers and foreigners from buying a lot of properties in Singapore.
Effect of ABSD on Property Market
As stated earlier, the core purpose of this property tax is to prevent foreigners, PR, and Singaporean citizens from buying too many properties.
The recent increment in ABSD rates has further changed the property dynamics. This tax was imposed first in 2011 to ensure that Singaporean citizens and especially foreigners don’t buy too many properties in Singapore. Imagine being a foreigner and having to pay a 30% additional amount on the actual property purchase. This is surely something that makes the investors think about making their next move in the property market.
Talking about the effects of ABSD on the property market, there has been a massive decrement in the property purchase pattern of buyers since 2011. This tax has maintained a stable buying graph, especially after the recent increment in ABSD rates.
Now with hefty ABSD rates and minimal buying preferences of the buyers as a result of this tax; we will witness a moderate volume of property transactions as long as these tax rates are applicable. Ordinary Singaporeans already find it difficult to pay their home loans. It was the foreign investors and rich Singaporeans who were buying too many properties. ABSD has brought a decrease in this trend.