Higher Buyer’s Stamp Duty for residential properties valued above S$1m

SINGAPORE – Buyers of residential properties valued at more than S$1 million acquired on or after tomorrow (Feb 20) will have to pay higher stamp duties.

The Buyer’s Stamp Duty (BSD) rate is computed on the purchase price or the property’s market value, whichever is higher. A new 4 per cent BSD will be imposed on the price or value of homes in excess of S$1 million, Finance Minister Heng Swee Keat announced on Monday (Feb 19) during his Budget statement.

For residential properties where the option to purchase has been granted and will be exercised within 3 weeks of the announcement, a “transitional provision” will be granted and current rates will apply.

The existing BSD rates for residential properties are 1 per cent for the first S$180,000, and 2 per cent for the next S$180,000. For properties valued at more than S$360,000, the next S$640,000 will be subjected to 3 per cent BSD. Following Monday’s announcement, a higher rate will apply to the remaining amount in excess of S$1 million.

Property analysts interviewed felt that the revised BSD rates were unlikely to have a significant impact on the recovering property market.

In light of the current market upswing, developers are unlikely to lower their prices as a result to try and attract buyers, they added.

“Given the upsurge in land prices in 2017 and positive market sentiments, private property prices are expected to grow by 5 to 7 per cent in 2018, and a 1 percentage point increase in BSD is unlikely to deter buying demand,” said Ms Christine Li, head of research at Cushman & Wakefield Singapore.

She added: “Given the heightened interest in the residential market, the government has timed the increase of the BSD well, as prices and transaction volumes could return in vengeance after Chinese New Year with more new launches in the pipeline.”

Moreover, as BSD rates are progressive, the effective increase would be less than 1 per cent for most properties above S$1 million but below S$1.5 million, Ms Li noted.

Taking a S$1.5 million property as an example, the current BSD payable is S$39,600. With the change, the new amount payable will be S$44,600 — or just S$5,000 more, said Mr Ong Teck Hui, national director of research and consultancy at JLL.

“As the bulk of residential transactions are below S$1.5 million, the effect of the BSD change on market demand is expected to be mild,” he said.

Nevertheless, buyers of more expensive residential properties are likely to feel the pinch, Mr Ong added. Agreeing, Ms Li felt that the increase in BSD rates would shift demand from buyers towards smaller units or properties in the suburban areas.

Mr Desmond Sim, head of CBRE Research for Singapore and South East Asia, said the higher rates may affect foreign investors more, and deter them from buying luxury properties here in prime locations. Still, he noted that overall, foreign investors pay less in property taxes and duties in Singapore, compared to place such as Hong Kong and Australia.

ZACD Group executive director Nicholas Mak said: “Over time, buyers and sellers will get used to the new BSD (rates) and it would just become a part of the property transaction costs.”