Singapore’s real estate market adapts to increased ABSD rates

Savills’ Alan Cheong offers insights on attracting foreign buyers and navigating challenges.

In response to the increase in Additional Buyer’s Stamp Duty (ABSD) rates recently implemented by Singapore, property sales have become more challenging for foreign buyers.

In an interview with the Singapore Business Review, Alan Cheong, executive director of research and consultancy at Savills, explained how realtors, developers, and landlords can navigate these changes and continue attracting foreign buyers to the Singapore property market.

Cheong said there is little that developers can do to directly counter the 60% ABSD levied on foreigners. Instead, they should focus on advising ultra-high-net-worth individuals to obtain permanent residency or Singapore citizenship, thus reducing their ABSD to 5% for their first property purchase, he said.

Cheong highlighted that the market remains open to foreign professionals contributing to Singapore’s economy. While high-net-worth individuals tend to focus on luxury properties in the core central region, professionals are more likely to target mass-market properties. These buyers can work in Singapore and await permanent residency, after which they will only face a 5% ABSD.

The expert also noted that citizens looking to buy multiple residential properties may face challenges due to the increased ABSD rates.

However, they can still invest in the real estate market by exploring alternatives. “You just need not confine yourself to the private sector, the private residential sector,” Cheong said.

“There are conservation shophouses, there are strata title offices or whole office blocks… retail. There are also industrial (properties) and hotels. So there’s no shortage of investable sectors in the sub-sectors within the Singapore real estate market,” he added.

Long-term implications of the ABSD rate hike may lead to a decrease in the supply of rentable properties, increasing the cost of doing business in Singapore.

Cheong questioned the rationale behind preventing Singaporeans from investing in real estate, particularly as the Total Debt Service Ratio policy is already in place to screen out buyers who may overstretch their finances.

Developers in the rental and EC markets, which are expected to benefit from the hike, should adjust their strategies accordingly. As developers must sell all units within five years or face additional taxes, they can focus on selling to buyers who, in turn, can benefit from the constrained market for leaseable properties in the coming years.

As the property market adjusts to these new policies, Cheong emphasized that a variety of investment opportunities remain in Singapore’s real estate market, despite the challenges posed by increased ABSD rates.