A recent slew of tax changes announced over the past few months is creating ripples in Singapore’s property landscape, with possible runoff effects on some investors, developers and others in the real estate space.
As part of extended cooling property measures, the Government has increased additional buyer’s stamp duties (ABSD) for property buyers — with duties reaching up to 35% for individuals and 40% for housing developers.
The impact of the ABSD increase may drive Singapore developers to shift their focus to smaller plot sizes with fewer units, said Teo Wee Hwee, Partner, Head of Real Estate & Asset Management, Tax, KPMG in Singapore.
In an interview with Real Estate Asia editor-in-chief Tim Charlton, he shared that developers who are unable to sell their properties within the first five years have to pay the ABSD initially waived when they first developed the property. The more units they have, the more difficult it is to sell.
“The risk of not being able to sell all those units is going to be higher. With the increase in ABSD, my view is that while more developers will still continue to develop properties for sale, they are likely to go for a smaller plot land with fewer units.”
He added that the undersupply of homes in Singapore, exacerbated by supply chain disruptions and labour shortages caused by COVID-19, would sustain developers’ demand for land — albeit with lesser focus on larger plots of land. This could see a reprioritisation from mega-sized condominium developments in Singapore for now.
“I would not say it is the end, but the focus might shift to smaller plots,” he said.
On investors’ front, those who are looking to move to Singapore may still find Singapore’s residential properties competitively priced from an overall perspective. He stressed that the duties would impact residential investments and not commercial ones.
“I think Singapore is very attractive as a real estate investment trust (REIT) listing location… As far as tax is concerned, the regime that we have now is already very attractive. But that’s not really the main driving factor.
“For anybody who wants to list their assets in Singapore, as opposed to listing it in their home country, it is really more about gaining international recognition through setting up a fund management platform in an international or regional hub.”
With the ABSD rates to be raised from 12% to 17% for citizens buying their second residential property, and from 15% to 25% for those buying their third and subsequent properties, what can Singaporeans expect in terms of property tax policies over the next few years?
“Currently, anybody who buys properties will still have to pay normal stamp duties of up to 4%, on top of the ABSD that applies for certain individuals depending on the number of properties they are buying… That's kind of strange because whether you're buying a condominium or a good class bungalow, you're still just paying the normal standard of 4% on anything in excess of $1 million.
“I think that's probably going to change as the Government tries to tax wealthy people more. There's still room to collect more stamp duty revenue from buyers of these super expensive properties by just simply increasing the normal buyer’s stamp duty.”