SINGAPORE - The hike in the additional buyer’s stamp duty (ABSD) for property has resulted in a steep fall in demand from foreigners, with analysts expecting the dampening effect to persist for an extended period.

In January 2023, foreign buyers accounted for 5 per cent of non-landed private resale home transactions, before falling to 3.7 per cent in May after the ABSD for foreigners was increased from 30 per cent to 60 per cent on April 27, noted PropNex Research.

The figure fell further to 1.2 per cent in September, and, by October, had slipped to 1.1 per cent, or nine transactions.

PropNex head of research and content Wong Siew Ying said that of the nine transactions linked to foreigners, seven involved buyers from the United States, and one each from Switzerland and Oman.

Ms Wong expects Singaporean and Singapore permanent resident (PR) buyers to continue to dominate resale condo sales.

She said that according to Urban Redevelopment Authority (URA) Realis data, foreigners from non-exempted jurisdictions accounted for 104 out of 165 resale condo transactions by foreigners from January to April, compared with 42 transactions from May to Nov 24.

Under existing free trade agreements, buyers from the US, Iceland, Liechtenstein, Norway and Switzerland do not need to pay ABSD for their first residential home in Singapore.

They have to fork out the extra stamp duty for subsequent residential properties.

“Overall, we would expect the punitive ABSD rate for foreigners to weigh on the sales of high-end homes,” said Ms Wong.

However, she added that anecdotal feedback indicates that there will still be some big-ticket property purchases, “perhaps among foreigners holding a US passport”.

“Foreigners who are looking at long-term residency in Singapore may also consider buying for their own use,” she said.

The higher ABSD was introduced as part of cooling measures to promote a sustainable property market, the Government said in April.

Ms Wong said fewer resale units were sold to foreigners in the core central region (CCR) and outside central region after the ABSD hike.

The number of units sold to foreigners in the rest of central region ticked up slightly.

Ms Tricia Song, CBRE head of research for Singapore and South-east Asia, said: “The largest impact obviously was in the CCR segment, given that traditionally it has the highest foreigner ratio.”

The number of foreign buyers in the CCR fell from 162 units in the first three months of 2023, to 39 units from July to September.

Six luxury apartments with quantums of $10 million and above, from developments such as Nassim Park Residences and Ardmore Park, were transacted between July and September.

This compares with 19 luxury apartments sold in the previous three months, said Ms Song, who expects the dampening effect on the luxury residential sector to persist in the first half of 2024.

She said that besides the impact of the property cooling measures, other factors like macroeconomic uncertainties and elevated interest rates could also impact sales in the luxury sector.

“Activity could pick up in the second half of 2024 when the economy picks up more confidently and interest rates stabilise.

“Prices are unlikely to fall significantly, with limited new supply. In the longer term, Singapore remains an attractive safe haven for most investors,” added Ms Song.

Market observers said Singaporean buyers are poised to take centre stage in prime markets, as seen in the preview sale of Watten House in Bukit Timah on Nov 18.

More than half of its 180 units were snapped up, at an average price of $3,230 per square foot.

Based on transactions done by PropNex agents, the majority were Singaporean buyers and Singapore permanent resident buyers, with only one non-PR foreign buyer from the US, said Mr Dominic Lee, head of luxury team at PropNex.

Singapore citizens buying their second residential property currently have to pay 20 per cent ABSD, and 30 per cent for their third and subsequent property.

PRs pay 5 per cent ABSD for their first residential property, 30 per cent for their second, and 35 per cent ABSD for third and subsequent properties.

Mr Lee said the transacted prices at Watten House ranged from $3.06 million to about $14.5 million, according to URA Realis data.

The purchases at the development showed local buyers have the liquidity to pick up prime, luxury units, he added.

“In 2024, we expect Singaporean buyers and Singapore permanent residents to continue to account for the majority of home sales, across the different sub-markets,” said Mr Lee.

Impact of ABSD

Ms Wong said foreigners accounted for 22.9 per cent of purchases of new sales and resale non-landed properties in December 2011, but the figure fell sharply to 7.3 per cent in January 2012, after the ABSD was first introduced on Dec 8, 2011.

She added that for the rest of 2012, the proportion of foreign buyers stayed below 10 per cent.

PropNex’s Mr Lee said the ABSD has been effective in bringing down the number of homes sold to foreigners.

He noted that between October and December 2011, foreigners purchased 1,236 non-landed new and resale private homes.

The highest number of such sales to foreigners in a single quarter was 634 transactions, between April and June 2012.

Mr Lee said foreign buyers used to return to the market a few months after each ABSD revision.

But with the soaring property prices seen in recent years, many foreign buyers have been hesitant to pay the 60 per cent rate.

Still, sales and buying interest will depend on the specifics of a project and whether it is priced sensitively, Mr Lee said.

If the project is good and well located, and the pricing is right, then it should still do well, he added.