Singapore’s move to double property taxes for foreigners signals that policy makers are growing more cognizant of surging money inflows from wealthy Chinese, even though the higher rates are unlikely to cool home prices.
In new measures announced, foreigners will pay 60% tax on any residential purchase, while the rate for using an entity or a trust was raised to 65%, preventing any circumvention of the rules. Permanent residents and citizens buying their second residential property will also pay more. The additional buyer’s stamp duty, or ABSD, comes on top of a multi-tiered existing tax that all homebuyers pay.
The policy comes after many ultra-wealthy Chinese moved to the city in recent years due to strict pandemic restrictions. Family office assets at Singapore’s banks are on the rise, and costs for everything from apartments to luxury cars and golf memberships are soaring, raising concerns about a widening wealth gap.
The timing of the announcement also comes ahead of a general election due by 2025. With housing a hot issue, authorities raised taxes for buyers of higher-value properties in the latest budget. In March, Singapore increased the threshold for global investors seeking permanent-resident status in an attempt to create more jobs and benefit locals.
Home prices in Singapore are defying a global slowdown that has seen markets cool from Hong Kong to London. Prices could rise as much as 5% in 2023 after gaining 3.2% in the first quarter.
Still, the new rules are unlikely to affect the mass market as foreigners only accounted for 4.4% of private home sales in Singapore last year, according to PropNex Realty and official data. The policy changes will affect about 10% of residential property transactions, according to the government statement.
The Singapore government doesn’t disclose the origins of wealth inflows, but Chinese have been the largest foreign buyer group since 2016 and made up 6.9% of foreign purchases of private apartments last year. That’s the highest proportion since before the pandemic. More than 10% increase in the number of homes purchased by Chinese this year, in tandem with rising supply.
The new measures could therefore be seen as more preemptive than immediate in order to slow down purchases from these foreign buyers, she added. “The more Singapore stands out when there are crises, the more people want to come to Singapore," said United Overseas Bank Ltd.’s Chief Financial Officer Lee Wai Fai.
