14 January 2013 Page 3 of 9
Singapore Property Sector
Taking the Wind out of the Sails
Equalizing the ABSD differential.
In our report “
A Theory of Relativity
”dated 30 Oct 2012, we wrote about the relatively lower transactioncosts for buying Singapore private property after Hong Kong introduceda 15% Buyer’s Stamp Duty of its own for non-HK resident homebuyers,when at that time, Singapore’s ABSD was at 10% for foreigners.Following the Singapore government’s latest round of coolingmeasures, the ABSD for foreign homebuyers has now been raised to15% to match that of Hong Kong’s, effectively removing that immediatecost advantage.
But is it necessary to raise it for foreigners?
Looking at the caveatslodged for all non-landed private property transactions in 2012, onewould notice that the percentage of foreign non-PR homebuyers hadremained fairly stable at 7% in each quarter last year. They alsoaccounted for less than 10% of the transactions for properties pricedbelow SGD18,000 psm (or SGD1,670 psf). Hence, the higher ABSDimposed on foreign buying could have been unnecessary, in our view.The imposition of the 7% ABSD on Singaporeans on their second homepurchase and 10% for third and subsequent purchase is to beapplauded, on the other hand, to ensure that home prices are notexcessively driven by investment demand and to maintain affordabilityfor first-time homebuyers.
Fig 4: Non-landed private property transactions in 2012
Fig 5: Foreigners most active in >SGD18,000 psm segment
Source: URA REALIS
Source: URA REALIS
Which segment bears the brunt of the measures?
In our view, theprivate property market is likely to undergo another deep freeze overthe next 2-3 months as developers and homebuyers grapple with themagnitude of the latest measures. In our view, the mass marketsegment will be the worst hit as marginal investors will be forced to thesidelines, with underlying demand coming mainly from first-timehomebuyers. The high-end segment which had enjoyed a “mini-revival”in the last quarter is likely to go into intermission as well, but we thinkthat longer-term fundamentals will prevail, and the wealthy and savvyinvestors will continue to see value in the segment.
2012Q1 2012Q2 2012Q3 2012Q4
Singaporean Singapore Permanent Residents (PR) Foreigner (NPR) Company
less than$5,000psm> $5,000 to$8,000psm> $8,000 to$12,000psm> $12,000to $15,000psm> $15,000to $18,000psm> $18,000to $21,000psmmore than$21,000psmSingaporean Singapore Permanent Residents (PR) Foreigner (NPR) Company