City-state takes action to cool housing boom partly driven by mainland Chinese buyers.
Singapore has doubled its tax on private property purchases by foreigners to 60 per cent in an unexpected move to cool a housing boom that has in part been driven by buyers from mainland China.
Foreigners who have secured permanent residency in Singapore will only pay a stamp duty of 5 per cent, but they will pay 30 per cent — up from 25 per cent — if they buy a second residential property. Entities or trusts purchasing any residential property will now pay a rate of 65 per cent, up from 35 per cent.
Singapore’s minister for national development Desmond Lee called the increases “pre-emptive measures” to damp local and foreign investment demand during a renewed spike in interest. Singaporean citizens, who pay minimal stamp duty on house purchases, will now be prioritised, he said. Foreign buyers account for a small proportion of overall property sales.
Thursday’s move is the latest attempt by Singapore’s government to rein in property prices amid growing concern that locals are being priced out of the housing market and high prices could make Singapore less attractive as an international financial centre. The demand for property in the Asian city-state, which attracts investors for its stability and low taxes, has made it an outlier compared with other global cities including London and New York, where house prices have fallen on the back of rising interest rates.
The government’s move comes ahead of first-quarter property data due to be released on Friday. Early estimates forecast foreign buyers comprised 7 per cent of purchases in the first three months of this year, up from 4.7 per cent in 2022. Prices of private homes in Singapore increased by 3.2 per cent in the first quarter of this year, up from a 0.4 per cent increase in the previous quarter, according to the Urban Redevelopment Authority’s flash estimates released this month.
Last year, prices rose 8.6 per cent, on top of a 10.6 per cent rise in 2021. Chinese buyers accounted for 25 per cent of foreign purchases of condos in Singapore in 2022, according to government data. People from mainland China have been the biggest group of foreign buyers in Singapore for more than a decade, though they still make up a small fraction of total private property sales.
Shares in Singapore property developers, including City Developments and UOL, were set for their worst trading day in more than two years on Thursday. Citigroup in a note called the latest measures “draconian” and said there would be a temporary “knee-jerk negative impact on residential developers”.
Property experts said the move might not have an immediate effect on the very wealthy.
“I am not sure even this will affect the very top end of buyers, especially those that have become permanent residents from places like mainland China, Hong Kong and Taiwan,” said one luxury real estate agent with clients from China, who asked to remain anonymous because of sensitivities involved.
“I was definitely caught off guard,” said Christine Sun, head of research and consultancy for real estate group OrangeTee & Tie, adding it felt like “more a freezing than a cooling” measure.