Purchases of private flats by foreign buyers down 50% after new tax was imposed

SINGAPORE: A higher property tax for foreigners imposed in April has already resulted in a plunge in foreign buyers. The government announced on the evening of April 26 that stamp duties for second-home buyers and foreigners purchasing private property would be increased to cool the market.

Effective the next day, the tax rate paid by foreigners doubled, going from 30 per cent to 60 per cent, the highest property tax rate in the world. Bloomberg reported on Tuesday (June 5) that in May, 57 private apartments were purchased by foreign buyers, a 50 per cent decrease from the previous month, based on Savills Singapore’s analysis of data from the Urban Redevelopment Authority.

The new tax rate makes it much more expensive for foreigners to move to Singapore.

For example, a $5 million property in Singapore purchased by a foreigner would require them to fork over a whopping $3.25 million more due to the new tax rate.

In comparison, the property tax rate for foreign buyers in Hong Kong and Vancouver is 29 per cent, while in London, Melbourne, and Sydney, it’s only around 14 per cent. The property tax rate of 4.3 per cent in New York is surprisingly low.

National Development Minister Desmond Lee explained that the higher property tax rate was a preemptive move from the government. Without it, “we may see investment numbers, both by locals and by foreigners grow, and that will add stress to Singaporeans who are looking to buy residential property”.

Ms Christine Sun, the senior vice president of research and analytics at OrangeTee & Tie, was quoted in Reuters as calling the higher tax rate a “freezing measure” for foreign buyers. “Luxury home sales may experience more impact and a temporary pullback in demand from these buyers.”

Nevertheless, she told Reuters, “From past experience, demand will usually rebound after a few months as supply remains low and those who need a home will still need to buy one eventually.” /TISG

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