Reduce ABSD for foreigners to buy homes in Marina South

The URA rejected the only bid for Marina South, Marina Gardens Crescent of S$770.5m or S$984 psf per plot ratio (psf per ppr), because it was too low.

Developers may have been cautious about the Marina Gardens Crescent because they were uncertain of housing demand in Marina South.

As we wait to find out if the government receives an acceptable offer in the future for the Marina Gardens Crescent, it may be worthwhile to make efforts to increase demand for the property.

Lack of schools in the area could be a factor that hinders locals from buying future homes in Marina South. Developers may also be concerned that the demand for housing from investors and foreigners, who aren’t Singapore permanent residents (SPRs), could be low.

Marina Gardens Crescent, a plot that can be developed for both residential and commercial purposes, is now on the Reserve List of the H1 2024 Government Land Sales Programme (GLS). Developers are invited to apply for the sale of this site which could generate 775 private houses, at a price acceptable to the government.

In order to revive foreign interest in buying homes, the government may consider lowering the Additional Buyer Stamp Duty (ABSD), which is charged on foreigners who do not hold Singapore Permanent Resident status. This could be done for certain areas. Marina South, Sentosa, and perhaps parts of Downtown Core are examples of areas that may not be as popular for locals to buy homes.

In 2023, the number of foreigners who bought private homes outside of SPR fell by about one third compared to last year.

According to URA data on February 14, the number caveats filed by non-SPR buyers of private homes has decreased significantly. The blame is attributed to the increase in ABSD for non-SPR buyers.

Since ABSD’s introduction in December 2011, the ABSD rate has increased dramatically from 10% to 60%. The ABSD rate was last raised in 2018, from 30% to 60%, effective April 27, 2023.

Some non-SPR foreigners pay no ABSD. The free-trade agreement with Singapore allows permanent residents and nationals of Iceland, Liechtenstein and Norway to enjoy the same stamp duties as Singaporeans.

Non-SPRs such as those from China, Indonesia, and India, however, pay 60% ABSD on the purchase of homes in Australia.

Locals who buy their first home should be favored by policies that govern the private housing markets.

A large number of foreigners buying private homes in the country can also distort markets and make it difficult for locals who want to own a home.

Foreigners who do not hold SPR passports can still benefit from buying a home in Singapore.

Singapore is a global leader in talent attraction. Attracting top talent to Singapore is good for the economy. When non-SPR internationals are not faced with onerous barriers to buying homes, they can attract global talent here.

A home in Singapore can also help foreigners who are not SPRs to become more familiar with Singapore. Some of these non-SPR foreigners could then deepen their Singapore connections and become SPRs, or even Singapore Citizens.

Some foreigners who are not SPR holders may also rent out their home here. The availability of rental properties for both locals and overseas students or workers who are working in Singapore, as well as those from other countries looking to rent an apartment, provides tenants with a wide range of choices.

Read more here on new condo in Jurong Lake District: Sora Condo

Third, foreigners who do not hold SPR visas and buy property here also contribute to the tax revenue.

All homeowners are responsible for paying property taxes and transaction taxes when they buy a house. The rates of Buyer’s Stamp Duty are progressive. Residential property tax rates for non-owners are higher than those for owners, and for more expensive properties.

Budget 2024 brought some good news to homeowners, homebuyers and housing developers. There are many reasons why ABSD rates should be lowered for foreigners who do not hold SPR visas and buy homes in certain areas. The government could announce this change outside Budget 2024.

If ABSD is lowered for foreigners who are not SPRs in certain areas, it could make these areas hotspots of home purchase by foreigners. Even if ABSD is 30%, foreigners who are not SPRs could still buy homes at a moderate pace.

Singapore’s ability to show its openness towards foreigners at a time when many other countries are becoming more inward looking can be demonstrated by lowering ABSD rates on selected areas for foreigners who do not hold SPR. This can increase tax revenue. This can also accelerate the pace of growth in areas like Marina South.

Having non-SPRs account for less than 5 percent of all private home sales, excluding ECs should not distort this market.

Locals can still achieve private home-ownership goals as long as government continues to ensure an adequate supply.

 


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