OPINION: Is it time to review ABSD rates?

By Elizabeth Choong
/ EdgeProp Singapore |
Attractive discounts gave a boost to demand for The Residences at W Singapore Sentosa Cove. (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) – There was an upward adjustment of Additional Buyer’s Stamp Duty (ABSD) rates for residential properties that took effect from April 27 last year. The largest increase was for foreign buyers, who saw their applicable ABSD rate doubled from 30% to 60% of purchase price or market value of the property, whichever is higher. Furthermore, the applicable ABSD rate for foreign buyers does not depend on the number of residential properties they own, unlike Singaporeans and Singapore permanent residents (PRs),
It has been slightly more than a year since the increase in ABSD rates, so we conducted a review to assess the impact of the rate increase on demand and prices for condos, particularly those located in the Core Central Region (CCR).

Fewer purchases by foreign buyers but PRs undeterred

The sharp increase in ABSD rates for foreigners has dampened demand from this group of buyers. The number of condos purchased by foreign buyers fell from 923 units in 2022 to 618 units last year. From May last year to the time of writing, only 328 condo units in Singapore have been sold to foreign buyers.
The decline is even more pronounced when comparing the number of units purchased by foreigners to the total number of transactions. In 2022, foreign buyers accounted for 4.7% of the total sales transactions for condos. Last year, the percentage dropped to 3.5% before declining further. Since May last year, foreign buyers represented a mere 1.8% of total sales transactions.
PR buyers seem to be less affected by the latest adjustment in ABSD rates. PR buyers purchased 17.7% of the condo units sold in 2022. The percentage dipped to 17.3% last year and slipped to 17% based on the transactions that took place since May last year.
There is minimal impact on demand for PR buyers because of the smaller increase in ABSD rates for them. The ABSD rate was unchanged for PRs buying their first property and increased by only 5 percentage points for those purchasing their second or subsequent properties. In contrast, the rate increased by 30 percentage points for foreign buyers regardless of the number of properties purchased.
It is notable that nationals and PRs of Iceland, Liechtenstein, Norway, and Switzerland, as well as nationals of the USA, are accorded the same ABSD treatment as Singaporeans due to free trade agreements signed between the aforementioned countries and Singapore.
Buyers from the USA and China have consistently been among the top five non-Singaporean buyers of condos in Singapore. While buyers from the USA are subjected to the same ABSD rates as Singaporeans, buyers from China are not. From 2018 to 2022, the number of foreign buyers (excluding PRs) from China surpassed those from the USA.
However, the trend started to reverse after the increase in ABSD rates last year. In 2022, Chinese foreign buyers snapped up 266 condo units while their American counterparts bought 251 units. Since May last year, foreign buyers from China have purchased 41 condo units, while those from the USA have bought 172 units.
In contrast, demand from PRs from China was stronger. They purchased 1,117 condo units in 2022 and 906 units since May last year.

Double whammy for Chinese foreign buyers

The arrest of 10 foreigners in August last year and the subsequent clampdown on money laundering by the Singapore government could have contributed to the decline in buyers from China. The 10 foreigners are originally from China.
The number of condo units bought by the Chinese (including PRs) dropped from 1,548 units in 2018 to 1,124 units last year. Since the increase in ABSD rates, the number of units purchased by the Chinese has fallen to only 947 units.
The decline is more stark if PRs from China are excluded. Non-PR foreign buyers from China purchased 525 condo units in 2018, representing 33.9% of the total number of condo units bought by buyers from China. The number of transactions fell to 184 units (16.4%) last year and 41 units (4.3%) since May last year.
Demand from Chinese foreign buyers is expected to decline further. This year, foreign buyers from China purchased only eight condo units, which represents only 2.7% of all condo units purchased by all buyers from China.

Impact on demand for CCR condos

Since the adjustment to ABSD rates, foreign buyers represent a smaller percentage of buyers for CCR condos. In 2022, 4,032 condo units in the CCR were sold, and foreigners accounted for 12.1% of all sales transactions in that region. The percentage fell to 6% based on sales transactions of CCR condos from May last year to this month.
In contrast, more PR and Singaporean buyers are snapping up CCR condos, which has helped mitigate the slowdown in demand from foreign buyers. PRs bought 15.6% of the CCR condo units sold in 2022, and this increased to 18.8% after May 2023. In 2022, Singaporean buyers accounted for 72.2% of all sales transactions for CCR condos, before increasing to 75.2% after the ABSD adjustment.
Despite the adjustment in ABSD rates, the resale market for CCR condos is still active. In 2022, CCR condos represented only 18% of the total resale volume, but this increased to 21% this year. The attractive discounts offered for Cuscaden Reserve and The Residences at W Singapore Sentosa Cove may have boosted demand for CCR condos this year.
Source: EdgeProp Market Trends (as at 23 May 2024)
In March, Cuscaden Reserve was relaunched at prices starting from $2,900 psf, which represented a 20% discount from the average transacted prices. Last month, The Residences at W Singapore Sentosa Cove was relaunched at prices starting from $1,648 psf, which is 40% below its peak price.
According to caveats lodged with URA at the time of writing, 78 units in Cuscaden Reserve and 46 units in The Residences at W Singapore Sentosa Cove have been sold this year. Thus far, these two developments are the best-selling CCR condos in the resale market for this year.

Average prices for CCR condos still rising

Prices for resale CCR condos continued on their upward trajectory on the back of strong demand. The average price for resale condos in the CCR was $2,187 psf in 2022 and rose by 0.8% y-o-y to $2,204 psf last year. At the time of writing, the average price is $2,293 psf this year, which represents a 4% increase compared to the average price for last year.
Likewise, the average price for new CCR condos is also on the rise. Last year, the average price grew by 6.1% y-o-y to $3,016 psf. At the time of writing, the average price for new CCR condos has increased further to $3,179 psf, representing a 5.4% increase from last year’s average price.
Source: EdgeProp Market Trends (as at 23 May 2024)

RCR condos finding favour with foreign buyers

Condos in the CCR saw a decline in demand from foreign buyers after the adjustment in ABSD rates. In 2022, foreigners bought 923 condo units, and 52.9% of these units were located in the CCR. After the increase in ABSD rates, CCR condo units represented 52.4% of the 328 condo units purchased by foreign buyers.
Demand from foreign buyers has shifted to condos in the Rest of Central Region (RCR). In 2022, 30.8% of the condo units purchased by foreign buyers were in RCR. After the increase in ABSD rate, this increased to 33.5%. The percentage for condos in the Outside Central Region (OCR) dipped from 16.4% in 2022 to 14% after the ABSD adjustment.
This could be driven by the lower average price for RCR condos. At the time of writing, the average price for CCR condos (based on all transactions) was $2,481 psf, which is $357 psf higher than the average price of $2,124 psf for their RCR counterparts. A lower price would also mean a lower ABSD since the amount paid for the stamp duty is based on the purchase price or market value of the property.
Source: EdgeProp Market Trends (as at 23 May 2024)

Developers have less appetite for CCR sites

The decline in foreign buyers, coupled with weaker economic conditions, could have affected developers’ interest in CCR sites. The recent tenders for several government land sales (GLS) sites in CCR have attracted fewer bids and lower bid prices.
The tender for the GLS site at Marina Gardens Crescent closed in January with only one bid, and the site was not awarded because the submitted bid of $984 psf ppr was considered too low by URA.
The tender for the Orchard Boulevard GLS site fared better with four bids and was awarded in February. However, the top bid of $1,617 psf ppr is approximately 32% lower than the $2,377 psf ppr paid six years ago for the nearby site of Cuscaden Reserve.
The tender for the Zion Road (Parcel A) GLS site closed with only one bid of $1,202 psf ppr and was awarded last month to a consortium comprising City Developments Ltd and Mitsui Fudosan. The consortium plans to build a mixed development comprising approximately 740 residential units for sale, 290 rental apartment units, and a retail podium.
This month saw the Holland Drive GLS site being awarded to the highest of three bids. A consortium comprising CapitaLand and UOL emerged as the top bidder with a bid of $1,285 psf ppr, which is significantly lower than the $1,888 psf ppr paid for the nearby site of One Holland Village. Two 40-storey condo towers with 680 units are slated to be built on the newly awarded site.
Source: EdgeProp LandLens (as at 23 May 2024)


The increase in ABSD rates has had an impact on demand for condos by foreign buyers. The notable decrease in demand from Chinese foreign buyers stands out due to the significant rise in ABSD rates for foreign buyers and the recent crackdown on money laundering by the Singapore government. The number of condo units bought by foreign buyers from China fell below their American counterparts for the first time last year. Some foreigners have shifted their attention to RCR condos.
The average price for CCR condos continues to rise, which could be attributed to the continued demand from PRs and Singaporeans. However, the weaker economic conditions in Singapore may put a damper on demand from Singaporeans. The Ministry of Trade and Industry announced that Singapore’s GDP grew by 2.7% y-o-y in the first quarter and is forecasted to grow by 1% to 3% this year. Geopolitical tensions in the Middle East and the conflict in Ukraine have disrupted global supply chains and trade.
More sales launches for condos in CCR can be expected because the tenders for three GLS sites in CCR were awarded this year. Attractive pricing seems to be the key to driving up demand for CCR condos. Generous discounts offered for Cuscaden Reserve and The Residences at W Singapore Sentosa Cove have given a boost to demand for these two developments.
An abundance of unsold condo units in CCR might be brewing. There will be more CCR condos units from the recently awarded GLS sites but the weaker economy might dampen demand. Reducing transaction costs for foreign buyers could be a way to boost demand and hence prevent an oversupply of CCR units. A tiered ABSD rate for foreign buyers, mirroring that for PRs and Singaporeans, should be considered.
Check out the latest listings for The Residences At W Singapore Sentosa Cove, Cuscaden Reserve properties

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