Foreigners buying condos dropped by 71% since ABSD raised

The additional buyer’s stamp duty (ABSD), a tax hike that was introduced in 2013, has proved to be effective at dampening the demand from foreign investors.

As of April 27, only 306 condo units had been purchased by foreigners in the period May 2023-April 2024 after ABSD rates were raised from 30% to 60%.

Comparatively, foreigners bought 1 064 condo units between May 2020 and April 2023. That’s a total of 5.4 per cent. This number fell to just 1.8 percent from May to April of 2024.

Analysts pointed out that the decline in foreign purchasers was most pronounced in the CCR, the core central area (CCR), where foreign investors are more likely to be interested.

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In the twelve months preceding the ABSD rise, foreigners accounted for approximately 14 per cent (or a total of 61 condos) sold in the CCR. In the past 12 month, this number dropped to approximately 6 percent.

Urban Redevelopment Authority Data showed that after the ABSD rise, fewer units were traded. The CCR saw a 36.6 percent drop in sales volume, going from 4,215 up to 2,672 units.

The number and average price of luxury apartments in the CCR priced above $10 million fell from 73 to 50 units between 2022 and 2023.

Many investors do not have to sell their properties at a discount and instead prefer to rent them out. Prices have held firm despite lower transaction volumes.

Luxury home sales could also have slowed down due to a longer sales process and more stringent due diligence by financial institutions for large-ticket purchase.

More foreigners are making inquiries about luxury residential non-landed property or have committed to buy it.

Some are of South Asian descent and hold US citizenship. The foreign buyer of luxury non landed private residential property today is more interested in value-for money deals than emotional value.

ABSD is not payable by buyers of their first home in Singapore who are from the US or Switzerland, Iceland, Liechtenstein Norway, and Liechtenstein.

The ABSD has caused a dramatic drop in Chinese buyers of luxury goods.

Chinese nationals topped foreign buyers for new and resale condominiums in CCR between 2020 and 2021 with 112 (and 155) caveats, respectively. PropNex Research & URA data show that the number of Chinese buyers dropped to 113 in 2030 and 93 in 2020.

A caveat lodged at the Singapore Land Authority protects a buyer by securing a property.

American buyers top the list of foreign purchasers on the CCR. 110 caveats were lodged in both 2023, and 2022. In 2020 and 2021 there had been 59 and 91.

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URA’s latest data, published on April 26, showed that total private residential volume dropped by 2,4% in the first 3 months of 2024. This was the 3rd consecutive quarter that sales were down.

In the period January to march 2024, there were 43 foreign transactions, with 22 being from US buyers. The rest were from China, Switzerland, Norway, and five other countries. In 11 of the transactions, there is no information about buyers’ nationality.

Between January and March of 2024, foreign buyers accounted 1,2 percent for new condo units and those sold at resale prices. It’s down from 1.7 percent during the fourth quarter in 2023. The lowest figure ever since 1995. Due to a drop in foreign demand, the majority of home sales will come from local buyers.