Property Unpacked: BSD and ABSD, the industry's most-dreaded acronyms

Housing developers received a reprieve with the recent changes to ABSD. (Photo: Samuel Isaac Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) – The Singapore government aims to keep the property market stable, especially in the residential sector, through a number of cooling measures which include Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD). The government adjusts the rates of these two stamp duties periodically based on prevailing market conditions.

What is BSD?

BSD and ABSD are payable by buyers when they purchase a property in Singapore. However, BSD is payable for all property types, while ABSD is payable for residential properties only. Furthermore, the BSD rates differ for residential and non-residential properties.

The rate for BSD is calculated based on the purchase price or market value of the property, whichever is higher. The rate also increases as the value of the property increases. This means that buyers of more expensive properties have to pay more BSD.

Based on prevailing rates, buyers of non-residential properties that are above $3 million pay less BSD compared to buyers of residential properties of the same price. For example, buyers of a residential property that costs $4.5 million will have to pay $209,600 in BSD, but only $194,600 if it is a non-residential property. This translates to a difference of $15,000 in BSD payable.

Impact of ABSD increase

ABSD is payable when a buyer purchases a residential property. Unlike BSD, the applicable rate does not depend on the purchase price or market value of the property but is based on the nationality of the buyer and the number of residential properties in Singapore that the buyer owns at the time of purchase.

In line with the government’s policy to encourage homeownership among Singaporeans, ABSD is waived for Singaporeans buying their first residential property, but they will have to pay ABSD if they purchase more than one residential property.

Furthermore, the ABSD increased by 3 percentage points for the second property purchased and by 5 percentage points for the third and subsequent properties purchased with effect from April last year.

However, the increase for Singaporeans is minimal compared to the increase for foreigners. The ABSD rate doubled to 60% for foreigners, which led to a significant decline in the number of residential properties purchased by foreigners after the rate increase took effect. In 2022, foreigners purchased 923 units before declining to 619 units last year, representing a mere 3.5% of total sales.

Foreign buyers should note that nationals and permanent residents of Iceland, Liechtenstein, Norway, or Switzerland, as well as nationals of the USA, will be accorded the same stamp duty treatment as Singaporeans because of the Free Trade Agreements that Singapore has signed with their respective countries.

Recent change in ABSD for developers

During Budget 2024, a tiered clawback rate for ABSD was announced. The change will benefit developers of residential properties. Prior to the announcement, developers had to pay the full non-remittable portion of their ABSD if they were unable to sell all units in the development within five years of purchasing the site, regardless of the number of unsold units. The non-remittable portion of the ABSD amounts to 25% or 35% of the land price. After the announcement, a lower rate of ABSD is applicable if they have sold at least 90% of the units in the development.

For example, a developer who purchased the land on or after December 16, 2021, will have to pay 35% of the land price as ABSD if the developer is unable to sell all units by the deadline. However, with effect from February 16, the applicable ABSD rate drops to 34% if the developer has sold 90% of the units. The rate drops further to 25% if 99% of the units have been sold.

The tiered clawback is expected to help mitigate some development risk for developers and perhaps encourage more developers to bid for large development sites. However, the amount payable is not insignificant despite the new tiered clawback. Hence, developers are still expected to remain motivated to sell as many units as possible before the deadline. However, the tiered clawback could also mean that developers are less likely to offer attractive discounts to buyers to offload their last few remaining units.

Concessions in ABSD for single seniors

Currently, a refund in ABSD is granted to married couples, with at least one Singaporean spouse, who jointly purchase a replacement home if they sold their first home within six months of buying their replacement home. The government announced during Budget 2024 that the concession will be extended to single senior Singaporeans, who are aged 55 years and above. These Singaporeans will be able to apply for a refund of their ABSD on their lower-value replacement home if they sell their first home within six months of purchasing the replacement home.

The impact on cash flow is minimal because the single senior will still have to pay the ABSD on their replacement home before applying for a refund. However, the refund will definitely help seniors, who wish to right-size, save more money for their retirement fund.