Singapore has long been an attractive destination for foreign businesses and homebuyers, and now the government is taking steps to insulate the market from possible future pricing corrections by taxing newcomers. The country is now charging first-time foreign buyers a 10% tax on property purchases, and a 3% tax on permanent resident and citizens who buy a second or third home. Foreign purchases accounted for 19% of all private residential real estate sales in the second half of 2011, and the country has experienced significant price gains as it emerges from the global economic crisis. For more on this continue reading the following article from Property Wire.
Singapore has introduced new taxes on residential property purchases to curb excessive investment by foreign buyers.
Foreigners and corporate entities will have to pay an unprecedented extra 10% stamp duty when buying a residential property in Singapore, the government confirmed.
There will also be an extra 3% on stamp duty permanent residents purchasing a second home and for citizens buying their third residential property.
‘We have always had open markets and must keep them that way. However, the reality is that investment flows into our property market are now larger than before, and unlikely to recede as long as interest rates remain low. The additional buyer’s stamp duty should help cool investment demand, and avoid the prospect of a major, destabilizing correction further down the road,’ said Finance Minister Tharman Shanmugaratnam.
Singapore has been attempting to rein in prices since 2009, when the government barred interest only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.
Home prices are 13% above the high seen in the second quarter of 1996 and 16% higher than the more recent peak in the second quarter of 2008, according to the government.
Foreign purchases accounted for 19% of all private residential property purchases in the second half of 2011, up from 7% in the first half of 2009.
‘This is severe and likely to have a significant and negative impact on the residential property market, especially in prime districts,’ said Wendy Koh, an analyst at Citigroup. The latest taxes could be the catalyst for price cuts and result in a significant decline in residential property sales volume, she added.
The move will curb investment demand for private residential properties drastically, especially demand from non-resident foreigners, according to Nicholas Mak, an executive director at SLP International Property Consultants in Singapore.
‘In the next one to two months or so, the home buying demand from non-resident foreigners will almost dry up,’ he said.
This article was republished with permission from Property Wire.