Every day, 99.co picks a piece of property jargon to explain it. Today we look at the notorious ABSD, which is a stamp duty (tax) on your house:
Additional Buyers Stamp Duty (ABSD)
The most notorious of the cooling measures, the ABSD is a stamp duty paid on your property. The cost is a percentage of your property price or valuation, whichever is higher.
For example, say you’re buying a property that’s valued at $2 million. The seller’s price, however, is $2.1 million. Assuming you’re subject to a tax of 12 per cent ABSD, you would pay a stamp duty of 12 per cent of $2.1 million (that’s $252,000).
The amount payable varies based on:
- Your citizenship or residency
- The number of properties you own
- Whether you’re an entity or developer
|For Singapore Citizens (SC), Nationals and Permanent Residents of Iceland, Liechtenstein, Norway or Switzerland, and Nationals of the United States of America||ABSD Rate|
|Buying 1st property||No ABSD|
|Buying 2nd property||12%|
|Buying 3rd or subsequent property||15%|
|For Singapore Permanent Residents (SPR)||ABSD Rate|
|SPR buying 1st property||5%|
|SC buying 2nd or subsequent property||15%|
Foreigners pay a flat 20 per cent ABSD on the residential properties they buy, regardless of the number of properties they own in Singapore.
For entities and developers:
Entities (e.g. companies or associations) pay a flat 25 per cent ABSD on residential properties they buy, regardless of the number of properties they own in Singapore. For developers, there is an added five per cent ABSD that is non-remittable (a total of 30 per cent ABSD).
What is ABSD remission, and how do you get it?
You can apply for ABSD remission if (1) you are a married couple in Singapore, and (2) at least one spouse is a Singapore Citizen.
If you purchase a second property, you’ll first have to pay the ABSD as usual (this is within 14 days of completing the sale). However, you can apply for a remission if you then sell your first home, within six months of buying the second one:
For example, say you just got married, and upgrading from your shoebox unit to a bigger condo unit. For convenience, you purchase the condo unit before you sell your shoebox.
You would have to pay the ABSD within 14 weeks of purchasing the condo unit; but you can then apply to get the money back, if you sell your shoebox within six months of getting your condo.
Note that you must remain married at the time you apply for the remission, and you must not have bought more properties before applying.
Hold on, what if the second property is still being built?
If the second property is under development, you must sell your first house within six months of the second property getting its Temporary Occupancy Permit (TOP) or Certificate of Statutory Completion (CSC), whichever is earlier.
Why do we have ABSD?
This stamp duty serves various purposes.
First, the ABSD applies downward pressure on property prices. When the government feels that private property prices are getting out of hand, they increase the ABSD to slow the price increase. This prevents the formation of property price bubbles, which can wreck havoc in the local economy.
A second purpose is to create an ownership bias, ensuring most of Singapore belongs to, well, Singaporeans. That’s why the stamp duty is steeper for companies and most foreigners.
A third reason arose during the en-bloc fever of 2017. At the time, foreign developers caused a huge surge in en-bloc sales. This artificially injected huge amounts of cash into the property market, and could later have translated to excessive supply and inflated home prices (the more developers pay for land, the more their properties cost).
In response, the ABSD became especially high on property developers, to put the brakes on land purchases.
Does ABSD matter to the average Singaporean, who doesn’t own more than one house?
ABSD is indirectly keeping your home affordable. It’s less great in that, if you’re moving to a new house, it can cause cash flow issues.
For example, say you’ve lived in a shoebox unit all your life, but now you’ve gotten married. You need a bigger condo unit. Well if you buy a condo unit before selling your old shoebox, you’ll have to pay the 12 per cent ABSD within 14 days of the making the purchase.
You can apply to get the money back – but this can only be done if you sell your old shoebox within six months of buying your new, bigger condo. Any disruption to the process – such as buyers pulling out at the last minute – can inadvertently cause you to forfeit the ABSD money.
There’s also the annoying fact that you need sufficient cash to pay for the ABSD first, when you’re already forking out huge sums for a new house (although ABSD can be paid through your CPF).
For these reasons, you may want to sell your old house before buying a new one; however inconvenient it may seem.