• Joshua Loo

Should ABSD be Removed?

Updated: Aug 31



Removing the ABSD will seem like amazing news for all property investors, as your hard-earned dollars will not seemingly disappear into thin air.


With its introduction on 8 December 2011, buyers have been lamenting that their dream home is further out of their reach, on top of the already expensive purchase price.


For the uninformed, the Additional Buyer Stamp Duty (ABSD) is a tax which was introduced, based on the count of properties and residency status which the property buyer has. This was implemented in order to cool a hot property market back in 2011-2016.


Now that the fire has apparently fizzled out, is it time for the ABSD to be removed? Here are my reasons why it should be left untouched, or why it should be removed.

Why ABSD Should be Left Untouched


Prevents Over Purchase of Properties


Singaporeans have subscribed to the thought that real estate = wealth. After all, these are how the billionaires of today have made most of their wealth. However, this is very disruptive for homebuyers who intend to purchase a property to occupy it.


Should there be multiple counts of properties owned by an individual, it will disrupt property prices as the balance of tenants and homeowners might be severely skewed.


Although real estate is a fantastic vehicle to multiplying your wealth, it should still be considered strongly as its purpose of providing shelter.


This is the main reason why the ABSD was implemented in the first place, and why it should not be removed.

Protect Our Investors


As ironic as what I am going to say next sounds, the ABSD is actually crucial for investors.


Singaporeans are heavy investors in residential properties. Immediately removing the ABSD will cause wild fluctuations in the market, and this instability can wreak havoc to their assets and net worth!


In addition, we do have foreign investors that are investing in our residential real estate properties. Removing the ABSD will cause a high influx of foreign investors, with the potential to price out our local investors.

Why ABSD Should be Removed


Steep Costs


The ABSD tax doesn’t contribute to the cost of the property. This can be a rude wakeup call for anyone that is not prepared for it, which ranges from 12%-20%, depending on the property count and Nationality of the buyer.


Those That Require the Homes for Their Own Stay


There are certain instances where an individual might have acquired a residential property from their previous generation, which might be an issue if the place is not to their liking for their own occupation or it requires heavy renovation works.


To make matters more challenging, it might be difficult to dispose of the property at a fair price, if the individual has a set deadline to purchase the new property, there will be no ABSD remission, unless it is a matrimonial home for a couple.


Yet, for ABSD remission, the property must be sold within 6 months after the date of purchase of the new property.


Developers ABSD


Place yourself in the shoes of the developers. You are taking a huge risk in redeveloping a piece of land, where the ABSD is 30% of the land price if they are unable to sell all the units within five years.


Inexplicably, won’t you think about increasing the purchase price of every developed unit to cover this potential cost?


In a way, this is highly unlikely as real estate investors are a savvy bunch, and will not be willing to take up extra costs if there are more lucrative options.


But this is some food for thought, and with the removal for ABSD for developers, technically new launch prices will be more attractive, but in the long run, might cause real estate prices to run amok.

Summary


It is unlikely for complete removal of ABSD in the Singapore Real Estate market due to the reasons mentioned above.


In my opinion, the best situation is to do a gradual reduction of the ABSD. This allows the authorities to assimilate the current changes and to make further implementations as and when required.


The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee, or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.

 

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