Since the Singapore government raised the ABSD in April 2023, the number of condominiums purchased by foreigners has significantly decreased by 71%. This policy adjustment has notably suppressed foreign investor demand, proving the effectiveness of government measures to cool the real estate market.
On April 27, 2023, the ABSD rate was increased from 30% to 60%. This substantial hike had a significant impact on foreign buyers. Between May 2023 and April 2024, foreigners purchased only 306 condominiums, compared to 1,064 units in the previous year (May 2022 to April 2023), which accounted for 5.4% of total condominium sales in that period. With the new tax rate in effect, this proportion dropped to 1.8% in the period from May 2023 to April 2024.
Analysts note that the decline in foreign buyers is particularly noticeable in prime or Core Central Region (CCR) areas, which typically attract more foreign investors. Before the ABSD increase, foreign buyers accounted for about 14% of CCR condominium sales over the previous 12 months. Over the past 12 months, this proportion has dropped to approximately 6%. Data from the Urban Redevelopment Authority also shows that post-ABSD increase, CCR sales fell from 4,215 units to 2,672 units, a decrease of 36.6%.
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The luxury condominium market in the CCR has also been affected. The number of luxury condominiums priced at 10 million or above decreased from 73 units in 2022 to 50 units in 2023. Despite the reduced sales volume, the average price per square foot for these luxury condominiums has remained around $3,800. Analysts indicate that many investors have strong financial positions and are not in a hurry to sell properties at discounted prices, opting instead to rent out units. Therefore, despite the drop in transaction volume, prices have remained firm.
Furthermore, financial institutions have implemented stricter due diligence on large property purchases, making the process of selling luxury homes longer and more complex. Nevertheless, in recent weeks, there has been an increase in inquiries and commitments to purchase local luxury non-landed private residences from foreigners, notably those of South Asian descent but holding U.S. citizenship. According to Singapore's policy, buyers from the U.S., Iceland, Liechtenstein, Norway, and Switzerland are exempt from ABSD on their first residential property purchase in Singapore, giving these buyers a certain advantage in the current market environment.
Post-ABSD increase, the number of Chinese buyers in the luxury property market has significantly decreased. In 2020 and 2021, Chinese citizens topped the list of foreign buyers for new and resale condominiums in the CCR, with 112 and 155 transactions, respectively. However, this number fell to 113 transactions in 2022 and further to 93 in 2023. From January to March 2024, foreign buyers accounted for only 1.2% of total new and resale condominium purchases, down from 1.7% in the fourth quarter of 2023, marking the lowest record since 1995.
These data series indicate that the ABSD increase has had a profound impact on the Singapore real estate market, particularly among foreign buyers. With the decline in foreign demand, future home sales will be primarily driven by local buyers. This could make the Singapore real estate market more stable but may also exert some pressure on the high-end real estate market, especially in the case of oversupply.
