Buyer Stamp Duty Update
As of 20th February 2018, Buyer Stamp Duty for Residential Properties costing $1,000,000 and over will be raised from 3% to 4%. This new policy was announced by Minister of Finance Heng Swee Keat, and will take effect immediately. What does this mean for prospective buyers of new condos in Singapore?
What are residential properties? According to IRAS, a Residential Property is defined as a property that is used solely for residential purposes, or mixed-use(such as a shophouse). These types of buildings will be the ones affected by the new policy. For more details, visit the IRAS e-tax guide.
Buyer Stamp Duty
Unsure of what Buyer Stamp Duty entails? To read up on the fundamentals of Buyer Stamp Duty and Additional Buyer Stamp Duty, please check out our information on Things You Need To Know About Buyer Stamp Duty.
|Purchase Price or Market Value of the Property||BSD Rates for residential properties||BSD Rates for non-residential properties|
Under the old scheme, BSD would be calculated in this way:Let us perform the calculations on a property valued at $2,000,000 for a simple illustration of the changes in the system.
BSD = $1,800 +$3,600 +(0.03 x [$2,000,000 – $360,000])
= $1,800 + $3,600 + $49,200
Under the new scheme, BSD is calculated as follows:
BSD = $1,800 + $3,600 + (0.03 x $640,000) + (0.04 x $1,000,000)
= $5,400 + $19,200 + $40,000
Total difference = $64,600 – $54,600 = $10,000
Purpose of Policy
Analysts have mentioned that the increased rates are not a cooling measure to slow the growth of the property market, but rather a tax on the rich and those with higher incomes. Hence, most property buyers will not be affected unless their property values exceed $1 million. Non-Residential Properties are also unaffected by the new ruling. However, from past experience, this will not be the only change taking place in 2018.
The Government is aware that prices for private properties did not price correct by a large amount in the past, so this measure is probably one of the few methods that is able to strike a balance between an approach which is too harsh and one which is too soft. Sitting on the sidelines and not taking action is not only bad for the government, but for prospective buyers too.
Buyers are encouraged to take action and invest in promising properties before any new changes take effect, because those who do not will be left in the dust and struggle to make up for the opportunity lost.
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