PropertyGuru says it’s time to reintroduce estate tax, adjust ABSD, and reduce the waiting period of 15 months for those who are ‘downgrading’.

Reintroduce estate taxes, reduce the 15-month waiting period for property downgraders and defer stamp duties to Singaporean families that buy second homes. PropertyGuru Singapore’s PropertyGuru Singapore made three recommendations to ease the challenges facing home owners and buyers in Singapore today, ahead of next Friday’s Budget 2024 announcement.

Withhold the ABSD from Singaporeans purchasing second properties

PropertyGuru has also proposed that Singaporeans should be able to rent out a second house, and the additional buyer’s stamp duty (ABSD) will not apply.

Singaporeans can now buy their second and subsequent properties at a 20% ABSD instead of the old 17%.

Singapore permanent residents can now enjoy an ABSD of 30% instead of 25% on their second property and 35% instead 30 percent for their third purchase.

Residential properties are a good investment for preserving value. They can also provide owners with a regular source of rental income during retirement. A common strategy for couples is to separate home ownership from the ABSD. This allows them to buy more property without the ABSD.

The financial stress that couples experience when they purchase an extra home is often increased by this strategy, because they are unable pool their resources together or diversify the risks.

A tight rental market may result in the future if the majority are set aside for owner occupation. This scarcity might lead to a volatile rental market, which can have adverse effects on the long term.

If only a handful of players in the market participate, then the effect from the policy will be minimal.

To combat speculative activity, ABSD is withheld from the second home. If the owners buy a new home, they must pay the ABSD with interest.

The rule does not apply if the home has been owned by the owner for more than ten years.

If the owner disposes of the property between five and ten years, capital gains taxes will be applied.

Reduced 15-month wait period for private home “downgraders”

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In September of 2022, the government increased, from 6 months to 15 month, the period during which private homeowners who were selling their houses had to wait to be able to purchase public housing units on the secondary market.

The policy shift has helped moderate price increases and demand for HDB apartments. HDB flat resale rates rose 4.9 percent in 2023. This was a decrease from the 10.4 percentage increase in 2020.

But now that the market has reached a new level, we should revisit certain assumptions. The market has cooled, and both supply and the demand for resale items have reduced.

The current economic climate is uncertain, due to rising geopolitical conflicts, and external forces may cause sharp corrections on the market. We must encourage households to exercise caution if they wish to upgrade to HDB flats.

He acknowledged the need to protect against the demand for bigger flats. Noting that the number million-dollar apartment deals has increased since 2023, this indicates strong demand from prospective buyers despite a 15-month downgrade restriction.

Upgraders will likely be the buyers who are looking for larger homes at prices that are higher than in the residential market.

The waiting period is not applicable to seniors who are 55 or older and moving from a private residence to a resale four-room apartment or smaller.

HDB will grant a waiver to homeowners who have extenuating circumstances. However, out of 3,470 requests made, only 850 were granted.

A hot market and sharp price increases could be the result of removing the HDB ownership barriers. This could be mitigated by increasing the required minimum occupation period, or by imposing capital gains tax that is prorated.

Reintroduce estate tax

PropertyGuru is also wishing for the reinstatement of estate duty, or inheritance taxes.

Following the abolishment of estate duty by the government in 2008, there is a growing polarisation between wealth and viewpoints.

In recognition of the need for Singapore to address the wealth disparity, the Government proposed the reintroduction in 2021 of inheritance tax.

The reintroduction estate duty may force affluent persons to relocate their wealth, thus deterring family offices from being established in Singapore and possibly undermining the status of Singapore as a major financial hub in Asia.

To mitigate these risks it may be necessary to make provisions to reduce the rates of individuals who invest their money in environmentally sustainable initiatives such as green-marked platinum buildings or those that provide a yearly amount to support vulnerable social segments and cross subsidise retraining programs for workers with lower incomes or those who have been laid off.

The estate duty usually applies to individuals with high net worth, but there are ways to expand this to a larger population.

He proposed adjusting rates according to the type and value property that an individual owns.

This approach would provide a more equal distribution of tax burden across various segments of society.

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