ABSD less harsh for singles & couples owner-occupied homes

Budget 2024 brought good news for single Singaporeans in the housing sector. Single Singapore citizens aged 55 years and older can claim a rebate on Additional Buyer’s Stamp Duty paid for their second home, provided they meet certain conditions.

The ABSD refund is a significant amount, as a Singaporean who purchases a second property pays ABSD at a rate of 20%. The ABSD refund is S$300,000. This is the amount that a local Singaporean would receive if they purchased a second home worth S$1.5million.

To be eligible for a refund in full, the local single has to sell their first home within 6 months of purchasing the second property. This is true if it was a finished property. The value of the second property must also be lower than the price of the first.

Currently, married couples with at least one Singaporean citizen can benefit from ABSD remission if they buy a second house together. However, there are certain conditions, including that the first home must be sold within a specified period.

Singles have a lot of advantages in the housing market over married couples.

In 2023, the proportion of singles among residents aged 30 to 60 will be 30,4%, 14,9%, 11,8%, and 10% respectively. In 2010, the proportion of residents in their 30s was 24.5%, 14.8%, 11.7% and 7.5%.

Due to Singapore’s limited land, most homes should be built for owners. Stakeholders, including developers, owners and agents, should welcome curbs on the private housing market that will ensure a stable and predictable market, where prices don’t run away or the market doesn’t experience boom-and-bust cycles.

Singapore’s home ownership rate is enviable – 90 percent of residents will own their homes by 2023.

Housing mobility is also important, as the housing needs of many households can change over time. Families can also experience suboptimal results if they face major obstacles when moving from one house to another.

A change in household size is a common reason to move house. A household can grow because an elderly parent moves in with their adult children, or a couple adds children. A household can shrink as grown-up children move out of their parents’ home.

Some families may wish to move to a location near their school or place of work to save on travel time and costs.

Moving homes can be driven by financial reasons. A household may want to move to a condominium in a high-end district or to a landed property to celebrate a career or business achievement.

A homeowner may decide to sell a costly home in order to buy a more affordable one if his financial situation changes or he retires. This can free up a lot of cash and reduce financial stress.

In a rapidly ageing Singapore, elderly people may also want to move into a home which is easier to maintain or more suitable for their needs, as their health declines.

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Owning a house with the right size, price or location can improve a family’s mental health and peace.

The household trading one home to another owner-occupied is not trying to increase the number of property it owns. It would seem unfair to charge a household that trades one owner-occupied home for another the ABSD rate.

Could the ABSD regime be more friendly to locals, who currently qualify for a more favorable ABSD when they purchase their second home. This is provided they meet certain conditions, including selling their first home in a specified timeframe?

Before a refund, allow locals to pay ABSD for their second home before they get a refund. If their first home does not sell within the specified time period, then they could be forced to pay ABSD for their second home.

Paying ABSD before receiving a refund can be a major strain on the household’s cash flow and could even prevent them from moving.

Consider making ABSD more favourable for groups that trade a home they own for a different one, including local singles under 55 and married permanent residents (PR).

The economic contribution of many PRs can justify helping PR couples. As it stands, ABSD rates for home purchase clearly favor citizens over PRs.

To avoid paying the ABSD on a second house, singles and couples in PR who are under 55 years of age must sell their only owner-occupied residence first.

These local singles or couples from PR may have to rent a house in the interim. If prices rise, people who first sell their home before purchasing their new home may find themselves in a difficult situation.

The ABSD rebate for singles who qualify should also apply when they trade in their existing home to a more expensive one.

Singapore’s housing mobility is supported by a world-class plan, excellent public housing and good transportation connectivity. Locals are able to move between public and private housing, or vice versa. They can also relocate anywhere on the island.

The costs associated with moving from one owner-occupied house to another can limit housing mobility.

The stamp duty on a home worth S$1.5m is approximately 3 percent, and for a home worth S$3m it’s about 4 percent. ABSD is a significant cost to the transaction.

ABSD should be more accommodating to residents who want to move from an owner-occupied house to another.