PropertyGuru: It’s time to bring estate tax back, change ABSD, and cut the 15-month wait period for “downgraders”

Reintroduce estate tax

PropertyGuru has also included the reintroduction or inheritance tax in its Budget wish list.

The government abolished the estate duty in 2008. Since then, wealth and views have polarised. This poses a danger to social cohesion.

Recognizing the need to tackle wealth inequality in Singapore and reintroduce inheritance tax in 2020, the government announced the proposal.

It is possible that the reintroduction of estate duty could force wealthy individuals to move their assets out of Singapore. This would discourage the establishment and growth in Singapore’s family offices, as well as undermine its position in Asia as a financial center.

To offset these risks, individuals who invest in environmentally-sustainable projects like green mark platinum building or those who allocate a monthly sum to support vulnerable segments of society and cross-subsidise training for low-income or retrenched worker could receive a rate reduction.

There is potential to extend estate duty to include the entire population.

He proposed that the rates be adjusted according to value and type property of individuals.

This would result in a fairer distribution of tax burdens across the different sectors of society.

Reduce the wait period for private property downgraders to 15 months. Withhold stamp duty payable by Singaporean families who purchase a second house. And reintroduce an estate tax. PropertyGuru Singapore released these three recommendations in advance of Budget 2024, which will be announced on February 16.

Stop paying ABSD when Singaporeans buy a second property

PropertyGuru also proposes to allow Singapore families to purchase a rental property and have the Additional Buyer’s Stamp Duty (ABSD), withheld.

Singaporeans purchasing their second property will pay 20% instead of the previous 17% ABSD. For their third and subsequent purchases, they will pay 30% instead of 25% ABSD.

Singapore residents who own a second home will now pay 30 percent instead of 25 percent, and 35 percent instead of 30 cents for their third or subsequent purchase.

Residential properties can be a reliable asset for value preservation and offer owners a steady rental income in retirement. Decoupling home ownership is a common strategy used by couples to acquire additional properties without paying the ABSD.

A strategy like this can often lead to increased financial strain, since couples are not able to pool resources or diversify risks when buying a second home.

The future rental market could be tight if most private homes are reserved for owner occupancy. This scarcity can lead to fluctuating rental prices which may have negative long-term effects.

Even though the government has implemented long-stay serviced apartment as a way to balance fluctuations in rental demand, its impact may be limited if a small number of market players participate.

In order to counteract speculative behavior, ABSD for the second property should be withheld. If the owner purchases a third house, they will need to pay back the amount with interest.

‘This rule will not apply to older homes,’ he said. This is so that older properties can be redeveloped.

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A capital gains tax could be levied if the owner sells the property in the five to ten years.

Reduce the wait time for “downgraders” of private home by 15 months

In September 2022 the government increased from six to 15 months the waiting time that homeowners selling private residential properties had to wait before they could buy public housing apartments on the resale markets.

This policy change has moderated demand and prices for HDB flats. HDB resale values rose 4.9 percent in 2023. That’s a slower rate than the 10.4 increase that occurred in 2022. However, volume fell 4.2 percent to 26,735 from 27,896 cases the previous year.

We should reconsider some assumptions, as the market is in a new phase. Prices, demand and supply have all moderated.

The market may be affected by external factors, such as the increase in geopolitical tensions. To enable households to move to HDB apartments, we need to encourage them to use caution.

He noted that despite the 15-month limit on downgraders, the number of deals for million-dollar apartments has increased in 2023.

Most buyers will be upgrading to larger homes in the market segment for private residences.

The wait-out does not apply to seniors 55 years and older who are moving out of their private home into a four-room resale or smaller flat.

HDB has granted waivers to private homeowners in extenuating situations, but only 25 percent of these requests, 850 out 3,470, have been successful since the rule’s implementation from September 20,22 to the end of 2018.

If HDB flats are made more accessible, prices could rise sharply and the market would heat up. To counteract this, the minimum period of occupation could be increased or capital gains taxes could be imposed on a prorated basis to stop private homeowners from taking advantage.

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