The ABSD Conundrum – Are SG Properties Still Worth Buying?

If you’re a home owner or property investor, you probably know that ABSD rates were increased during Dec 2021.

This marks the 4th time that ABSD rates were revised.

Home owners with intentions to upgrade to a second (or more) property were understandably concerned, as they had to pay a significantly higher price to secure their new homes.

This begets the question – With the implementation of higher ABSD rates, are Singapore properties still worth buying?

Before we answer this burning question, let’s take a quick look at the historical trend of ABSD, and why it’s a necessary measure despite the rise in home prices.

 

The Often Overlooked Function Of ABSD

Whenever ABSD rates are adjusted, most home owners tend to focus more on the negative aspects (price increase), and overlook the main function of this regulation.

However, it’s important to understand the history of this cooling measure, and why it plays a pivotal role in the Singapore property landscape.

In 2011, ABSD was first introduced to discourage foreigners from over-buying residential properties.

Singapore was, and still is, a hotspot for foreign property investment. Factors like government stability and constant infrastructure improvements are major attractions for foreign investors.

In order to curb the worrying trend of foreigners purchasing multiple residential properties, especially since they’re primarily meant for Singaporeans, ABSD was introduced.

Over the years, ABSD rates were adjusted upwards on 4 occasions to be in line with new buyer profiles.

If you’re a Singaporean home owner, you may be wondering – Is it really that important to keep foreign buyers in check?

Based on calculations and projections by industry experts, home prices are likely to be even higher without ABSD.

Like most markets, Singapore property prices are fueled by supply and demand.

ABSD’s function as a cooling measure is vital to keep demand at a manageable level (especially key for land scarce Singapore), as prices are likely to spiral out of control without it.

In summary, even though ABSD may seem unfavorable at first glance, it’s actually keeping home prices from ballooning to unrealistically expensive levels.

Even so, it’s undeniable that compared to the pre-ABSD period, Singaporean home owners now have to pay more to secure their second property.

 

So Are SG Properties Still Value-For-Money?

If you’ve been planning to upgrade to a new home, the increased ABSD rates have probably caused you to pull the brakes and think twice.

So here’s our take on the situation – If you’re planning to buy a second SG property for investment purposes, it may not be the most value-for-money purchase now.

Because there are many better investment options beyond Singapore’s shores.

Take the UK for example, and compare its property investment potential against the latest ABSD rates:

 

  SG Condominium UK Condominium
Price $1,000,000 $270,000
ABSD/Stamp Duty for Singaporean 17% + 3% = $200,000 5% = $13,500
Loan-To-Value 45% 70%
TDSR YES NO
Cash Deposit plus Stamp Duty $750,000 $94,500
Estimated Gross Rental Yield 3% 6%
Estimated Gross Rental $2500 ($2000 net) $1400 ($1058 net)
Private Property Vacancy Rate 6.5% 1.60%
Mortgage Term 25Y / 1.6% 25Y / 3.25%
Mortgage Monthly Repayment $1,821 $512
New Monthly Cash Position $179 $546

*For illustrative purpose only. Not indicative of actual performance.


As you can see, an SGD$1million property is subject to a payable ABSD of $200,000.

Compare that to a similar property in the UK, which is 4-5 times more affordable and with a much lower stamp duty rate…

And it’s clear to see that UK properties can offer a lot more value than SG properties from an investment standpoint.

When you consider other important factors like the cash deposit amount, estimated gross rental yield and the UK’s ongoing regeneration, it’s little wonder that many Singaporeans have been snapping up UK properties in recent times.

 

Keen To Find Out More About UK Property Investment?

Although UK properties generally offer more value than SG properties, this doesn’t mean that every UK property is worth buying.

There are specific areas in the UK with a lot more growth potential than others. And certain projects with comparatively higher room for appreciation too.

The good news – Our UK property specialists have handpicked the most promising projects in the UK, and have also established official partnerships with key property developers.

So if you’re interested to find out more about UK property investment, and perhaps secure an affordable UK property to strengthen your portfolio, drop us a message below and we’ll contact you to share more!

 

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