Make ABSD less punitive for younger local singles and PR couples trading owner-occupied homes

Housing mobility can be impeded when the transaction costs of moving homes are high

Leslie Yee

Jun 10, 2024

Single Singaporeans had something to cheer about from Budget 2024 on the housing front. Subject to meeting various conditions, a single Singapore citizen aged 55 and above can now claim a refund of Additional Buyer’s Stamp Duty (ABSD) paid on the second home they buy.

The ABSD refund represents a meaningful sum as a Singapore citizen buying a second home pays ABSD of 20 per cent. For example, the full ABSD refund for an eligible local totals S$300,000 for a S$1.5 million second home purchase.

Among the conditions to get a full refund, the local single must sell his first home within six months after the date of purchase of the second property for a completed property, or the issue date of the Temporary Occupation Permit / Certificate of Statutory Completion, whichever is earlier, if the property was uncompleted at the point of purchase. Also, the value of the second home must be less than that of the first home sold.

As it stands, married couples comprising at least one Singapore citizen can enjoy ABSD remission when they jointly buy a second home, subject to meeting various conditions including the need to dispose of the first home within a prescribed period.

While married locals enjoy various advantages over singles in the housing market, helping singles matters as singles are a large demographic.

In 2023, singles accounted for 30.4 per cent of residents in their 30s, 14.9 per cent of those in their 40s, 11.8 per cent of those in their 50s, and 10 per cent of residents in their 60s. In comparison, the proportion of singles among residents in their 30s, 40s, 50s and 60s stood at 24.5 per cent, 13.8 per cent, 11.7 per cent and 7.5 per cent respectively in 2010.

Given Singapore’s land scarcity, homes should largely be built for owner-occupation. Having curbs in the private housing market to ensure a stable market where prices do not run away and the market does not experience boom and bust cycles should be welcomed by stakeholders including developers, owners, agents and buyers.

Singapore has an enviable home ownership rate – about 90 per cent of resident households own their homes in 2023.

Housing mobility

However, housing mobility matters too as many households may see housing needs change over time. And households face sub-optimal outcomes if they encounter major obstacles in moving from one home to another that better suits their needs.

Changing household size can be a key reason for moving house. For example, a household grows because a couple has children or elderly parents move in to live with their grown-up children. Or a household’s size shrinks as adult children leave their parents’ homes.

Some households may want to relocate to live near a particular school or workplace, thereby saving on travelling time and expenses.

Financial reasons can also be a key driver for moving homes. Perhaps a household wants to upgrade to a prime district condominium or a landed home to mark career or business success.

If an owner’s financial fortune declines or a person retires, he may seek to trade a pricey home for a cheaper one. Much cash can be freed up in the process, and financial stress substantially alleviated.

Additionally, in a fast ageing Singapore, some elderly folk may want to move to a home that is easier to manage or better suited for their needs as their health declines.

Ultimately, owning a home with the appropriate size, price, location, or specifications can add to a household’s peace and harmony and boost its members’ mental health.

Friendlier ABSD regime

A household that trades one owner-occupied home for another is not looking to add to the number of properties it owns. Thus, it would appear unfair that such a household may need to pay the ABSD rate applicable to residents buying a second home.

Indeed, could the ABSD regime become friendlier for locals who are currently eligible for more favourable ABSD treatment when they buy their second home, provided, among other conditions, they sell their first home within a prescribed time frame?

Maybe allow these locals to not pay ABSD on their second home first, before getting a refund. Instead, they can be made to pay ABSD on their second home, if their first home is not sold within the prescribed time frame.

After all, paying ABSD first before getting a refund subsequently can significantly strain the cash flow of some households, and be a potential stumbling block to moving homes.

Furthermore, consider making ABSD treatment friendlier for other groups who trade an owner-occupied home for another, such as local singles who are below 55 years old and married permanent resident (PR) couples.

Helping PR couples can be justified by the economic contribution that many PRs make. Also, as it stands, the rates of ABSD payable for home purchases clearly favours citizens over PRs.

Today, local singles who are below 55 years old and PR couples would need to sell their sole owner-occupied home first before they buy a replacement home, in order not to pay the ABSD applicable to buying a second home.

Therefore, these local singles and PR couples may need to incur the hassle and costs of renting a home in the interim. Also, if prices escalate, those who sell their owned home first before buying their replacement home might find themselves in a sticky situation.

Moreover, perhaps the ABSD refund for eligible singles should apply even when a single trades an existing owner-occupied home for a pricier one.

World-class planning, high quality public housing and good transport connectivity support housing mobility in Singapore. Locals can fairly seamlessly move from public to private housing and vice versa, or relocate to wherever in the island.

However, transaction costs of moving from an owner-occupied home to another can impede housing mobility.

Buyer’s Stamp Duty is about 3 per cent for a S$1.5 million home and 4 per cent for a S$3 million home. And paying ABSD can add significantly to transaction costs.

To support housing mobility, let’s make ABSD much friendlier for residents who are looking to move from one owner-occupied home to another.