ABSD: Give Singaporeans a break, says Wing Tai boss

Wing Tai chairman Cheng Wai Keung has urged the government to keep the additional buyers' stamp duty (ABSD) for foreign buyers but fine-tune it for Singaporeans who wish to buy more than one property.

 

While many players lament a drying up of foreign buying - especially in the high-end residential sector due to the punitive ABSD rate, and hope that the authorities would reduce the rate, if not do away with the charge altogether - Mr Cheng shared a different perspective.

 

 

ABSD should be retained for foreigners as the danger posed by foreign hot money still lurks. But the total debt servicing ratio (TDSR) framework is already in place for Singaporeans to limit their debt exposure.

 

The original intent of the ABSD is to deal with excessive liquidity flooding in from developed countries' monetary policies. And the conditions that necessitated the introduction of the ABSD by MAS have not abated. Notwithstanding QE (quantitative easing) tapering moves in the US, interest rates are still expected to stay low, and countries like Japan and Europe are still expanding their liquidity policy. Hence it is prudent for government not to remove the ABSD on foreign buyers for now.

 

However, Singaporeans who wish to purchase additional residential properties for investment should be given relief from the ABSD, Mr Cheng said. "Why should they be dealing with three policies - SSD, ABSD and TDSR? Especially with the TDSR in place to limit debt exposure and SSD to prevent short-term trading. I believe that it is redundant to continue imposing ABSD on Singaporeans who have the financial ability and wish to invest locally in real estate."

 

Given that the market has already responded to the cooling measures - demand has shrunk and prices have softened - it is timely for the government to consider opening up options for Singaporean investors so that they may invest their excess funds in the local property market, which provides greater protection for buyers and is considered relatively less risky than foreign property markets.

 

"This can be a win-win situation for both the industry and the domestic investor market," Mr Cheng said.

Info source: BT

The call that Mr Cheng made to get reprieve from ABSD for Singaporeans is actually quite shrewd on at least two counts:    
 

1. It subscribes to the "Singaporeans first" call that many locals have been clamouring the government about. By suggesting that ABSD should be eased for Singaporeans but maintained for foreigners, Mr Cheng will probably garner quite a bit of support from his fellow countrymen. 

2. It reaffirmed to some extent the notion that the "meat" when comes to property purchases in Singapore still resides with the locals. Foreign buyers, which no doubt have been increasing in numbers over recent years, may not necessarily be as "evil" in terms of inflating property prices as many of us made them out to be... at least not across all sectors of the private residential market anyway. This is because the bulk of the demand (70%) still comes from Singaporeans - foreign institutional and individual buyers currently constitutes only about 11% of total purchases. As long as Singaporeans are given a freer hand to participate in the market and willing to pay the prices that developers set , chances are that they are really the ones that are chasing up prices. Granted that the continual imposition of ABSD on foreign purchases will continue to dampen demand from foreign buyers, but the effects will primarily be felt on the upmarket/luxury sectors. And between cutting off a limb or removing the heart, the decision is quite straightforward really.