Singapore To Impose Higher Buyer’s Stamp Duty Rate For Pricier Commercial Properties
SINGAPORE – The government is poised to impose higher rates of Buyer’s Stamp Duty (BSD) for more expensive non-residential properties, with effect from Wednesday (15 February), reported The Business Times on Tuesday afternoon (14 February, SGT).
While market observers believe the move is unlikely to significantly impact demand for commercial assets, its effect will be felt more in transactions costing at least S$1 billion and in the collective sale market, where the higher stamp duty could widen further the price expectations between sellers and buyers.
Under the new BSD regime, the percentage of the commercial property’s selling price over S$1 million and up to S$1.5 million will be taxed at 4 percent, while the excess of S$1.5 million will be taxed at 5 percent. This is up from the present ceiling rate of 3 percent.
The move is expected to impact 60 percent of Singapore non-residential properties.
“The changes are expected to affect the majority of non-residential properties, especially strata commercial spaces, smaller industrial properties, and commercial shophouses, thereby increasing the entry costs of smaller commercial properties,” commented Colliers’ Research Head Catherine He.
Jones Lang LaSalle’s (JLL) Research Head in Singapore Tay Huey Ying estimated that an investor acquiring a commercial property costing S$2 billion would pay nearly S$40 million more in BSD under the new rates.
“Hence, for big ticket deals, the changes in BSD would encourage alternative deal structuring that involves lower acquisition costs,” she noted.
Still, Cushman & Wakefield’s (C&W) Research Head Wong Xian Yang said the higher rates looked “manageable” for most of the commercial real estate (CRE) market, given that the median prices of retail premises, office units, and shophouses in Singapore’s central business district (CBD) last year stood at S$1.5 million, S$2.5 million, and S$13 million respectively.
In particular, a strata office unit costing S$2.5 million would see an additional transaction cost of S$25,000, which translates to 1 percent of the selling price. For a S$13 million shophouse, there’s an added cost of S$235,000 or 1.8 percent of the asset’s value.