The introduction of elevated Additional Buyer’s Stamp Duty (ABSD) rates has markedly altered the approach to property ownership and investment evaluation in Singapore. Singaporean real estate investors in the 1990s effectively navigated the market by utilizing rental income from one property to finance the purchase of another. How things have changed over the years.
In practice, the ABSD has become a substantial obstacle, forcing even the most discerning investors to reassess their strategies. This concise guide explains how to buy 2nd property in Singapore without ABSD.
You may or may not be eligible for ABSD remission under FTAs, depending on your nationality. When they buy residential properties in Singapore, nationals or permanent residents of countries such as the United States, Norway, Iceland, Liechtenstein, and Iceland pay the same ABSD rates as Singaporeans.
This privilege is derived from the ‘National Treatment’ obligation outlined in the Singapore-European Free Trade Association (EFTA) agreement. In accordance with the relevant free trade agreements, individuals who are citizens or permanent residents of these countries are eligible for ABSD remission.
For individuals looking to buy a second commercial property in Singapore, the strategy of investing in commercial property without paying Additional Buyer’s Stamp Duty (ABSD) is appealing. ABSD rates do not apply to commercial properties. They constitute an appealing option for investors seeking to broaden their property portfolio without incurring additional stamp duty, as they are exempt from such levies.
It is essential to acknowledge that commercial properties typically deliver higher rental returns, averaging around 5%, compared to the standard range of 2% to 3% seen in the residential sector. Due to the potential for future development, commercial property investments may prove to be financially beneficial.
It is crucial to possess a comprehensive understanding of the unique characteristics and related risks of commercial properties. The cash investment required to buy a commercial property is higher because, first, commercial properties are typically more expensive than residential properties.
To make matters worse, whereas residential properties may permit the use of a CPF for the down payment, commercial properties require the entire down payment to be paid in cash. GST, currently 8%, is undoubtedly applicable to commercial properties. The GST amount must be paid in cash at all times.
Although investing in commercial property can be highly lucrative, it requires thorough research and a comprehensive understanding of Singapore’s commercial real estate market, which differs markedly from the residential market.
