PropNex Comments On Singapore Budget 2023: Changes In Public Housing Measures And Buyers Stamp Duty (BSD) Regime

14 February 2023, SINGAPORE – Deputy Prime Minister and Finance Minister Lawrence Wong delivered the Singapore Budget 2023 in Parliament today, with the Budget’s theme being “Moving forward in a new era”.

This year’s Budget highlighted several goals, including charting the way forward for Singapore’s economy in a new post-pandemic future, helping citizens cope with inflation and the rising cost of living, and strengthening social compact. The Budget’s announcement came after Singapore further lifted its Covid-19 restrictions this week.

Ismail Gafoor, CEO of PropNex Realty:
There were plenty of hopes and expectations from Budget 2023, including wishes on helping the more vulnerable and low-income group cope with the rising cost of living, helping firms innovate and build capabilities, as well as addressing public housing affordability. The Budget announced by DPM Wong did not disappoint on these fronts.

There were several announcements relating to the real estate segment. Specifically, on public housing, DPM Wong announced further support to make public housing more affordable and accessible for young families buying their first home. They are:

1) HDB will increase the CPF Housing Grant from $50,000 to $80,000 for eligible first-timer families buying a 4-room or smaller resale flat, and from $40,000 to $50,000 for first-timer families buying a 5-room or larger resale flat. Eligible first-timer singles will similarly receive an increased CPF Housing Grant from $25,000 to $40,000 when buying a 4-room or smaller resale flat, and from $20,000 to $25,000 when buying a 5-room resale flat.

The HDB resale price index has risen by nearly 31% between Q1 2020 and Q4 2022. We think this is a timely move and the substantial increase in CPF Housing Grant will help flat buyers manage the cost of resale flats by lowering their down-payment or lowering the loan amounted needed. Eligible first-time buyers can now receive up to $190,000 in housing grants – up from $160,000 previously – to help fund the resale flat purchase.
With 2-room to 4-room flats enjoying a bigger increase in grants, this could also encourage families to right-size their homes according to their needs, potentially easing demand for 5-room or larger flats.

On the flip-side, in view of the tightness in the supply of HDB resale flats on the market, there is a chance that the increase in grant amount could further spur demand for resale flats, there by keeping their prices firm. Meanwhile, there may be a small handful of flat owners of highly attractive units, who may take the opportunity to raise asking price, seeing that prospective buyers can enjoy a higher housing grant. However, such sellers could risk pricing themselves out of the market as most buyers remain price-conscious.

2) HDB will introduce a new sub-category of first-timers comprising families with children, and young married couples aged 40 years and below, who are buying their first home.

This will give greater priority for these groups of applicants, including offering them an additional ballot chance for BTO flat applications. We think this will be helpful for those with genuine and more pressing housing needs to secure a BTO flat. It could perhaps also help the HDB to reduce rejection rate for BTO flat selection exercises, which was at 40%, the HDB had said previously.

The government will also introduce a higher marginal Buyer’s Stamp Duty (BSD) for higher-value residential and non-residential properties, DPM Wong announced.

3a) For residential properties, the portion of the value of the property in excess of $1.5 million and up to $3 million will be taxed at 5%. Properties in excess of $3 million will be taxed at 6%, up from the current rate of 4%.

We think this builds on the increase in property tax rates announced in the 2022 Budget and is another revenue-generating measure to help fund government spending going forward. Generally, we do not expect this change in BSD to impact home sales significantly as the increase in BSD payment should be manageable for buyers of homes priced over $1.5 million and $3 million. For instance, a buyer purchasing a residential property that is valued at $2 million will see BSD payable rise by $5,000 (see illustration in Table 1), which is not a big leap for those buying homes at this price tier.

3b) For non-residential properties, the portion of the value of the property in excess of $1 million and up to $1.5 million will be taxed at 4%. Properties in excess of $1.5 million will be taxed at 5% up from the current rate of 3%.

Generally, we think demand for non-residential properties in Singapore will still be healthy, underpinned by the country’s sound fundamentals. We anticipate that buyers/investors will be able to take the increase in BSD payment in their stride and that the non-residential property segment should remain resilient.

Overall, we think the public housing announcements today are not unexpected, given the increase in HDB resale prices in recent years and discussions on public housing affordability and accessibility. Meanwhile, the changes to the BDS regime are in line with efforts to enhance Singapore’s tax system, ensuring that it is fairer and more progressive.