It may seem counterintuitive to buy a luxury house amid surging prices, but analysts predict that prices will only continue to increase in Singapore.
Median property prices are expected to cost between SGD 1.9 million (US $1.4 million) and SGD 2.5 million (US $1.9 million) by 2030, according to a report from DBS Group Research (DBS).
Morgan Stanley’s note in 2017 also echoed the sentiment of higher property prices. Home prices in Singapore may double by 2030, indicating an up to 6% increase per year.
Whether you want to save money by buying as early as now or you wish to capitalize on higher prices, there might be some wisdom behind a second home purchase.
The Key Reasons For Higher Property Prices By 2030
A bigger population will cause a higher demand for homes in Singapore. According to DBS, the country’s population could reach up to 6.5 million people by 2030.
As the population grows, it implies a yearly demand ranging from 13,000 units to 16,000 units until 2023.
The annual demand would then decline to an average range between 12,000 and 13,500 units.
Another key reason for higher home prices involves the “upgraders market.” DBS expects approximately 17,000 HDB households per year would qualify to move into the private residential sector.
The Singaporean government requires HDB homeowners to occupy their properties for at least five years before transferring to private residences.
While many of these households won’t seek luxury properties, DBS predicted that foreigners would account for up to 10% of total private housing transactions.
Dubbed as the “wild card” for the projected increase, foreign home purchases could tip the scales of demand for private residences.
The Best Places To Buy A Second Luxury Home
Some of the best places to buy a second luxury home in Singapore include Greenbank Park, Leedon Heights, Mount Elizabeth and Nassim Road.
Several property developers have launched mid-term plans for premium residences in these areas.
For example, Shun Tak Holdings invested SGD 557 million (US $413 million) in a luxury development at Mount Elizabeth by 2027.
You should also consider Ang Mo Kio and Clementi for a second luxury home. Singaporean billionaires have doubled down on real estate through land auctions in these areas.
Prepare For Additional Buyer’s Stamp Duty (ABSD)
Once you’ve decided to acquire a second luxury home, be ready to deal with expensive stamp duty.
The Inland Revenue Authority of Singapore (IRAS) imposed new ABSD rates in December 2021. If you’re a Singaporean citizen buying a second home, the IRAS will collect a 17% ABSD rate plus the usual BSD.
Here’s a sample estimate for a Singaporean citizen buying a second house worth SGD 6.86 million (US $5.08 million):
SGD 259,000 (BSD) + SGD 1,166,200 (ABSD) = SGD 1,425,200
IRAS formula for BSD
- 1% of the first SGD 180,000
- 2% of the second SGD 180,000
- 3% of SGD 640,000
- 4% of the remaining amount
Keep in mind that BSD depends on the property’s market value or purchase price, whichever is higher. A 25% ABSD rate applies to a permanent resident who buys a second home in Singapore.
The ABSD rate for foreigners, whether or not they’re buying a second home, remains fixed at 30%.
A Competent Broker Will Be More Relevant Than Ever
Stamp duty remains one of the biggest obstacles for luxury property buyers. For this reason, you should invest in a competent broker to make sure your taxes are a worthwhile expense.
A seasoned broker can help you with uncovering potential blind spots for a property purchase. One of them could involve a bad choice of property in a good location.
Brilliance Capital knows how to solve the inconveniences of looking for the right luxury home. It became well-known with over SGD 400 million (US $296.6 million) in successful transactions during its debut year alone.
Click here to find out more about the full-service agency.