The introduction of higher Additional Buyer’s Stamp Duty (ABSD) rates has drastically changed how property ownership and investment are calculated in Singapore. Singaporean real estate investors easily navigated the market in the 1990s, using rental income from one property to finance the purchase of another. How times have changed.
In actuality, the ABSD has become a significant obstacle that forces even the most savvy investors to reconsider their approach. This simple guide explains how to buy 2nd property in Singapore without ABSD.
You may be eligible for ABSD remission under FTAs or be excluded from it, depending on your nationality. When they buy residential properties in Singapore, nationals or permanent residents of countries including the US, Norway, Iceland, Liechtenstein, and Iceland pay the same ABSD rates as Singaporeans.
This privilege stems from the ‘National Treatment’ obligation outlined in the Singapore-European Free Trade Association (ESFTA) agreement. Individuals in these countries who are citizens or permanent residents are eligible for ABSD remission under the relevant free trade agreements.
For individuals looking to buy a second property in Singapore without paying ABSD, investing in commercial property is an attractive option. Considering that commercial properties are not subject to the ABSD rates, this is easy to comprehend. They are a desirable option for investors who want to increase their property portfolio without paying additional stamp duty, as they are exempt from stamp duty.
It is crucial to remember that commercial properties usually yield higher rentals, with an average of about 5%, as compared to the ordinary range of 2% to 3% that applies in the residential sector. Due to the potential for income growth, commercial property investments may prove to be financially advantageous.
It is imperative to have a comprehensive understanding of the unique characteristics and risks of commercial properties. First off, commercial properties are usually more expensive than residential ones; thus, buying a commercial property requires larger cash outlays.
To make matters worse, unlike residential properties, commercial properties require the down payment to be paid entirely in cash. Commercial properties are, of course, subject to the Goods and Services Tax (GST), which is currently 8%. At all times, the GST charge must be paid in cash.
Even though commercial property investing can be lucrative, it requires thorough research and a deep understanding of Singapore’s commercial real estate market, which differs significantly from the country’s residential market.