Single digit millionaires are the demographic most likely to buy a private condo, either by upgrading from an HDB flat, or by buying a small unit as a first-timer. For this reason, a lot of single digit millionaires look at property cooling measures, and think the Singapore government is trying to sabo them. But in reality, the people most negatively affected are not the single digit millionaires buying mass-market condos: in fact, the cooling measures may be the very thing that gives them a fair chance, against their multi-millionaire counterparts. Here’s why:
Reason 1: If you’re upgrading to a condo, or a first-time buyer of a condo, ABSD prevents you from being priced out
I’m just going to be blunt: with private property prices where they are in 2024, a single digit million may be enough to upgrade to a nice family-sized condo (e.g., a new launch three-bedder right now may be in the range of about $2.1 million). It is probably not enough to buy and rent out a second property, with the 20% ABSD tax.
So that’s against you right? Wrong.
The people with $10 million, $20 million, or $100 million portfolios are happy to buy up entire blocks of condo units; and against their sheer financial firepower, you have zero chance of competing. The truly affluent can get huge discounts for buying en-bloc; and if they decide Singapore property is a safe haven in this increasingly volatile economy, they will price you straight out of the market.
(And being a single digit millionaire, don’t think the government or the general public will sympathise much, if you don’t qualify for an HDB flat or EC. You’re going to be in the ultimate sandwich situation).
So in this sense, the higher ABSD rates (going up to 65% for corporate entities) are the very thing protecting your chances to upgrade. It may be annoying that you need to sell before you buy*, but at least – being just an upgrader – you might still qualify for ABSD remission.
*If you buy a property before selling your previous one, you need to pay the 20% ABSD first. If you’re married, one of you is a Singaporean, and you sell your previous home within six months of buying the new one, you can then get full ABSD remission. But for the most part, if you don’t want to pay ABSD at all, you can get away with it by just selling your previous home first.
Reason 2: Paying upfront ABSD when upgrading is annoying, but it also works in your favour
ABSD remission seems like just an annoying red-tape error; an unnecessary hurdle. But if that were the case, our ultra-efficient government would have pegged that as an issue from day one. I think it’s very much deliberate, and a clever move.
First, if people are rushing for ABSD remission, they have a strict six month time limit to dispose of their previous home. That takes away the time required to wait for higher offers, or risk negotiating for a better price. And for those who are dangerously close to the six month limit, there’s a good chance they’ll drop their asking price, thus putting a cheaper resale home on the market. If you have the cash reserves, this gives you opportunities in the resale market.
Second, by pressuring people to sell before buying, it slows the rapid influx of buyers into showflats or resale condo viewings. This helps to moderate the pace at which home prices rise; a pretty important factor in a market where even single digit millionaires are being priced out.
Reason 3: The ABSD is giving you a chance to move up to the OCR, if you already own RCR properties
The ABSD rate has been doubled to 60% for foreigners and entities. And you know who eats the biggest serving of excrement from that? Owners of Core Central Region (CCR) condos. It’s gotten so bad, that even developers are shying away from Government Land Sales in the CCR.
The reason is that CCR is much more dependent on rich foreign buyers or investors as a demographic: two groups of people most affected by the ABSD. This has sent CCR prices lower – between 2012 to 2021, the median price gap between a Rest of Central Region (RCR) condo and a CCR condo was 42.7%. As of April this year, the gap had narrowed to 25.7%.
So thanks to the cooling measures, it’s now easier to make a jump from, say, Upper Thomson or Marine Parade, into a CCR neighbourhood like Bukit Timah or Balmoral. I acknowledge that ABSD rates and tighter loan curbs might bring more financing considerations; but consider that without the cooling measures, you might not have this opportunity at all.
So as irritating as the ABSD and cooling measures may be, they mostly come out on your side
This is especially true in 2024, when – in the context of big ticket costs like property – a single digit million is not enough to insulate from sky high prices. In fact, as ABSD measures from April 2023 sink in further, it may even provide unexpected advantages for single digit millionaires with sufficient cash reserves. For insights on how you can optimise your home ownership in this market, give us a shout out with your questions on Single Digit Millionaire.
