How the Seller’s Stamp Duty in Singapore Affects Your ROI
The seller’s stamp duty Singapore came about as part of a set of cooling measures designed to prevent residential properties from changing hands too quickly in an escalating real estate market. The idea is to tell the property owner that they shall have a longer investment horizon and to hold on to properties for more years before selling.
The government encourages property owners and investors to look at long-term prosperity rather than short-term speculation as a way to stabilise the private housing market. The seller’s stamp duty Singapore applies to any and all vendors, regardless of nationality or investment potential, except HDB which is governed by another set of rules.
If you want to sell a property shortly after buying it, you may have to pay a seller’s stamp duty in Singapore. Therefore, it makes sense to look at your financial options before reaching this decision.
What Is the Seller’s Stamp Duty in Singapore?
The seller’s stamp duty involves a percentage payment of the overall price similar to a buyer stamp duty in Singapore or an additional buyer stamp duty in Singapore. The one significant difference is that the seller’s stamp duty becomes zero after a certain time elapses.
Your SSD liability depends on the type of property sold, the date of the acquisition and the time you sold the property. The seller’s stamp duty occurs up to four years after you purchase a residence. The tax does not apply to commercial properties, although it does apply to buildings under construction.
The SSD is a percentage you pay on top of the final sale price or market value of the residential property, whichever is more if you sell it to another party within four years of buying it. The idea is that the Singaporean government does not want property speculators to change the real estate market in Singapore artificially, therefore trying to avert a housing market collapse.
Percentages and Time Frames
The amount of the seller’s stamp duty varies based on the time frame after you sell a property. If you sell your investment in less than a year of purchasing it, you owe a seller’s stamp duty of 16 percent.
For a property sold between one year and two years after buying it, you owe 12 percent. When you sell after two years but before three years of ownership, you pay 8 percent of the purchase price or market value. From three years to four years of ownership, the figure goes down to 4 percent. The seller’s stamp duty expires any time after four years of ownership, as of laws passed in January 2011.
The basic rule of thumb is that the seller’s stamp duty in Singapore lowers by 4 percent every year until after you own the property for four years. Let’s see an example.
You sell your condo at a price of $1.5 million, and that figure is above market value. You bought the condo six months ago, but then you decided to buy a bigger one after having a monetary windfall. Your seller’s stamp duty is 16 percent of $1.5 million, or $240,000. Let’s say you hold on to this condo for three years and six months. Your seller’s stamp duty lowers to just 4 percent, which comes to a figure of $60,000. If you sell it after four years of ownership, you do not owe a seller’s stamp duty at all.
Not everyone pays the seller’s stamp duty. Licensed developers operating under the Housing Developers Act do not have to pay this fee. Public authorities, such as the HDB, don’t pay the seller’s duty, either. If the government purchases your property under the Land Acquisitions Act, and you own it less than four years, you do not have to pay the seller’s stamp duty in Singapore. People under bankruptcy or repossession do not pay this fee, nor do foreigners when they invoke the Residential Properties Act.
Even with the seller’s stamp duty in place for more than five years, some people still voluntarily pay it if the investment is right.
Sometimes, the return on property investment is too good to pass up even the seller’s stamp duty Singapore might come into the picture. As many as 244 vendors let go of property after the third year of ownership, but before the four years, from January to November 2015, which is 44 more than in all of 2014. These people paid the 4 percent fee on the seller’s stamp duty.
Experts believe this action might come as investors wait to see prices go down even further. That means the possible reinvestment potential is greater than paying the 4 percent seller’s stamp duty. Another factor could be that some investors lost money due to a combination of low rents and higher interest rates.
Who Can Help
Looking at property price trends is one way to gauge whether selling your investment is the right choice for you, even if you own your property for less than four years. Dylan Tan can point you in the right direction. Dylan knows what’s going on in the real estate market in Singapore, and he can show you any potential returns on investment if you want to sell sooner rather than later.
Dylan can do quick calculations that show you the best way forward with your investment. There is no “one size fits all” properties in Singapore, and Dylan can point you in the right direction with a no-obligation initial consultation to assist in making your money work harder for you. Keep an open mind to take full advantage of the opportunities opened up in some locations thanks to newer developments.
Because of cooling measures, including the seller’s stamp duty, investors are holding onto properties for longer periods of time. As more new condo TOP in the coming years, that means there could be a surplus of empty units waiting for buyers just like you. Dylan can advise you as to what properties may create a better ROI in the coming years and which ones may pose more risk to your portfolio.
Dylan can also advise you on what to do if your family needs change. You might need a smaller property after your grown children move out. You could also need a bigger place because some family moved in with you. No matter your situation, Dylan can advise your situation and make an honest assessment so you can make the best possible move.