IMPACT OF THE ADDITIONAL BUYER STAMP DUTY ON THE PRIVATE RESIDENTIAL MARKET

Abstract

Upon recovery from the Global Financial Crisis (GFC) in 2009, the Singapore economy has experienced robust growth. With the improved market confidence and record-low interest climate, the local private housing prices escalated beyond what was considered to be legitimate by assessing the economic fundamentals. Several contentious issues on housing affordability, social unhappiness and political instability have plagued the city-state, rendering immediate government intervention necessary. Eight successive cooling rounds were imposed on Singapore property market since 2009. Regardless, the objective of this study endeavours to examine the effectiveness of the Additional Buyer Stamp Duty (ABSD), which was only introduced in Singapore on 7 December 2011 and was later revised on 11 January 2013, on the private residential market. To achieve so, the Difference-In-Difference (DID) methodology is adopted in which the highly active and speculative condominium market is regarded as the treatment while the significantly less active landed housing market to be the control group. Such enables the study's objectives to be carried out while controlling for the general market conditions. The end-result shows that when the ABSD was first imposed in December 2011, it effectively dampened the speculative activity and cooled down prices within the private housing market in the core central region (CCR) and the rest of the central region (RCR). Comparatively, the private housing market outside of the central region (OCR) was significantly less impacted upon. On the other hand, the revised ABSD is concluded to be ineffective in serving its purpose to cool down the overall private housing market in Singapore. Despite its revision with higher ABSD tax rates imposed, the private housing prices within the CCR, RCR and OCR are empirically observed to continue rising. Where speculative activities are seen to weaken significantly, such observations underpin the possibility of prevalent long-term investors who may still find it worthwhile to pay for the additional taxes.