Foreign Ownership Impact: Singapore's residential property tax doubled

Individuals from other countries who wish to purchase property or land in Singapore, specifically those designated for mixed commercial and residential purposes, will now be required to obtain approval from the government. The Ministry of Law (MinLaw) and the Singapore Land Authority (SLA) have recently announced a refinement to the Residential Property Act (RPA), which now categorizes these mixed developments as residential property or land. Before this change, mixed commercial and residential developments, such as shophouses and some shopping centres with residential units above, were considered part of the non-residential property category in the list of designated land use zones.

According to information on the Urban Redevelopment Authority's (URA) website, mixed commercial and residential developments involve a blend of commercial establishments and residential flats. According to MinLaw and SLA, since land zoned or developments permitted for mixed use are mainly intended for residential purposes, they will now be classified as residential property and subject to regulation under the RPA. Foreigners who intend to buy or acquire an interest in properties permitted for mixed commercial and residential use must now seek approval under the RPA.

However, if foreigners already own such land or property, they are not obligated to obtain RPA approval as long as they "intend to retain the property as-is." On the other hand, if they plan to keep and redevelop the property, they will need to obtain approval as specified by MinLaw and SLA. Foreigners can also be exempted from seeking approval for such properties if the sellers granted them the Option-to-Purchase (OTP) before July 20 of this year.

If a development is primarily owned by a foreigner, accounting for approximately 80 percent of ownership, that individual has the authority to make decisions regarding the development, including the possibility of carrying out an en-bloc sale. The Singapore government has taken the step of increasing the residential property tax for foreigners to 60 percent.

As a result of this change, there might be uncertainty in the investment sales, collective sales, and shophouse markets during the transitional period as market participants seek clarity on the new regulations. For instance, the sale of strata units in commercial and residential developments, along with certain shophouses in the Bugis area, could potentially be affected. However, majority of residential project launches are on land zoned specifically for residential use and are not expected to be impacted by the tax increase for foreigners.

Next (Forecasting a Slower Pace: Multi-family housing starts on the decline in US)

Foreign Ownership Impact: Singapore's residential property tax doubled

This Month

Overview

Explore

Join Us