Due to Singapore’s Foreign Trade Agreement with the above five countries, which require their citizens to be treated like Singapore nationals, those citizens will not be obliged to pay the recently-hiked stamp duty of 10 per cent – on top of an existing 3 per cent, reported here.

The reason for this, is that the aforementioned countries are members of the European Free Trade Association, pointed out Nicolas Holt, research manager at agent Knight Frank's Singapore office.

“So, like Singaporean citizens, the only Additional Buyer’s Stamp Duty these foreign buyers will be subject to is 3 per cent on a third property,” he added.

The ABSD was enforced last December primarily to cool housing speculation and discourage foreign investors from using the city-state as a safe haven for their cash - and it appears to be working.

Since the legislation took effect on 8 December 2011, sales volumes decreased sharply in December, with 632 units sold by developers, followed by a strong rebound in January 2012 with approximately 1,800 units sold. 

Three successful project launches took place in January, which distort this "record" month, suggesting the residential market was affected by the ABSD.

The ABSD is tiered for different groups of buyers. While most foreign purchasers and corporate entities buying a first and subsequent residential property in Singapore will pay 13 per cent, permanent residents buying a second and subsequent residential property in Singapore will pay an ABSD of just three per cent.

Born-and-bred Singaporeans buying a third and subsequent residential property in Singapore will also pay just three per cent, said the government.

To offset an anticipated drop in demand, some developers are offering to share the burden of the ABSD, through discounts and incentives, said Holt. “We have even seen a number of developers prepared to pay the ABSD with the buyer paying the standard stamp duty,” he added. Developers may increasingly target European Free Trade members who do not have to pay the duty. 

Holt added that with a softening of prices likely in the Singaporean market in 2012, buyers could pick up good deals at attractive prices. And the allure of Singapore remains strong. 

“Singapore has one of the more mature and liquid markets in Asia Pacific. It is not priced as highly as Hong Kong and has more secure tenure and better liquidity than China,” said Holt.