Duration-dependent transaction tax effects on sellers and their behaviors

Abstract

We identify three interrelated behavioral outcomes of the duration-dependent seller's stamp duty (SSD) implemented in the Singaporean private housing market and examine how it reduces market liquidity. An SSD lowers lock-in home sellers’ opportunity cost of holding their properties through the lock-in period thresholds. Consequently, their selling prices are higher than non–lock-in home sellers. An SSD lowers their probability of home sales; the magnitude of this effect depends on the SSD's tax rate and tax rate deduction across a threshold. Moreover, an SSD drives some lock-in home sellers to lease out the properties at lowerents.