Singapore introduced higher Buyer's Stamp Duty, or BSD, rates for residential properties worth above S$1 million, along with the republic's Feb. 19 announcement of its 2018 budget.

The country's finance minister, Heng Swee Keat, unveiled plans to raise the official stamp duty to 4% from 3% of the value of luxury homes valued in excess of S$1 million, a change that was put in place Feb. 20.

Before the stamp duty hike, the city state had been adopting general BSD rates between 1% and 3% for residential properties, a range it has kept since 1996.

The move is seen as part of the Ministry of Finance's aim to make Singapore's tax system more progressive, Heng said during the budget announcement.

The new policy comes amid a quick recovery of Singapore's housing market after the government eased some of its cooling measures in March 2017.

In January, Singapore home sales jumped 37% compared to the same period last year. Developers sold 522 units within the month, up from 382 homes a year earlier, marking the best start to a year since 2014, Bloomberg News reported Feb. 14, citing data from the country's Urban Redevelopment Authority.

Nevertheless, analysts said the impact of the BSD change on the housing market would be mild.

"Taking a S$1.5 million property as an example: the current BSD payable is S$39,600, but the new amount payable will be S$44,600, [just] S$5,000 more. This absolute sum is not large and is merely 0.3% of the total transactional cost," said Ong Teck Hui, JLL's national director of research and consultancy.

As the majority of Singapore's home transactions fall below S$1.5 million, he expects the current market recovery — by way of demand fundamentals — is unlikely to be dampened by the slight growth in the BSD.

But Ong also added that some buyers may factor the BSD increase into their purchase plans for big-ticket items, since the increase in the amount payable would consequently be significant due to the higher base prices.

As of Feb. 21, US$1 was equivalent to S$1.32.