One-time tax rebate for owners to reduce impact of tax hikes
In FY2022, 7.4 percent or S$5.1billion of government revenue was derived from property taxes. The amount collected grew by 9.1 % from S$4.7billion in FY2021.
In addition, property taxes for residential properties that are owned and occupied by the owner for the portion AV over S$30,000 have also increased. The rate of tax was raised from 4% to 16% in the past, to 5% and 23% by 2023. In 2024 the rate will be increased to 6 percent and 32 cents.
Singaporeans will be hit with a higher tax burden on their property next year. Both annual values (AVs), as well as tax rates are expected to rise. As a result, the Government has decided to offer a one time rebate to ease the impact.
In response to rising living costs and a planned increase in the property tax in Singapore, the Ministry of Finance of Singapore, and Inland Revenue Authority of Singapore, (IRAS), announced a one time property tax exemption for owners of residential real estate in 2024.
In 2023, property taxes for non owner-occupied residential homes, which include investment houses, will rise from 10% to 20%. From 2024 onwards, the tax rate will increase between 12 percent and 36 cents.
In the third year of 2023 condo rents were 19.3% higher than they were a year ago. HDB rental prices in October rose by 14.1 percent compared with a previous year, based on data from SRX and 99.co.
MOF & IRAS on Thursday said that the rise in AVs combined with the increase in property tax rates announced within Budget 2022 would result in a property tax increase for most residential properties 2024.
Owners of HDB flats with a maximum area of three rooms will be exempt from paying any taxes after a refund of 100%. Owners of three-room, executive-style flats, five-room flats, and four-room flats will be eligible for rebates ranging between 30% and 70%.
Investment property owners won’t be eligible for a rebate and their properties that are not occupied by them will see a double hit of tax increases and rising property values.
Property taxes are calculated by AVs. These are adjusted annually according to the estimated rental income if you were renting out the property. Market rentals, including those of public housing and private housing, have increased since 2022.
MOF has responded to The Business Times and said that HDB flat owners in 2024 can expect their AVs will increase by 20% to 25%.
80 % of all residential properties in private ownership will see an average increase of between 15 and 25%. Some properties may even experience an increase greater than 25 %. These AV increase reflect the market movement of each property.
Lawrence Wong from the Ministry of Finance in Singapore announced, at Budget 2022, that Singapore will be increasing property taxes on owner-occupied as well as non-owneroccupied residential property by two percentage points starting in 2023.
Owners of luxurious residential properties are likely to take the rise in property tax with ease, since the incremental tax is only an insignificant fraction of property value.
Higher property tax rates may in future encourage buyers to purchase slightly smaller homes. As buyers become more price-conscious, land developers may bid more carefully on land, which can help prevent prices for land from rising.
Increased property taxes may cause landlords to resist lowering rents, as they face increased operating costs.
Amounts of AV increases in 2023 have not been disclosed. Iras claimed that by the time of the last AV update on Jan. 1, 2023, both HDB rental and private housing market rents had risen 20 percent, and AVs would be increased to reflect this.
Analysts don’t anticipate any impact on residential demand or home prices.
Budget 2022 included the tax hike but market prices remained strong, rising 8.6 per cent in 2018.
However, if rental prices continue to fall, landlords must lower their expectations. Otherwise they will be faced with higher vacancy and tax costs.