credit: PropNex Research
In Singapore Budget 2022, announced by Finance Minister Lawrence Wong on 18 February 2022, Property Tax will be increased as part of efforts to enhance its tax system, ensuring that it is fairer and more progressive – with those who could afford to pay more, contributing more toward helping to fund public spending.
Here’s a quick re-cap. The tax rates for residential properties will be raised – in two steps starting from 2023 – with higher end properties seeing steeper increase:
Owner-occupied Residential Properties with annual values of more than S$30,000: there will be a taxation range of 5% to 23% beyond the first S$30,000 valuation by 2023, with a further increase to 6% to 32% in 2024.
Non-owner Occupied Residential Properties: Currently at 10 to 20 per cent, the tax rates for such properties, which include investment properties, will first be raised to 11% to 27% in 2023, before being raised further to 12% to 36% per in 2024.
Impact on owner-occupied properties
For owner-occupied properties, the increase in property tax affects those of annual values in excess of $30,000. According to the Ministry of Finance (MOF), this will only impact the top 7% of all owner-occupied homes in Singapore. Therefore, many households that are living in HDB flats or private properties in the suburban areas – whose annual value of residence is $30,000 or below, will not be affected by the change.
For owner-occupied residential properties
Source: PropNex Research, Ministry of Finance
For instance, a 4-room HDB flat in the city fringe with an annual value (AV) of $11,040 will continue to pay $121.60 in property tax – similar with the tax payable under existing tax treatment:
Owner-Occupied 4-room HDB Flat in city fringe with AV of $11,040
current property tax payable: $121.60
An owner-occupied condominium in the central location with an annual value of $40,000 will see a final tax increase of $200 in 2024 as the property tax payable rises from the present $1,280 to $1,480:
Owner-Occupied Condominium in central location with AV of $40,000
current property tax payable: $1,280
Meanwhile, a home owner who is living in a large landed property will have to fork out more on property tax after the revision, with tax payable rising from the current $2,780 to $3,930 in 2023 and to $5,080 in 2024:
Owner-Occupied large landed home with AV of $70,000
current property tax payable: $2,780
In a nutshell, most households should be able to manage the increase in property tax on owner-occupied homes. However, a certain segment of the population, such as retirees who are living in a sizeable landed home and do not have a lot of savings to tap from may find the property tax hike challenging.
Impact on non-owner-occupied properties (including investment homes)
For non-owner-occupied homes, properties that have a higher annual value will see a greater impact from the property tax increase. The revised rates will kick in over two phases, starting from 2023.
For non-owner-occupied residential properties
Source: PropNex Research, Ministry of Finance
To illustrate, a non-owner-occupied HDB flat with an annual value of $10,000 will see an increase in property tax payable from $100 to $1,100 in 2023; a further increase to $1,200 in 2024:
Non-owner-occupied HDB Flat with an AV of $10,000
current property tax payable $1,000
Meanwhile, a non-owner-occupied condo in the suburbs with an annual value of $30,000 will see an increase of $600 in property tax payable to $3,600 from 2024:
Non-owner-occupied Condominium in the suburban area with an AV of $30,000
Current property tax payable: $3,000
For a non-owner-occupied condo in the central location – where many investors tend to purchase their investment property – the property tax payable for a unit with annual value of $40,000 will climb from the existing $4,200 to $4,900 in 2023 and to $5,600 in 2024:
Non-owner-occupied Condominium in the central area with an AV of $40,000
Current property tax payable: $4,200
In general, the new property tax adjustment will not affect the residential market significantly. Most investors take a longer-term view on property purchase in Singapore, focusing on the long-term returns, capital growth potential and as a means to preserve their wealth.
The Singapore residential property market is seen good long term growth and also hedge against inflation. In 2021, private home prices grew by 10.6%. Reference to Urban Redevelopment Authority’s Property Price Index, private home values rose by 22% from 2011Q1 to 2021Q4. Singapore remains an attractive investment destination, with its stable currency and political environment.
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