Budget 2022: Quick Takes on higher property taxes for residential properties

Fiona Lam &

Tan Nai Lun

Published Fri, Feb 18, 2022 · 11:23 AM

PROPERTY tax rates for both owner-occupied and non-owner-occupied residential properties in Singapore will be revised in 2 steps, starting from 2023.

For owner-occupied homes, the property tax rate will increase for the portion of the annual value in excess of S$30,000, to 6 to 32 per cent, from the current 4 to 16 per cent.

And for those that are not owner-occupied, including investment properties, the rate will go up to 12 to 36 per cent, from today's 10 to 20 per cent. High-end properties will see a steeper increase.

Here are some quick takes from analysts and market observers on these higher tax rates:

Cushman & Wakefield head of research, Singapore, Wong Xian Yang:

"While an increase in property tax does increase holding costs for property, it is unlikely to dampen demand as the increase in costs seem manageable. Assuming an investment property with an annual value of S$22,200, the increase in tax would only come up to S$444.
"While the Good Class Bungalow segment may see the largest increase in property tax, it is unlikely to impact demand as high-net-worth individuals would be able to absorb the increase in property tax."

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"The increase in the property tax is substantial but we do not think it will significantly dent residential property investment demand. Many investors take a longer-term view of property investments and are looking at potential for capital growth and wealth preservation in the future.
"With the increase in the property tax for investment properties, we anticipate that rents could potentially increase as some residential landlords may raise rentals to help defray the rise in property tax payable. For some investors who own multiple properties, they may perhaps explore investing in commercial properties, which have a flat property tax rate of 10 per cent.
"Property tax rates for owner-occupied homes of higher value will also be raised. We think this fair and progressive, with those who could afford to pay more contributing a larger share."

Huttons Asia senior director (research), Lee Sze Teck:

"Increasing property taxes is probably the easiest and cost effective way of levying a wealth tax. As described by some, it is the low-lying fruit.
"Will this make investing in properties less attractive? It may not. Most investors buy properties for several reasons - wealth preservation, rental and capital appreciation. Properties are a good hedge against inflation and hold its value over time.
"Furthermore, investors look towards capital appreciation more than rental income. Capital appreciation is more significant than rental. In the current positive rental market conditions, owners will try to pass some of the increase in property taxes to the tenants. This will result in higher rents and costs to foreigners. They may ask for a higher pay package which raises the business costs for companies."

Edmund Tie head of research and consulting, Lam Chern Woon:

"A key thrust (of Budget 2022) was a concerted slew of measures to tax the haves while shielding the have-nots from the GST hikes and the rising costs of living.
"A widely anticipated introduction of a wealth tax was put on hold, but it was no surprise that other low-lying fruits were not spared. To this end, the increase in the highest marginal personal income tax rates, the higher tax on luxury cars, as well as higher property tax rates on non-owner-occupied properties or prime owner-occupied properties is a welcome move to reduce social inequality and strengthen our social compact.
"All but the top 5 to 10 per cent of residents are likely to be unaffected by this multi-pronged increase in tax, and we do not expect a significant impact on the property market."

ERA Singapore head of research and consultancy, Nicholas Mak:

"Although the increase in the tax rate appears to be rather large, it would not have a significant negative impact on the housing demand.
"The sharper increase in the property tax rate that applies to non-owner-occupied residential properties will not deter investors from investing in real estate. There are bigger financial hurdles, such as additional buyer's stamp duty (ABSD) and the total debt servicing ratio (TDSR), that property investors must face if they want to buy and own investment properties. In addition, property investors would also pay property maintenance costs and commissions to property agents to rent out their properties.
"The higher property tax would reduce the net rental yield for residential properties. As a result, investors would rely even more on capital appreciation when they invest in real estate."

PwC Singapore asset and wealth management tax leader, Anuj Kagalwala:

"A common question posed by families looking to set up Singapore family offices has been around the direction Singapore will take on taxation of wealth. Today that mystery has been partially solved and probably in line with expectations; an increase in property tax rates and tax on luxury cars. Furthermore, the wait and watch approach on the taxation of net wealth ensures that Singapore adopts a balanced approach, if and when needed.
"Singapore is doing well in the family office and wealth management space. ... But we should not be complacent since there is a lot of competition out there. Whilst choosing a location for a family office or wealth managers depends on several factors, tax complexity and compliance burden are important considerations."

Kristal.AI founder and CEO, Asheesh Chanda:

"We welcome the announcement of sweeping changes in the wealth tax scheme, pertaining to luxury vehicles and property, where individuals who have more will contribute more to nation building."

Get the latest updates on Budget 2022 here: bt.sg/budget22

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