SINGAPORE homeowners will face a higher property tax burden next year as both annual values (AVs) and tax rates rise, prompting the government to hand out a one-off rebate to soften the blow.

Owner-occupiers of residential properties will receive a one-off property tax rebate in 2024, to help address cost-of-living concerns and the upcoming increase in property tax, said the Ministry of Finance (MOF) and Inland Revenue Authority of Singapore (Iras) on Thursday (Nov 30). 

Owners of the smallest HDB flats will pay no tax after a 100 per cent rebate. Owners of three, four and five-room flats and executive flats will receive rebates of 30 per cent to 70 per cent, while private property owner-occupiers will get a 15 per cent rebate, capped at S$1,000.

Owners of investment properties will not get a rebate for their non-owner occupied properties and will be hit the hardest by the double blow of higher property values and taxes.

Property taxes are calculated based on AVs, which are revised yearly based on the estimated annual rent if the property was rented out. With market rentals of both private and public housing on the rise since 2022, AVs have risen in tandem. In the third quarter of 2023, condo rents were up 19.3 per cent year on year. HDB rents in October were up 14.1 per cent from a year earlier, going by data from 99.co and SRX.

Rising AVs, together with increases in property tax rates announced in Budget 2022, will bring about an increase in property taxes for most residential properties in 2024, MOF and Iras said on Thursday. 

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In response to queries from The Business Times, MOF said that for 2024, HDB flat owners can expect AVs to increase by 20 per cent to 25 per cent. 

“For private residential properties, the vast majority, or 80 per cent, of properties will see an increase of 15 per cent to 25 per cent, with some increasing by more than 25 per cent. These AV increases reflect the market rental movement of the respective properties,” MOF noted.  

AV increases for 2023 were not disclosed. Before the last AV revision on Jan 1, 2023, Iras said that market rentals of both HDB and private housing had risen by more than 20 per cent, and AVs of residential property would move up to reflect this.

Although those who own high-end property for investment are expected to feel the increase in tax and AV most acutely, analysts do not expect residential demand or property prices to be dented as a result. 

The tax hike was announced in Budget 2022 but the market remained buoyant, with private-home prices rising by 8.6 per cent that year, said Huttons senior director of data analytics Lee Sze Teck. 

Nicholas Mak, chief research officer at property search portal Mogul.sg, said: “Owners of luxury residential properties will take the hike in property tax in their stride as the incremental property tax payable from next year onwards is only a small fraction of the property value.”

Higher property taxes may, however, push buyers to opt for slightly smaller homes in the future, said Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie. “As buyers turn more cost-conscious, developers may also be more measured in their land bids, which will help to prevent land-bid prices from escalating further.”

Higher property taxes could lead landlords to resist lower rents as they now face higher property operating costs, said Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia.

But if the rental market softens further, “landlords would have to lower their expectations, or else they risk bearing higher vacancy costs on top of higher taxes”, added Wong.

Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru Group, said: “Actual rent prices are also reaching a resistance level... there will likely be a limit on how much landlords will be able to charge for rent moving forward.”

At Budget 2022, Minister for Finance Lawrence Wong announced that property tax rates for both owner-occupied and non-owner-occupied residential properties would go up in two steps starting from 2023, and said property tax is Singapore’s principal means of taxing wealth. 

In FY2022, government revenue from property taxes accounted for 7.4 per cent of revenue collected, or S$5.1 billion. The amount collected rose 9.1 per cent from S$4.7 billion in FY2021. 

In 2023, the property tax rate for non-owner-occupied residential properties – which include investment properties – was hiked across the board to between 11 per cent and 27 per cent, from between 10 per cent and 20 per cent previously. From 2024, the tax rates will increase to between 12 per cent and 36 per cent. 

Property tax for owner-occupied residential properties for the portion of AV in excess of S$30,000 has also been on the rise. The rate was hiked to between 5 per cent and 23 per cent in 2023, from between 4 per cent and 16 per cent previously. From 2024, the rate will be raised to between 6 per cent and 32 per cent.

After rebates, owner-occupiers of HDB flats will see their property tax bill increase by less than S$3 per month on average next year. 

“The bottom half of private property owner-occupiers will experience a property tax increase of less than S$15 per month,” the authorities said.

On Thursday, MOF also announced that it would raise the AV thresholds for social support schemes from January 2024 as AVs have risen, to ensure that Singaporeans with greater needs continue to receive support. 

Various government social support schemes provide higher benefits to individuals or households with lower means; the AV of their property may be used as an indicator of means. These social support schemes include the GST Voucher scheme, MediShield Life premium subsidies and the Workfare Income Supplement scheme. 

For the first tier of benefits, the AV threshold will be revised from up to S$13,000 to up to S$21,000. The AV threshold for the second tier of benefits will increase from more than S$13,000 and up to S$21,000, to more than S$21,000 and up to S$25,000.

The AV threshold of S$25,000 will cover about 75 per cent of residential properties, including some lower-value private properties, said MOF.