Property taxes for most residential properties will increase in 2024 due to higher market rents and annual values for most residential properties (Photo: Samuel Isaac Chua/EdgeProp Singapore)
On Nov 30, the government announced that property taxes for most residential properties will increase in 2024 due to higher market rents and annual values (AVs) for most residential properties.
Property taxes for higher-value private residential properties will increase, primarily luxury condos and landed properties.
On the other hand, owner-occupied residential properties will receive rebates to offset the increases in property taxes.
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Rents for private residential properties and HDB flats increased by 29.7% and 28.5%, respectively, in 2022, which translated into higher AVs in 2023, says Lee Sze Teck, senior director of data analytics, Huttons Asia. The higher AVs meant higher property taxes in 2023, he adds.
Meanwhile, the first three quarters of 2023 saw private property rents increase by 11.1%, while HDB rents increased by 8.3% from January to October 2023. "This points to further increase in AV for 2024 even though rents have shown signs of softening in 4Q2023," notes Lee.
As property tax rates are set to rise in 2024, residential property owners are bracing themselves to pay higher property taxes.
However, the government is stepping up to help with the rising cost of living by offering tax rebates ranging from 30% to 100% for owner-occupied HDB flats but 15% or capped at $1,000 for owner-occupied private property.
"The clear distinction of rebates for owner-occupied properties and no rebates for non-owner occupied properties reflects a progressive tax system," says Huttons' Lee. "The well-to-do population will be taxed more, and the taxes collected will be used to provide assistance to those who need it more."
According to Lee, the appeal of investing in residential property in Singapore lies in the potential for capital appreciation, which far outweighs the increase in property tax.
Lee further pointed out that the increase in property tax for non-owner occupied or investment residential property was announced in Budget 2022. Still, the residential property market remained buoyant, with prices increasing by 8.6% in 2022. Therefore, Lee does not foresee a significant impact on residential property investment in 2024.
"With private residential rents and HDB rents expected to soften in 2024, it is unlikely that investors will pass the increase in property tax to tenants," he adds.
Hence, the increased property taxes are likely to reduce rental income for landlords, says Christine Sun, OrangeTee & Tie senior vice president of research and analytics.
Next year, a slowdown in the rental market, coupled with high additional buyer's stamp duty (ABSD) rates for investment properties, elevated interest rates, and higher maintenance costs, will lead to higher investment costs. "The increased property taxes will be an additional consideration on top of the existing stamp duties, mortgages, and other costs," says Sun.
Hence, she sees buyers likely to remain budget-conscious, owing to higher cost of living, increased goods and services tax (GST), and economic uncertainties.
"The combined effect of these factors may help prevent a potential escalation of property prices," she adds. "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."
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