Impact of higher property tax in Singapore

Singapore property tax is due to increase in 2023 and 2024. How will it impact the residential market?

On 18 February 2022, Singapore Finance Minister Lawrence Wong said in his 2022 budget speech that property taxes on non-owner-occupied homes, including investment properties, will be raised to 12 to 36 percent over the next two years from the current rates of 10 to 20 percent. Owner-occupied properties would also see increase rates from the current 4 to 16 percent to 6 to 32 percent by 2024.

Wong pointed out that the new system, which imposes higher taxes on more expensive units, places its highest tax rates on homeowners in the top seven percent of the city-state’s income bracket. With Singapore looking to reduce social inequality, this will sanction those high earners who earn more to contribute more as taxes on personal income, property and luxury cars go up.

The new tax scheme will be implemented over a two year period, with duties on non-owner-occupied properties set to increase to 11 to 27 percent in 2023 and to climb to 12 to 36 percent in 2024. For owner-occupied homes, properties with annual values greater than S$30,000 will have a property tax of 5 to 23 percent starting next year and this will be increased to 6 to 32 percent in 2024.

property tax owner occupied
Property Tax – Owner Occupied
Property Tax - Non Owner Occupied
Property Tax – Non Owner Occupied

While there is an increase across the board for both owner-occupied and non-owner occupied residential properties, properties with a higher annual value will be taxed more.

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 (the most easily achieved of a set of tasks, measures).

The majority of the property market will not be affected as they will not see a big increase in the annual value and hence the property tax payable. Singaporeans made up more than 80% of the buyers in recent years and thus should not be affected much.

Will this make investing in properties less attractive? In our opinion, it may not. Many investors take a longer-term view of property investments and are looking at potential for capital growth and wealth preservation in the future. Properties are a good hedge against inflation and maintain or increase its value over time. Furthermore investors in Singapore properties look towards capital appreciation more than rental income, as capital appreciation is more significant than rental in the long term.

We however do anticipate that rents to potentially increase, as 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 and thus raises companies’ business costs with higher pay package requests by expats.

Some potential investors or those who own multiple properties may explore investing in commercial properties that have a flat property tax rate of 10 per cent, or overseas properties especially given the recent property cooling measures announced three months back in December 2021.

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