Progressive property tax rates unlikely to dampen investor sentiment: analysts

The new set of progressive tax rates introduced in Budget 2013 will see high-end property owners paying more in property taxes.

While the tax bill may be higher for the rich in percentage terms, analysts say this may not dampen investor sentiment to buy luxury properties.

From January 2014, properties with higher annual values will be taxed at higher rates.

With a tax rate of between zero and 15 per cent, there will be a significant gap in the property tax bill between mass and higher-end homes.

Still, analysts said most high-end home owners will just take this in stride.

Nicholas Mak, executive director of research and consultancy at SLP International, explained: “The increase may seem substantial. It can range anywhere from 20 per cent to 70 per cent in some cases. But if we look at it in absolute quantum, in thousands of dollars, the increase is only a few thousands of dollars. And I think if the person is able to spend a few million dollars on a high-end luxury property, I believe they can well afford this increase in property tax.”

Experts said this latest move is not an extension of property cooling measures.

While this could make some buyers rethink their plans, experts said such prime luxury properties will continue to remain attractive.

Chua Yang Liang, head of research and consultancy at Jones Lang LaSalle, said: “By and large, I don’t think you will see a major shift because the high-end market, they are established neighbourhoods. The likes of (Districts) 9, 10 and 11 still command certain premium. It may see some downside risk, but I don’t think it will see a large impact.”

Alan Lau, a corporate tax partner at KPMG, said: “If you compare Singapore against Hong Kong, these are two very similar countries with similarly high residential property prices that the respective governments are trying very hard to cool down. So I think even after this latest round of property tax increases for non-owner occupied residential properties, we do not think that it will actually put Singapore in an inferior position compared to Hong Kong.”

Analysts said the new progressive tax rates could have marginal impact on yield and may see some corporates and high-end investors looking to commercial and suburban properties as alternatives.

Overall, they said the government’s move to cut foreign workers is the one that will soften demand for mass market property and rents.

Source : Channel NewsAsia – 25 Feb 2013

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