Singapore homeowners are likely to face higher property taxes next year due to both an increase in annual values (AVs), and a rise in tax rates. The government has responded by offering a one-off refund to help ease the burden.

The Ministry of Finance and Inland Revenue Authority of Singapore announced on Thursday, November 30, that owners of residential properties would receive a special property tax rebate to address concerns about rising costs of living and the upcoming property tax increase.

After a 100% rebate, owners of the smallest HDB apartments will not pay any tax. Owners of executive flats, three-, four-, and five-room apartments, and flats with 3, 4, and 5 rooms will receive rebates ranging from 30% to 70%, while owners of private properties will get a maximum of S$1,000 in a 15% rebate.

The owners of investment properties won’t get a refund for their non-owner-occupied properties, and they will be the ones who will suffer the most from the double blow of increased property values and tax.

The property tax is calculated using AVs. These are revised annually based upon the estimated rent for the year if the house was rented. Since 2022, both market rents of private and public housing have been on the rise.

Condo rents increased 19.3% year-on-year in the third quarter 2023. According to data from 99.co SRX, HDB rents were up 14.1% from a year ago in October.

MOF and IRAS announced on Thursday that rising AVs in conjunction with increases in the property tax rates announced by Budget 2022 will result in an increase in property taxes in 2024 for most residential property.

MOF responded to The Business Times’s queries by saying that HDB flat owners should expect to see their AVs increase between 20 and 25 percent in 2024.

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In the case of private residential properties, 80 percent of them will experience an increase between 15 and 25 percent, while some may even see a rise of more than 25 percent. These increases in AV reflect the rental movements of the properties.

The AV increase for 2023 was not revealed. Iras stated that before the last AV review on Jan 1, 20,23, market rents for both HDB housing and private housing have risen by over 20 per cent. AVs will be adjusted to reflect this.

Analysts do not anticipate that residential property demand or prices will be affected by the tax increase and AV.

Budget 2022 announced the tax increase, but market conditions remained positive. Private-home prices rose by 8.6 percent that year.

The property tax hike will not affect owners of luxury residential properties as it is only a fraction of their property value.

However, higher property taxes could push buyers in the future to choose slightly smaller homes. Developers may be more cautious in their bids for land as buyers become more cost-conscious. This will prevent the land bid prices from increasing further.

Rents could be lowered by landlords if they are faced with higher operating costs.

If the rental market continues to soften, landlords will have to lower expectations or risk higher vacancy costs and higher taxes.

In Budget 2022, Finance Minister Lawrence Wong said that the rates of property taxes for owner-occupied and not-owner-occupied properties will increase in two steps beginning 2023. He also stated that property tax is Singapore’s primary means of taxing its wealth.

Property taxes contributed 7.4 percent of the total revenue in FY2022, or S$5.1 Billion. The total amount collected increased by 9.1 percent from S$4.7 Billion in FY2021.

The property tax on owner-occupied residential homes for the portion of the AV above S$30,000 is also increasing. In 2023 the rate will be raised to 5 – 23 %, up from 4 – 16 %. The rate will increase to 6 per cent to 32 per cent in 2024.

Property tax rates for non-owner occupied residential properties, which includes investment properties, will be raised to 11-27% in 2023 from the previous 10-20%. Tax rates will rise to 12-36% in 2024.