SINGAPORE – Most home owners will have to pay higher property taxes in 2023 as the authorities raise the annual value of most residential properties to reflect the rise in rentals.
In addition to this, property tax rates are also set to increase from next year.
To offset the burden, the Government will provide a one-off tax rebate of up to $60 for all owner-occupied properties, said the Ministry of Finance and Inland Revenue Authority of Singapore (Iras) in a joint statement on Friday.
The annual value of most private residential properties and Housing Board flats will be raised from Jan 1, 2023, as part of Iras’ annual review of properties to calculate how much taxes should be paid, the authorities said.
The Government had also announced an increase in property tax rates in Budget 2022. This will take effect over two years from 2023, with steeper hikes for higher-end properties.
Those who own expensive private properties will feel the brunt of the revision, particularly owners of properties purchased for investment purposes.
For example, the 2023 progressive property tax on properties with an annual value of above $100,000 is 23 per cent if they are occupied by the owner. The progressive tax on similar properties is 27 per cent if they are not occupied by the owner.
In 2022, owner-occupiers were taxed up to 16 per cent, while those who rented out their flats were taxed up to 20 per cent.
Mr Wong Hong Wei, a credit research analyst at OCBC Bank, said that if a property which is not occupied by its owner has an annual value of $80,000 in 2022 that is increased to $100,000 in 2023, the property tax would increase from $10,200 to $19,650.
The property tax would rise further to $25,200 in 2024, he said.
All one-room and two-room flat owners will continue to pay no property tax, as the annual values of their homes remain below $8,000, said the authorities.
The majority of those living in other HDB flat types will pay between $30 and $70 more in property tax compared with 2022, after taking into account the rebate.
Owners living in three-room flats will each pay between $7.20 and $30.40 more after the rebate, while those living in four-room, five-room and executive flats will each pay between $33.60 and $67.20 more.
The one-off 60 per cent rebate, which is capped at $60, will be automatically offset against any property tax payable in 2023, said the authorities.
Iras monitors market rental trends to determine the annual value of properties. Since the last revision of annual values on Jan 1, 2022, rents of HDB flats and private homes have risen by more than 20 per cent, it said.
“Residential property annual values will be revised accordingly from Jan 1, 2023, to reflect this,” Iras said.
Rents rose in October for the 28th consecutive month for HDB flats and the 22nd consecutive month for condominium units.
HDB rents were 24.7 per cent higher in September compared with the same month last year.
A property’s annual value is its estimated annual rent if it were to be rented out, and is determined based on the market rents of comparable properties.
The property tax payable is derived by multiplying the property tax rate with the annual value of the property.
Owners living in their property, known as owner-occupiers, enjoy concessionary property tax rates ranging between 0 per cent and 23 per cent, while the property tax rates for those who rent out their flats range between 11 per cent and 27 per cent.
The tax rates are progressive, with higher-value properties and those that are rented out being taxed at higher rates, the authorities said.
For example, owner-occupiers of a four-room flat will pay between $107.20 and $155.20 in property tax next year, after an increase of $33.60 to $45.60 in annual tax payable from 2022. In comparison, the increase in annual tax payable from 2023 will be $55.20 to $67.20 for owner-occupiers of executive flats.
Property tax rates for residential properties not occupied by their owners, including investment properties, will be increased to 12 per cent to 36 per cent by 2024.
This compares with the current 10 per cent to 20 per cent tax levied on such properties.
Social support schemes that use annual property values to determine eligibility will not be affected by the 2023 revision in annual values. These include the GST Voucher scheme, MediShield Life premium subsidies and Workfare Income Supplement Scheme.
The annual value of HDB flats was last revised in 2022, and had previously remained unchanged since 2017.
Associate professor of economics Walter Theseira of the Singapore University of Social Sciences said: “Typically, annual value estimates from the tax authorities will lag (behind) actual increases in market and rental value, so the nature of these tax increases is that owners will enjoy some untaxed gains before the taxman catches up.”
For home owners with unoccupied properties, the increase in property taxes would encourage them to rent them out, Prof Theseira added.
Economist Song Seng Wun of CIMB Bank said there is strong demand for properties in land-scarce Singapore.
The property tax is a progressive wealth tax that is levied on those who can afford it and helps to diversify the sources of government tax revenue, he added.
OCBC’s Mr Wong noted that rising rents should mitigate the increase in property tax and mortgage repayment rates for private property owners.