SINGAPORE: Unlike buyer’s stamp duty and additional buyer’s stamp duty, which are taxes on transactions, property tax is a form of wealth tax, which contributes a steady source of revenue to the government coffers to fund social, infrastructure and development, defence and other expenditures.
Two years ago in his maiden Budget speech, Finance Minister Lawrence Wong announced a two-stage increase in property tax rates for residential properties. The aim was to shift the tax burden more heavily onto high-income home owners and investors of more expensive properties.
Those changes, coupled with the stiff rising rental market resulting from strong demand and COVID-19-related supply constraints, caused a double whammy not just to property investors, but to the wider market.
Housing rents in some Housing and Development Board (HDB) flats rose by more than 50 per cent, even in non-mature estates such as Woodlands, Sembawang and Sengkang. The Urban Redevelopment Authority (URA) non-landed rental index also rose by 45 per cent between the first quarter of 2021 and the second quarter of 2023.
During the broad-based increase, it would have been possible for investors to pass on some of the tax costs to tenants by increasing rents. However, home owners who used their properties for their occupation purposes would have had to bear higher taxes, driving up their living costs.
“We had originally expected the property tax changes to impact mainly the top 7 per cent of owner-occupied residential properties. The annual value increases resulted in the proportion of affected owner-occupied properties nearly doubling to 13 per cent,” Mr Wong said in his Budget 2024 speech on Friday (Feb 16).