New Reporter
19-02-24, 10:31
Lower property tax helps, but retirees must pay heed to costs of owning private homes
Leslie Yee
Feb 19, 2024
SOME older Singaporeans are asset-rich and cash-flow-poor. A local retiree, who is over 60 years old, could be owning a private home bought years back that has since appreciated significantly in price.
The said retiree, whose key asset is his owner-occupied home, may lack robust sources of cash flow and struggle with paying for costs linked to owning a home, such as property tax.
The above scenario can be viewed as a first-world problem.
The said retiree could rent out a room to generate recurring income.
Nonetheless, the retiree may be concerned with safety and privacy issues when taking in a tenant. Or the retiree may like to have space set aside for use by children and grandchildren whenever they visit.
Certainly, the said retiree could raise funds by downgrading from a private home to an Housing and Development Board (HDB) flat.
There are numerous HDB flats, which are spacious and in choice locations. Many HDB towns have good transport connectivity and comprehensive amenities including healthcare and recreational facilities.
Still, moving home can be stressful, especially for older folk in their 70s or 80s. Can they adapt well to a new environment? Will their mental well-being suffer due to moving homes?
Moving from one owner-occupied home to another also involves incurring costs such as stamp duty, legal fees, agent fees, relocation expenses and renovation expenses.
Property tax changes
Many private home owners, especially retirees, probably heaved a sigh of relief when Finance Minister Lawrence Wong announced in Budget 2024 that the Annual Value (AV) bands for owner-occupier residential property tax rates will be raised.
From Jan 1, 2025, the lower threshold of AV will be raised to S$12,000 from S$8,000, while the highest band of AV will be raised from over S$100,000 to over S$140,000. Corresponding adjustments will be made to bands in between.
The AV of buildings is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings and maintenance fees.
Also, the Inland Revenue Authority of Singapore will offer a 24-month instalment plan without any interest to retirees living in higher-end residential properties, who face cash flow issues when paying their property tax bills.
Many private-home owners will see lower property tax bills in 2025 due to the changes to AV bands.
Take the owner-occupier of a condominium unit whose AV rose by 30 per cent from S$54,000 in 2022 to S$70,000 in 2024.
Assuming the AV is S$70,000 in 2025, annual property tax is cut by 27 per cent from S$5,080 to S$3,720 due to the tweak in AV bands.
However, the property tax bill in 2025 of the owner-occupier in the above example will be more than double that of S$1,840 in 2022.
The owner-occupier tax rate for homes rose from 0 to 16 per cent in 2022 to 0 to 23 per cent in 2023 and 0 to 32 per cent in 2024. Higher tax rates apply to homes with higher AVs.
The government sees property tax as a key source of taxing wealth. Property tax is effective as it is hard to avoid. Taxing wealth is vital in fighting inequality, and fair, because those with greater means contribute more.
In Budget 2024, the AV bands for non-owner-occupier residential property tax rates were unchanged.
Going forward, do not discount the need to raise residential property tax rates further to help fund higher expenditure in healthcare and other areas.
Non-owner-occupier homes as well as pricier homes could bear the brunt of any future property tax rate hikes.
Indeed, there may have been no need to lower the property tax for owners of top-end private homes. An owner-occupier of a high-end home with AV of S$150,000 will see property tax in 2025 reduced by 21 per cent from S$27,980 to S$22,220 due to the change in AV bands.
Costs of owning private homes
Looking ahead, residential property tax rates on owner-occupiers may rise. Moreover, if AV of homes rise, the property tax will rise accordingly.
Owning a fully paid-up home when one retires can be crucial for ageing with dignity.
Also, with rising life expectancy, it is useful to receive a fixed annuity from CPF Life to fund retirement needs.
Nonetheless, retirees who own private homes need to pay heed to potentially rising costs associated with home ownership, including higher property taxes.
Relying largely on a fixed annuity to fund expenses in one’s retirement years can be inadequate should expenses rise.
Perhaps, coldly assessing whether one can afford to hang on to one’s owner-occupied private home is vital in retirement planning.
Pre-emptively right-sizing one’s owner-occupied home when one still has the energy to move homes can help one to both mitigate the risk of property tax rises and age with dignity.
Hopefully, property tax rates for owner-occupied homes can be kept affordable for many people. After all, some may aspire to hold on to owning their well-loved private homes to truly enjoy their golden years.
Ultimately, having people who can comfortably retire in their private homes in Singapore after working for many years may help inspire younger locals to work hard to achieve such a dream.
https://www.businesstimes.com.sg/opinion-features/lower-property-tax-helps-retirees-must-pay-heed-costs-owning-private-homes
Leslie Yee
Feb 19, 2024
SOME older Singaporeans are asset-rich and cash-flow-poor. A local retiree, who is over 60 years old, could be owning a private home bought years back that has since appreciated significantly in price.
The said retiree, whose key asset is his owner-occupied home, may lack robust sources of cash flow and struggle with paying for costs linked to owning a home, such as property tax.
The above scenario can be viewed as a first-world problem.
The said retiree could rent out a room to generate recurring income.
Nonetheless, the retiree may be concerned with safety and privacy issues when taking in a tenant. Or the retiree may like to have space set aside for use by children and grandchildren whenever they visit.
Certainly, the said retiree could raise funds by downgrading from a private home to an Housing and Development Board (HDB) flat.
There are numerous HDB flats, which are spacious and in choice locations. Many HDB towns have good transport connectivity and comprehensive amenities including healthcare and recreational facilities.
Still, moving home can be stressful, especially for older folk in their 70s or 80s. Can they adapt well to a new environment? Will their mental well-being suffer due to moving homes?
Moving from one owner-occupied home to another also involves incurring costs such as stamp duty, legal fees, agent fees, relocation expenses and renovation expenses.
Property tax changes
Many private home owners, especially retirees, probably heaved a sigh of relief when Finance Minister Lawrence Wong announced in Budget 2024 that the Annual Value (AV) bands for owner-occupier residential property tax rates will be raised.
From Jan 1, 2025, the lower threshold of AV will be raised to S$12,000 from S$8,000, while the highest band of AV will be raised from over S$100,000 to over S$140,000. Corresponding adjustments will be made to bands in between.
The AV of buildings is the estimated gross annual rent of the property if it were to be rented out, excluding furniture, furnishings and maintenance fees.
Also, the Inland Revenue Authority of Singapore will offer a 24-month instalment plan without any interest to retirees living in higher-end residential properties, who face cash flow issues when paying their property tax bills.
Many private-home owners will see lower property tax bills in 2025 due to the changes to AV bands.
Take the owner-occupier of a condominium unit whose AV rose by 30 per cent from S$54,000 in 2022 to S$70,000 in 2024.
Assuming the AV is S$70,000 in 2025, annual property tax is cut by 27 per cent from S$5,080 to S$3,720 due to the tweak in AV bands.
However, the property tax bill in 2025 of the owner-occupier in the above example will be more than double that of S$1,840 in 2022.
The owner-occupier tax rate for homes rose from 0 to 16 per cent in 2022 to 0 to 23 per cent in 2023 and 0 to 32 per cent in 2024. Higher tax rates apply to homes with higher AVs.
The government sees property tax as a key source of taxing wealth. Property tax is effective as it is hard to avoid. Taxing wealth is vital in fighting inequality, and fair, because those with greater means contribute more.
In Budget 2024, the AV bands for non-owner-occupier residential property tax rates were unchanged.
Going forward, do not discount the need to raise residential property tax rates further to help fund higher expenditure in healthcare and other areas.
Non-owner-occupier homes as well as pricier homes could bear the brunt of any future property tax rate hikes.
Indeed, there may have been no need to lower the property tax for owners of top-end private homes. An owner-occupier of a high-end home with AV of S$150,000 will see property tax in 2025 reduced by 21 per cent from S$27,980 to S$22,220 due to the change in AV bands.
Costs of owning private homes
Looking ahead, residential property tax rates on owner-occupiers may rise. Moreover, if AV of homes rise, the property tax will rise accordingly.
Owning a fully paid-up home when one retires can be crucial for ageing with dignity.
Also, with rising life expectancy, it is useful to receive a fixed annuity from CPF Life to fund retirement needs.
Nonetheless, retirees who own private homes need to pay heed to potentially rising costs associated with home ownership, including higher property taxes.
Relying largely on a fixed annuity to fund expenses in one’s retirement years can be inadequate should expenses rise.
Perhaps, coldly assessing whether one can afford to hang on to one’s owner-occupied private home is vital in retirement planning.
Pre-emptively right-sizing one’s owner-occupied home when one still has the energy to move homes can help one to both mitigate the risk of property tax rises and age with dignity.
Hopefully, property tax rates for owner-occupied homes can be kept affordable for many people. After all, some may aspire to hold on to owning their well-loved private homes to truly enjoy their golden years.
Ultimately, having people who can comfortably retire in their private homes in Singapore after working for many years may help inspire younger locals to work hard to achieve such a dream.
https://www.businesstimes.com.sg/opinion-features/lower-property-tax-helps-retirees-must-pay-heed-costs-owning-private-homes