http://www.straitstimes.com/archive/...wners-20141211

Property tax cut for one in four private home owners

Soft rental market sees annual values of many private homes marked down

Published on Dec 11, 2014 12:42 AM

By Marissa Lee


ONE in four private home owners will pay less property tax next year after the taxman marked down the annual values of about 73,300 homes.

Letters have been sent to home owners to outline their levies for the coming year.

This comes on the heels of property tax relief for many owners of Housing Board flats, who saw their annual values cut by about 3 per cent earlier this week.

The Inland Revenue Authority of Singapore (Iras) reviews property values every year using a mass appraisal system that bases the annual value on rents paid for similar homes nearby.

The slowing rental market has led it to reduce the annual values for 25.7 per cent of private homes from Jan 1 next year.

This is in contrast to the 2013 review for the 2014 levy when only 2 per cent of private homes had their annual values reduced.

This year's reductions come amid a cooling property market where vacancies - a forward indicator of falling rents - are rising.

This is good news for some but not all private home owners.

Oil trader David Goh, for example, has been sent his property tax bill, which has been unchanged for the last three years. Even if rents move down next year, the property tax he will pay over the next 12 months will not change.

Some feel that the volatility in the property market cannot be captured by annual reviews. Iras, however, pointed out that Hong Kong also reviews the annual values once a year while some countries have longer review cycles of three to five years.

Expediency must be a factor too, noted Rodyk & Davidson partner Lee Liat Yeang: "Maybe Iras could do a review twice a year. But if the administrative cost is high, is there any value in that?"

Some home owners said their annual values were skewed higher by neighbours who renovated their properties, raising the annual values for the rest of the street.

"In the past, there were more owner-occupiers," said Mr Goh, 54, who lives in a terrace unit in Holland Grove. "Now, I have three expat neighbours renting homes with swimming pools in their backyards."

Iras maintains that owners can raise objections if they believe there is an error in the annual value calculations, but a lack of good rental information has impeded some from taking that approach.

"It's not that the process is not transparent, but that both Iras and home owners are handicapped," said KPMG Singapore principal tax consultant Leung Yew Kwong. "It's impossible for Iras to go into every house to assess the condition it is in, and rental information is difficult for individuals to get."

Property taxes are also a sore point for some private home owners at the higher end of the rental market. This group says it has been paying higher levies since the Government introduced a more progressive property tax schedule at the start of this year.

Higher annual values should be a result of higher annual rents, but such properties are also more difficult to rent out in the soft real estate market.

"As you go up the annual value ladder, those in the high end are affected by a double whammy of high taxes and (no one to rent to)," said Mr Lee.

There are about 70,000 landed residential properties and 215,000 private high-rise flats here.

In the 12 months to March 31, property tax contributed $4.2 billion - 10 per cent of total tax revenue. Of that, taxes on private residences contributed $720 million, and Housing Board flats contributed $150 million.

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