Double whammy of higher tax rates, higher annual values could hit rental property owners hard

Dec 02, 2022

RESIDENTIAL property investors in Singapore could soon face a double whammy from higher property tax rates and an increase in annual values of both private and public housing, said analysts. 

On Friday (Dec 2), the Ministry of Finance and Inland Revenue Authority of Singapore (Iras) announced that the annual values (AV) of most residential properties will be revised upwards from Jan 1, 2023, as part of their annual review of properties to calculate property tax payable. The AV assessment is based on estimated annual rent if the property was rented out.

Since AVs were last revised on Jan 1, 2022, Iras said market rentals of Housing and Development Board (HDB) flats and private residential properties had risen by more than 20 per cent. The AVs of residential property will therefore be revised from Jan 1, 2023, to reflect this, it said. 

Owners of higher value properties and those holding properties for rent will see a larger tax bill, in line with revised rates announced in Budget 2022. Changes were made to put in place a more progressive structure, with higher value and non-owner-occupied residential properties being taxed at higher rates.

Owner-occupiers of one- and two-room HDB flats continue to be exempted from paying property tax.

Analysts believe that investors, particularly those with properties in the Outside Central Region (OCR) and Rest of Central Region (RCR), will soon start feeling the pinch from this increase. 

Based on CBRE’s calculations and assuming AVs increase by 20 per cent in tandem with residential rentals:

- Non-owner occupiers holding properties with a current AV of S$30,000 would have an AV of S$36,000 in 2023. Their property taxes will climb by S$1,260 or 42 per cent next year. 

- Properties with a current AV of S$60,000 would have an AV of S$72,000 next year, with property taxes rising by S$5,190 or 75.2 per cent

- Properties with current AVs of S$90,000 would have an AV of S$108,000 next year, with a hike in property taxes of S$9,810 or 81.8 per cent. 

“(This) will further cream off the rental gains so far for investors or non-occupier homeowners,” said Tricia Song, head of research at CBRE South-east Asia. 



Executive director of research and consultancy at Savills Singapore Alan Cheong added that the property taxes payable have already risen sharply as rentals in both the OCR and RCR soared by 25 to 50 per cent – or even more in certain instances – in 2022. 

“Therefore, the amount of property taxes payable under the existing rates will still be very much higher even without the need to raise them,” he said. 

Cheong added that the rise in property taxes is unlikely to curb property investment appetite. This is because some homeowners may “feel the need to lease out their properties to cover their monthly overheads, such as personal expenses or mortgage payments”, he said, and more so with rising interest rates and a slowing economy amid a strong rental market.

ERA Realty head of research and consultancy Nicholas Mak highlighted that landlords might use this as an opportunity to raise their rent, especially for those looking to renew rental leases.

“However, based on our calculations, the actual increase in rental on a monthly basis for a typical three-bedroom condo unit in the OCR and RCR is about S$100 per month,” he said. 

“Many tenants are already feeling the pain from rising rentals over the past one and a half years. Landlords should be mindful not to be too greedy and kill the goose that lays the golden eggs.”  

To mitigate the effect of higher AVs, all owner-occupied properties will receive a one-off property tax rebate capped at S$60, equivalent to 60 per cent of the 2023 property tax bill, said the Ministry of Finance and Iras in a press statement on Friday. 

This means that the majority of HDB residents will pay between S$30 and S$70 more in property tax after rebate next year, compared with the property tax this year, they said. 

Government revenue from property taxes rose 49.3 per cent to S$4.67 billion in FY21, from a lower base of S$3.13 billion in FY20 when the government granted qualifying non-residential properties property tax rebate for the period of Jan 1, 2020 to Dec 31, 2020.

Compared to the S$4.76 billion collected in FY19, it dipped 1.9 per cent in FY21.

With both property tax rates and annual values being revised upwards, revenue from property tax looks set to grow further.



Despite the hike in property taxes, PropertyGuru country manager of Singapore Tan Tee Khoon expects homeowners to be more concerned about economic uncertainties and rising interest rates.

“Separately, we expect AVs to stabilise in 2023 since the rent increase is likely to slow as the supply crunch starts to ease,” he said.

For next year, the owner of a five-room HDB flat would see their 2023 property tax payable increase by S$40.80 to S$52.80, to S$148 to S$196 after rebate – an almost 40 per cent increase at least.

For three-room HDB flat owners, property tax payable in 2023 will go up by S$7.20 to S$30.40 in 2023, to S$20.80 to S$40 after rebate. Owners of four-room HDB flats would pay an additional S$33.60 to S$45.60 in property tax next year, at S$107.20 to S$155.20.

For executive flats, property tax payable ranges from S$176.80 to S$224.80 after rebate next year, an increase of S$55.20 to S$67.20 from this year.

Iras added that property owners who face financial difficulties may approach them for assistance to discuss a suitable payment plan before the end of next January, including appealing for a longer payment plan.

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