Property tax
| | | |

How much will property tax increase cost homebuyers and property investors in 2022 vs 2024?

In a recent Budget 2022 announcement, the government said they would increase the property tax effective 2023. The tax rate that has continued from 2015 till 2022 will see a higher bracket in 2023 followed by an even higher bracket in 2024. 

  1. Should property owners be worried? Who will be most at stake by the recent change?
  2. How property tax in Singapore is calculated?
  3. What is Annual Value (AV)?
  4. Does AV of a property change?
  5. Does everyone have to pay the same property tax rate?
  6. 2022 vs 2024: How increase in property tax will affect home buyers and property investors?
  7. Owner-occupier tax rates
  8. Non-owner-occupier tax rates – Vacant or rented
  9. Commercial and industrial properties tax rate
  10. Why does the Singapore government impose more tax on the wealthy?
  11. Who is most at stake with the change in the tax rate in 2022 vs 2024?
  12. What should be your NEXT MOVE in face of the increasing property tax in 2022 vs 2024?

Should property owners be worried? Who will be most at stake by the recent change?

The increment will not be significant for homeowners. But the tax cost may mount for investors and landlords. Before breaking down the effects of the concerned parties, here are some basics to cover for those who would like to touch up how property tax is calculated in Singapore.

How property tax in Singapore is calculated?

Property tax is based on the Annual Value (AV) of a property. 

Annual Value (AV) x Property tax rate = Property tax payable

What is Annual Value (AV)?

AV comprises the yearly rental value of a property deducting general maintenance cost and furniture rental cost (if any).

Does AV of a property change?

AV of a property can differ from year to year. If an area develops and has new amenities, the rental of a property will go up. So will the AV followed by an increased tax. Similarly, if the market falls, AV will go down and so will the tax. 

Whenever your property’s AV is changed, the Inland Authority of Singapore (IRAS) will send you a notification with the revision. You can also log in to IRAS myTax Portal to check the AV of your property at any time. If you disagree with the reassessed AV, you can submit an objection within 30 days of the valuation notice. Though you cannot object to the tax rate itself, your AV will be reassessed to reaffirm the AV rate.

If you want to check the AV of your property before buying it, go to  Check Annual Value of Property service. Do note that each search will cost you $2.50 including GST.

Does everyone have to pay the same property tax rate?

No! Your tax rate depends upon your property’s AV and the group you belong to.

  • Own property and live in it – Subject to Owner-occupier tax rate.
  • Own property and does not live in it. You have either rented it out or kept it vacant – Subject to Non-Owner Occupier tax rate.
  • Commercial and industrial property owners – Subject to 10% of AV.

2022 vs 2024: How increase in property tax will affect home buyers and property investors?

The property tax will differ depending on which category you fall into

  • Owner-occupier tax rates
  • Non-Owner occupier tax rates – Vacant or rented
  • Commercial and industrial property owners

Owner-occupier tax rates

Annual Value (AV) (S)Effective 1 Jan 2015 – 31 Dec 2022Property Tax PayableAnnual Value (AV) (S)2024Property Tax Payable
First $8,000
Next $47,000
0%
4%
$0
$1,880
First $8,000
Next $22,000
0%
4%
$0
$880
First $55,000
Next $15,000

6%
$1,880
$900
First $30,000
Next $10,000

6%
$880
$600
First $70,000
Next $15,000

8%
$2,780
$1,200
First $40,000
Next $15,000

10%
$1,480
$1,500
First $85,000
Next $15,000

10%
$3,980
$1,500
First $55,000
Next $15,000

14%
$2,980
$2,100
First $100,000
Next $15,000

12%
$5,480
$1,800
First $70,000
Next $15,000

20%
$5,080
$3,000
First $115,000
Next $15,000

14%
$7,280
$2,100
First $85,000
Next $15,000

26%
$8,080
$3,900
First $130,000
Above $130,000

16%
$9,380First $100,000
Above $100,000

32%
$11,980
Source: IRAS

Observing the table above, you can see that most residential owners won’t have any significant effect due to tax as the first $8,000 AV is exempted. As the tier of the taxes increases, the rate of tax increases as well. This reflects upon how those who have expensive properties have to pay more tax. This makes sense because the idea is to tax the wealthier. 

Now, looking at the tax rate between 2022 and 2024, you can see the tiers effective in 2022 is wider than the one to be imposed in 2024. Both years have 7 brackets of the tax rate. But for 2022, the tax bracket ranges from 0%-16% while for 2024, the tax bracket escalates to 32%, twice of what you have to pay in 2022.

For instance, in 2022, the first $8,000 of your AV is exempted. Then for the next $47,000, your tax rate is 4%. But in 2024, after the exempted first $8,000 AV, you already have to reach the third bracket to pay the next $47,000.

To illustrate, let’s say you buy a house worth an AV of $105,000 and you plan to live in it. What will be your tax rate in 2022 vs 2024?
Annual Value (AV) (S)Effective 1 Jan 2015 – 31 Dec 2022Property Tax PayableAnnual Value (AV) (S)2024Property Tax Payable
First $8,0000%0First $8,0000%0
Next $47,0004%$1,880Next $22,0004%$880
Next $15,0006%$900Next $10,0006%$600
Next $150008%$1,200Next $15,00010%$1,500
Next $15,00010%$1,500Next $15,00014%$2,100
Next $5,00012%$600Next $15,00020%$3,000
Next $15,00026%$3,900
Next $5,00032%$1,600
Total$6,080$13,580

When you compare, the house with an AV of $105,000 has an owner-occupier tax of $,6080 payable in 2022. In 2024, the house with the same AV will have a tax payable of $13,580, 123% more than in 2022.

Non-Owner-Occupier tax rates – Vacant or rented

Annual Value (AV) (S)Effective 1 Jan 2015 – 31 Dec 2022Property Tax PayableAnnual Value (AV) (S)2024Property Tax Payable
First $30,000
Next $15,000
10%
12%
$3,000
$1,800
First $30,000
Next $15,000
12%
20%
$3,600
$3,000
First $45,000
Next $15,000

14%
$4,800
$2,100
First $45,000
Next $15,000

28%
$6,600
$4,200
First $60,000
Next $15,000

16%
$6,900
$2,400
First $60,000
Above $60,000

36%
$10,800
First $75,000
Next $15,000

18%
$9,300
$2,700
First $90,000
Above 90,000

20%
$12,000
Source: IRAS

Non-Owner Occupier’s tax rate is meant for those who do not live in the house. In other words, they are investors. So, whether they rent out the place or leave it vacant, they are charged a higher-tiered tax rate than owner-occupied properties. 

During 2015-2022, this rate range from 10% to 20% with 5 progressive tiers. But in 2024, the tiers are reduced to just 3 with the rate going up. In the first bracket itself, the tax rate for the first $30,000 of AV is up by 2% while the next $15,000 of AV is up by 8%. The second tier sees a tax rate jump from 14% to 28% and so on. 

Basically, the logic behind the higher non-owner occupier’s tax rate is that higher-priced properties can fetch higher AV so it just makes sense to charge them more. Besides, investors, who do not live in the property are deemed wealthier. So, to balance out the gap between wealthy and non-wealthy, the Singapore government imposes a higher tax rate upon the rich, affluentials and ultra-high net worths.

To illustrate, let’s say you buy a house worth an AV of $105,000 but you won’t be living in it. What will be your tax rate in 2022 vs 2024?
Annual Value (AV) (S)Effective 1 Jan 2015 – 31 Dec 2022Property Tax PayableAnnual Value (AV) (S)2024Property Tax Payable
First $30,00010%$3,000First $30,00012%$3,600
Next $15,00012%$1,800Next $15,00020%$3,000
Next $15,00014%$2,100Next $15,00028%$4,200
Next $15,00016%$2,400Next $45,00036%$16,200
Next $15,00018%$2,700
Next $15,00020%$3,000
Total$15,000$27,000

As you can see, for a house with AV $105,000, the non-owner occupier’s tax is already higher compared to the owner-occupier’s rate. To top it, in 2022, the non-owner occupier will have a tax payable of $15,000. But for the same house with the same AV, you will have to pay $27,000 in 2024 which is 80% more than what you will be paying in 2022.

Commercial and industrial properties tax rate

For commercial properties, the tax bracket has not changed. It is a flat rate of 10% of your AV. Suppose if you buy a shophouse with an AV of $105,000, your tax will be ($105,000 x 10%) = $10,500 for both 2022 and 2024.

Why does the Singapore government impose more tax on the wealthy?

Singapore’s government does not want wealthy people to hog the properties in Singapore. They wish that every Singaporean in the country own at least 1 property. Imposing higher tax will either make them sell the property or rent out the vacant flats. This will give access to more available properties to people who need it.

Who is most at stake with the change in the tax rate in 2022 vs 2024?

The above calculations tell us that owners living in the property and investors are 2 key affected parties of the changing rate in 2022 vs 2024. For both parties, the tax rate will jump to double of what they have to pay right now. 

That being said, an HDB flat has an AV below $10,000 per year. The majority of homes in Singapore, even the mass market condos have AVs between $22,000 to $24,000. So, owners living in a property with a similar AV will not have much drastic effect on the changing tax in 2024. Or first-time homeowners buying a $500,000 property will not feel the heat.

But if you have an upmarket condo, prime region developments of landed homes, your AV will likely exceed $30,000. Owning high ticket properties worth $5 million or $10 million will have higher AV. As such you will see a surge in property tax in 2024 compared to 2022.

However, those falling under the higher $30,000 AV bracket are usually ultra-high net worths, foreigners and investors who have hot money flowing in the market. Thus, they have the ability to ride out this cost especially since their rental will also likely increase especially with the inflation rate hike.

As for those interested in commercial and industrial properties, they will enjoy a flat 10% rate without any dramatic changes as of now. They are the least of the affected group concerning Singapore real estate.

What should be your NEXT MOVE in face of the increasing property tax in 2022 vs 2024?

If you want to play safe, you can buy mass-market condos which is unlikely to cross AV above $30,000. For investors, the price of the luxury high-end property will not drop because their existing owners will not sell the property. If they sell, they will be subject to ABSD and stamp duty. They would be rather benefited from the higher rental yield growth. 

So, investors can buy undervalued luxury homes. Yes, the cost of having an investment property is that you have to pay income tax as well as property tax. But the cost of property tax is usually brought over to the tenant. And combined with the inflation hike, you can enjoy a growing rental yield.

However, for investors, undervalued commercial and industrial properties can be the hotspot. In our next series, we will talk about what opportunities lie in commercial real estate and how to unlock it in today’s market.

The property market will be a revolutionary change with the impending inflation hike, property tax hike and interest rate. This is a good time to invest in a valuable asset that will give a profitable return in the future as well as hedge your investment against currency devaluation.

To make a timely and impactful move, subscribe for a free consultation. Having been more than a decade in the field, I have built client portfolios, both foreign and local, backed with data analytics and industry insights. Talk with me for any queries, concerns or one-stop solutions for property investment.