property news
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Today, the 2024 budget was announced, with a focus on “strengthening education and training” and providing financial support to targeted groups. Some of the benefits include $1.9 billion in household financial support (in various forms), changes to CPF, and more. We also provide support to Singaporean tenants. But one of the biggest changes on the housing front involves property taxes. Here’s what you need to know:
Property tax changes
This is perhaps the most important change in housing. Back in 2022, the property tax rate for homes has increased. It was intended as a form of wealth tax and targeted high-end luxury real estate.
(We discussed the details of the 2022 tax reform in this article)
However, as you know, starting in 2022, rental prices will increase across the board. This affected the annual value (AV) of residential properties and caused tax rates to rise even for lower value homes. Therefore, although the original plan was to target the top 7% of owner-occupied properties (by value), it was actually the top 13% that were affected.
Therefore, from January 2025, the tax rate in the AV band for owner-occupied housing will be revised. This means that owners of luxury properties will continue to shoulder the burden of property tax payments paid by most Singaporeans.
Property tax changes
Adjustments to annual owner-occupant residential property tax rate bands from January 2025
| Limit PT rate | Part of AV (S$) | |
| January 1st – December 31st, 2024 | From January 1, 2025 | |
| 0% | From $0 to $8,000 | 0 to $12,000 |
| Four% | $8,000 – $30,000 | $12,000 – $40,000 |
| 6% | $30,000 – $40,000 | $40,000 – $50,000 |
| Ten% | $40,000 – $55,000 | $50,000 – $75,000 |
| 14% | $55,000 – $70,000 | $75,000 – $85,000 |
| 20% | $70,000 – $85,000 | $85,000 – $100,000 |
| 26% | $85,000 – $100,000 | $100,000 – $140,000 |
| 32% | Starting from $100,000 | From $140,000 |
Interestingly, for retirees who live in luxury homes and may have cash flow problems, IRAS will be offering a 24-month interest-free installment plan.
What are the possible impacts?
The main concern, as the government clearly recognizes, is older Singaporeans living in expensive properties, who may not have the wealth or income to match (this story brings to mind) .
Although not particularly wealthy, some Singaporeans have inherited real estate, such as landed homes, from their parents or grandparents, and their assets have appreciated greatly over the decades. These properties can be subject to very high AV and property taxes. Probably beyond the financial means of the owner. We suspect that even an interest-free installment plan may incentivize some of these owners to sell and right-size to a smaller or less expensive property. I doubt it.
However, for the average apartment or mass-market condo owner, this is not a huge change, as taxes will probably be the same or lower. I also don’t think this is a huge increase for the most affluent buyers. People who don’t care about a 20% ABSD will likely be equally unfazed by a 6% annual property tax increase.
New ABSD concessions
Some people may get excited when they hear the word ABSD, but this is only for some people. For those who didn’t already know, if one spouse is Singaporean and sells the previous property within 6 months of buying the new property, ABSD can go into remission for the couple (This is usually a problem when buying a new property before selling the previous home).
In the future, this concession will be extended not only to married couples but also to single people.However, your successor must be a Singaporean citizen aged 55 or over. private The property must be worth less than the property you are selling. for example:
If you’re 55 years old and buy a $800,000 single bed while still owning your $1.6 million triple bed, you’ll pay $160,000 in ABSD. However, you can get this amount back if you sell the 3-person bed within 6 months. However, this cannot be done the other way around.
What are the possible impacts?
This will benefit lifelong single older people, who were previously at a much greater disadvantage than married people. Without a chance for ABSD to go into remission, these single people would be forced to first sell their property and then buy another (which could cost a lot of money in rent) ).
Together with the property tax (see above), it seems like the government is subtly encouraging older private property owners to right-size because it will be more convenient. This could lead to several more unlisted properties hitting the resale market, increasing supply. This product is invaluable considering that more HDB upgraders are now looking to resell (with the latest new products often being priced out of family-sized units).
We’ve already heard singles questioning the age limit. And we tend to agree. There are lifelong bachelors in Singapore who cannot marry for legal reasons, and it’s hard to understand why we would want to penalize or inconvenience them to right-size them.
New ABSD concessions (for developers)
Developers also pay ABSD. This is his 40 percent of the land price, but if the developer completes and sells the entire development within five years, he can claim ABSD relief of 35 percent.
Under the new rules, developers are eligible for ABSD exemption if they sell at least 90 percent of their units. The ABSD exemption amount varies depending on the percentage of unsold units remaining (but the developer must also meet other requirements, such as that he complete construction within five years).
What are the possible impacts?
This could encourage developers to add some larger units (e.g. 4 or 5 beds) or make the units a little larger overall. This is because a common obstacle when moving a unit is the large amount of weight in larger homes.
In most sales launches, low-volume one- and two-bed beds sell first, leaving developers “stuck” with a small number of large or penthouse units that are difficult to move due to the small target market. . In some cases, a developer may lose his ABSD remission once he has only three or four of these units left. This shows how smaller homes are generally encouraged.
Rental vouchers for young families waiting for a BTO apartment
Although this is a one-off, young families under the Parental Provisional Housing Scheme (PPHS) will be given a one-time rental voucher. This can be used to offset the rent of her HDB apartment on the open market. We don’t know how much the voucher will cost, but it will be announced later.
This is helpful given that HDB rental rates (actually all rental rates) have skyrocketed in the post-coronavirus period. However, this is complementary to ongoing plans. For example, HDB already aimed to double the availability of rental apartments last year, and PPHS already includes subsidized rental options for some families. So this is actually nothing new, but a complement to existing policies given the current high rental rates.
What are the possible impacts?
Not much in itself. I don’t think a one-time coupon will convince him to switch to resale or anything less dramatic than his BTO. But this is part of a broader ongoing solution that will help alleviate demand for more expensive resale apartments. If more Singaporeans can be convinced to wait out the BTO construction period, there will be fewer cash over valuations (COVs).
Overall, Budget 2024 appears to be more of an exercise in rebalancing ongoing plans than introducing anything new. Our policies and intentions remain unchanged from last year. But it’s great to see governments recognizing the unintended effects on different groups and quickly remediating them.
Follow Stacked for more news as it unfolds. We’ll keep you updated as we hear from real estate agents, homebuyers, and other industry participants.