Press release
Comments on property tax increases and related support
30 November 2023 - The government has announced property tax increases and the related support for 2024.
Impact on private market
The impact of the recent property tax increase will be felt most acutely for investment properties and larger homes. For investment properties, the impact is expected to be greater for luxury condos and landed properties, as the tax increase tends to be higher for these categories of properties.
Investors who purchase private homes for rental income may face increased challenges due to the anticipated slowdown in the rental market next year, and stagnating rental prices from the increased housing supply. The high ABSD rates for investment properties, increased property taxes, elevated interest rates, and higher maintenance costs will lead to higher costs of investment.
Some landlords may try to pass these costs to tenants, but the increased competition for tenants may make it difficult for them to do so. As a result, the increased property taxes are likely to reduce rental income for landlords.
However, investors who are buying properties for long-term capital appreciation may look beyond the tax increases and factor these additional costs into their future sales price.
On the other hand, genuine buyers who are buying for owner-occupation may not be too affected by the tax increase.
Impact on home prices
In terms of property prices, impact from the property tax increase is likely to be limited. However, buyers will still remain budget-conscious in general, due to higher costs of living, increased GST, and economic uncertainties. The increased property taxes will be an additional consideration on top of the existing stamp duties, mortgages, and other costs.
As a result, the combined effect of these factors may help prevent a potential escalation of property prices. Buyers may also opt for slightly smaller homes in future due to rising taxes and cost constraints. As buyers turn more cost conscious, developers may also be more measured in their land bids, which will help to prevent land bid prices from escalating further.
Summary
As the government will continue to provide subsidies to help lower-income households cushion the impact of the property tax increases, the tax increases may be manageable for most Singaporeans, particularly for genuine buyers who are buying homes for owner-occupation.