By Romesh Navaratnarajah: The new property tax rates of between 12 to 20 percent for non-owner occupied residential properties introduced in Budget 2013 will make investing in high-end properties less attractive, said experts.
According to Alan Cheong, Research Head at Savills Singapore, the revisions to the tax structure wouldn't have much impact on the rental market as rents are determined by supply and demand factors.
But owning a luxury property in Singapore as an investment will become less attractive compared to investing in other developed economies where taxes are higher. Ultimately, this would encourage more investors to move their capital overseas.
"The graduated property tax on luxury properties may impact investors, particularly corporates and high-net-worth investors," noted Petra Blazkova, Head of CBRE Research for Singapore and South East Asia.
While "it may put pressure on the holding cost of investment properties held by developers and investors", it is still too early to gauge the new tax rates' full impact as the ministries have yet to reveal the full details of the plan, Blazkova added.
Meanwhile, Cheong noted that "this may affect high-end properties owned by foreigners who do not have a place of residence in Singapore".
"If they leave their units vacant, which many do, they will be taxed under this new regime. A negative if we want to position ourselves to attract the high-net-worth."
Meanwhile, the government's plan to remove property tax refunds on vacant properties could seriously affect the rental market as it would force individuals or companies to sell their vacant units "at a time when rental budgets are constrained and the net number of employment passes issued have not been growing", Cheong added. Romesh Navaratnarajah, Senior Editor of PropertyGuru, wrote this story. To contact him about this or other stories email firstname.lastname@example.org Related Stories: Budget 2013: Your Views
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