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Singapore to raise bar for property taxes amid affordability hit

The residential area in Singapore.
The residential area in Singapore. (Bloomberg)

By Low De Wei

(Bloomberg) — Singapore will raise the threshold for property tax payments and lower a penalty imposed on developers that don’t sell projects in time, underscoring concerns about the slowing real estate market and frustration over housing affordability.

For occupied residential units, the lower threshold of the so-called annual value will increase to S$12,000 ($9,000) from S$8,000. The highest band will be lifted to more than S$140,000 from S$100,000 and above, Deputy Prime Minister and Finance Minister Lawrence Wong said during an annual budget statement on Friday. The measure will take effect on Jan. 1 next year.

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The dial-back follows a slowdown in Singapore housing sales where the country saw the weakest start to the year since 2009. By increasing the bar for tax payments, the government is seeking to squeeze in more money from the ultra-rich and high-value properties more specifically.

Source: Urban Redevelopment Authority

In 2022, the government announced a two-step increase in property tax rates for residential real estate. This was meant as a wealth tax for investment property and luxury units.

But the surge in rental prices has pushed up the annual value used to calculate taxes. That’s nearly doubled the proportion of affected properties to 13% from an intended 7%.

Singapore authorities announced last year it will give a one-time rebate for property taxes in 2024, as housing affordability remains a top concern for locals. Wong said he will provide another such discount in 2025 if needed.

The government said it recognizes there are retirees living in higher-end residential units. Those who face cash-flow issues when paying tax bills, can apply for a zero-interest 24-month installment plan.

The city-state is also easing rules penalizing developers if they don’t sell homes within a specified period, a sign of authorities’ acknowledgment of the slowdown in sales. Wong said developers that sell at least 90% of each development within a prescribed time frame will pay lower mandatory stamp duties. The change kicks in from Feb. 16.

Singapore saw 6,421 new private residential units sold last year, the fewest since 2008. Annual transaction volumes, existing homes included, reaching a seven-year low.

©2024 Bloomberg L.P.