Budget 2024: Revised property taxes to benefit owner-occupied properties with lower annual values

Two years ago, in Singapore's Budget 2022, Deputy Prime Minister and Minister for Finance Lawrence Wong introduced a "two-step increase" in property taxes for homes. It was meant to be "a wealth tax" targeted at all investment properties and higher-end segments of owner-occupied private properties, he said in the Budget 2024 announcement on Feb 16.

It was meant to impact the top 7% of owner-occupied residential properties. However, rents rose sharply from 2022, significantly increasing annual values (AVs) and affecting 13% of owner-occupied properties. According to CBRE Research, the URA private residential rental index rose 35.3% between 1Q2022 and 4Q2023.

Under Budget 2024, all AV bands of owner-occupied residential property tax rates will be raised from Jan 1, 2025. The Inland Revenue Authority of Singapore (IRAS) will also offer a 24-month interest-free instalment plan to retirees living in higher-end residential homes who face cash flow issues when paying their property tax bills, says DPM Wong.

Table 1: Revised AV bands for owner-occupied properties

Source: MND

Currently, property tax is charged on properties with AVs from $8,000 to over $100,000. The lower end of the threshold will be raised from $8,000 to $12,000, while the highest band will also be raised from over $100,000 to above $140,000. Corresponding adjustments will likewise be made to the bands in between. It will still uphold the intent of the property tax changes, emphasises Wong, and ensure that "those residing in higher-value properties continue to pay their fair share of taxes".

However, the government is providing a rebate to cushion the impact of the property tax changes this year. It will continue to monitor the property market and provide another rebate in 2025 if needed.

According to CBRE, compared to current property tax payable, residential properties with AV of $50,000 will decrease by 31% from Jan 1, 2025. For residential properties with AV of $100,000, property tax payable from Jan 1, 2025, will decrease by 28%, while residential properties with AV of $150,000 will see a 21% decrease from current property tax payable.

Table 2: Percentage difference in property tax payable for properties of various AVs

Source: CBRE Research

"The difference in property tax payable is more significant for properties with lower AVs, except for properties which have AVs close to the lowest threshold," says Tricia Song, CBRE head of research for Singapore and Southeast Asia. "For properties with AVs of $140,000 and above, the difference in tax payable remains at $5,760, which is marginal for properties with high AVs. Thus, the revision of the AV bands is expected to benefit owners of mid-tier properties the most."

Previously, those living in higher value properties who have no or lower income may have considered downgrading, adds Song. "With the revised AV bands, coupled with the 24-month interest-free instalment plan to retirees, owners may be able to pay the property taxes and hold firm to their current property."

Most properties had an AV below $30,000 in the past, which meant homeowners only paid 4% property tax, according to Christine Sun, OrangeTee Group chief researcher and strategist. However, due to the recent increase in rental prices, many homeowners' AVs have crossed the $30,000 mark, resulting in higher taxes for them, she notes.

"This has affected many people, especially those who did not benefit from the rental hike and felt that they were being unfairly penalised," says Sun. "Therefore, the changes are considered fair and beneficial for most homeowners, especially those who are not landlords. The adjustment of AV bands for 2025 is also timely because rental prices may not drop soon and may remain stable for certain areas due to fewer expected completion of condos or residential projects this year."