Property prices in Singapore have increased significantly over the past few years. The New Launch Mania in Nov 2024 is pushing Singapore’s property price to another level.
Just two days ago, National Development Minister Desmond Lee stated that the Government is “not averse” to implementing additional cooling measures on the property market if necessary. Although they did not explicitly announce new measures, it is clear that there is a willingness to intervene as needed.
One method the government used was raising property taxes, particularly targeting high-value properties and investments. This year, most Singaporeans will have to pay higher property taxes, from 12% to 36%, due to elevated market rents and annual values for most residential properties, coupled with increased property tax rates for high-value private homes. The following group of people will feel the brunt of the revision:
- You own expensive private property
- You bought the property for investment
- Your property’s annual value is more than $30,000
In this article, we will go deep into the Singapore property tax system and highlight the recent changes. I will also share my opinion from the financial planning point of view.
What is Property Tax?
Singapore’s property tax system has been in place since 1948. It was introduced by the British colonial government to generate revenue for public services and infrastructure development.
Over the years, the system has evolved. Today, property tax is a progressive wealth tax and administered by the Inland Revenue Authority of Singapore (IRAS).
It serves the same purpose to diversify the sources of government revenue and is based on the ability to pay. Property tax is applicable whether your property is:
- Owner-occupied
- Tenanted out
- Left vacant
Do note property tax is a separate obligation from income tax. If you rent out your property, you must pay both income tax and property tax.
How is Singapore Property Tax Calculated?
There are three categories in the context of property tax in Singapore:
- Owner-Occupied Residential properties
- Non-Owner-Occupied Residential properties
- Commercial and Industrial Properties (Non-Residential properties)
Property Tax to be paid = Annual Value (AV) x Tax Rate
For example, if the AV of your property is $30,000 and your tax rate is 10%, you would pay $30,000 x 10% = $3,000 in property taxes.
What is Annual Value?
Annual Value is the estimated yearly rental your property could fetch if rented out, excluding furniture, furnishings, and maintenance fees. The Inland Revenue Authority of Singapore (IRAS) determines this value each year based on market rentals of similar properties.
How to Check Your Property Annual Value?
If you are the property owner, your property’s annual value is reflected in your property tax bill. Alternatively, you can find out by logging into IRAS’s myTax Portal, under the “Property” tab, click on “View Property Summary”.
How to Check The Annual Value of a Property You Don’t Own?
If you are buying a property or simply “Kaypoh” (busybody), IRAS provides a “Check Annual Value of Property” digital service. You just need to pay $2.5 per successful enquiry.
What are the Property Tax Rates?
Property tax rates for residential properties are applied on a progressive scale. All other properties are taxed at 10% of the Annual Value (AV). In general, owner-occupied properties have a lower property tax rate than non-owner-occupied properties.
Owning two properties, one for personal use and one for rental income is a common aspiration for many Singaporeans. But you need to understand that if you were to buy a property to invest, you would need to pay higher property tax. And it is a lot higher.
Upcoming Property Tax Rates
Owner-occupier tax rates (Effective 1 Jan 2025)
Owner Occupier Tax Rates (Effective 1 Jan 2024 to 31 Dec 2024)
What if you have more than one residential property?
The owner-occupier tax rates are only granted to one property owned and occupied by you. For subsequent properties, you will be taxed at non-owner-occupier residential tax rates even if you are occupying it as your second home.
Non-Owner-occupier tax rates (Effective 1 Jan 2024)
Commercial and industrial properties (Non-Residential)
Non-residential properties such as commercial and industrial buildings and land are taxed at a flat 10% of the Annual Value. Owner-occupier tax rates do not apply to non-residential properties even if you have bought the properties for your own use/occupation.
One-Off Property Tax Rebates
For your 2023 property tax, the government has provided a one-time rebate equal to 60% of the 2023 Property Tax Bill for HDB owners only.
For your 2024 property tax bill, the government will provide another one-time rebate of up to 100% tax, and it applies to all owner-occupied residential properties. This rebate will be automatically offset against any property tax payable in 2024.
Pay Property Tax On Time to Avoid Penalties
You have to pay your 2024 property tax by 31 January 2025 to avoid a 5% penalty.
If for some reason, you face financial difficulties, you can appeal for a longer payment plan through the “Apply for payment plan” e-service at myTax Portal using your Singpass accounts.
You can pay property tax via:
- GIRO – To sign up / access more information on GIRO, click here
- PayNow – You can refer to the step-by-step guide on how to make payments in myTax Portal.
- AXS via myTax Portal
- Internet Banking Billing Payment
My Thoughts about the High Property Tax Now
Property tax rates have increased significantly in recent years due to two primary reasons:
- Rapidly rising property prices
- Aggressive increases in property tax rates
Some individuals may feel it is unfair to pay higher taxes simply because other properties have appreciated a lot. However, we can see that the government has already made efforts to balance this.
Let’s not forget property tax serves as a form of wealth tax, targeting those who own high-value properties or purchase properties for investment purposes. It also helps fund the development of Singapore and build the nation. So it is one-stone-kill-two-birds.
To deter property flipping and encourage more affordable housing, the government has raised property tax rates for non-owner-occupied properties while providing rebates for individuals who genuinely purchase a house to reside in.
Currently, new livable condominiums are launching at a minimum of $2 million. Assuming an annual value of $45,000, if you reside in the condo, your property tax would be $1,207. Conversely, if you rent it out, the property tax would amount to $6,600 per year.
For a $3 million condominium with an assumed annual value of $67,500, the property tax would be $2,949.50 for an owner-occupier and a substantial $13,500 if rented out. This figure is probably already more than two months of rental income!
You can use this property tax calculator to quickly estimate your upcoming property tax obligations for 2025.
Ultimately, it is important for you to do your math right. In Singapore, rental yields are already relatively low, generally less than 3%. Factoring in loan interest, property tax, income tax, maintenance fees, and agent fees, the net yield diminishes significantly.
In Summary…
We all know that property prices have been skyrocketing lately, leading to hefty increases in property tax rates. The government is trying to strike a balance.
To curb property flipping and promote affordable housing, higher tax rates are set for non-owner-occupied properties, while genuine homebuyers get rebates.
Throughout my 2-decade financial advisory career, I have reviewed thousands of financial plans. I can’t emphasize more on the importance of crunching the numbers and planning your finances carefully before diving into any investments, be it financial products or properties. Proper financial planning helps you stay prepared for these expenses and make sound investment decisions.
If you find this article useful, join our Telegram or subscribe to our email list below to join our FIRE Retirement community to invest wisely and retire well.