Thursday, March 14, 2013

57,000 investment homes face higher taxes


The Straits Times - March 8, 2013
ABOUT a third of Singapore's 169,000 investment homes will face higher property levies once the Budget's new tax structure takes full effect in 2015.

ABOUT a third of Singapore's 169,000 investment homes will face higher property levies once the Budget's new tax structure takes full effect in 2015.

Owners of such units with an annual value of more than $30,000 - or about 57,000 homes - will pay higher taxes, the Ministry of Finance (MOF) told The Straits Times yesterday. The progressive tax rates range from 12 per cent to 20 per cent of a property's annual value.

The other investment homes - about 112,000 properties - have annual values of $30,000 and below, so the existing property tax rate of 10 per cent will continue to apply.

The annual value is the estimated annual rent the property may fetch. An annual value of $30,000, for instance, could apply to a suburban condominium.

Singapore has around 962,000 owner-occupied properties and 169,000 investment homes.

Investment homes - about 15 per cent of the total housing stock - include vacant units, an MOF spokesman said.

Experts say the changes will affect mostly high-end homes, especially with the removal of the property tax refund concession for vacant properties next year.

Savills Singapore research head Alan Cheong said vacant units are likely to be high-end homes as more expatriates are coming in on local packages and have moved into the mid- and mass-market segments over the past few years instead.

Without the tax concession, there might be more high-end homes coming on stream, some held by developers, and that could further dampen rents.

Rents for homes in the prime districts of 9, 10 and 11 have already fallen 7.4 per cent in the three months to Dec 31 compared with the same period a year ago, Mr Cheong noted.

Properties that are vacant despite reasonable efforts by owners to find a tenant, for instance, can get a full property tax refund for the duration of the vacancy. But from the start of next year, they will be taxed at prevailing property tax rates.

Investor Anthony Ong, 48, said he expects his property taxes to increase by a "few hundred dollars" under the new tax regime. "It's not a very big impact as we don't own a very luxurious type of condo but after paying the taxes and the instalments, it will definitely have an impact on our rental yields," he added.

As far as owner-occupied homes go, 97.8 per cent of owners will enjoy lower property taxes, 1 per cent will continue paying no tax while the remaining 1.2 per cent will face higher taxes, the MOF spokesman noted.

Owners of homes with an annual value of $6,000 and less - there are about 9,600 owner- occupied homes in this category - will continue to pay no property tax under both tax structures. These homes include one- and two-room Housing Board flats.



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LOWER RENTAL YIELDS

It's not a very big impact as we don't own a very luxurious type of condo but after paying the taxes and the instalments, it will definitely have an impact on our rental yields.

-        Investor Anthony Ong, 48, who expects his property taxes to increase by a "few hundred dollars"
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