Feb 27, 2013 - By: iProperty.com Singapore
According to the latest Budget released by the government, tax vacancy refund would be abolished such that individuals and developers can no longer apply for tax rebates for vacant units, thereby increasing their holding costs. On top of that, the progressive tax rates structure would see owners of high-end residential properties paying more property taxes. As a result, high-end developers are likely to be hit with a double whammy where higher tax rates make properties seem less attractive as an investment tool.
At present, residential properties that are fit for occupation while undergoing building works are granted full property tax refund. However, such properties would no longer enjoy the tax refund with effect from 1st January 2014. Still, owners can apply to the Inland Revenue Authority of Singapore to be taxed at the owner-occupier residential property tax rate for the duration of building works which is allowed up to a maximum of 2 years.
Experts said that the abolition of this tax refund would likely push developers to take on creative pricing structures. As such, developers are expected to offer attractive discounts to buyers in a bid to offload property. For example, CapitaLand introduced cash rebates to buyers for its d’Leedon and Interlace projects which saw an increase in take-up rates eventually.
In addition, the removal of the tax refund concession is likely to exert pressure on rental for high-end properties as more investors lower their rental expectations and seek to quickly rent out their properties to offset the property taxes. Similarly, high-end residential developers would be pressured to sell their unsold units in the face of higher property taxes, including Wing Tai, Wheelock, Ho Bee, City Developments Limited and Keppel Land for homes in the prime segment.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)