Property Tax on Investment Properties to Rise in 2024

On 30 November, the Government announced that property taxes for most residential properties will increase in 2024, driven by higher market rents and Annual Values (AV).

Property tax will rise for higher-value private residential properties, primarily luxury condominiums and landed homes.

On the other hand, owner-occupied residential properties will receive rebates to cushion the impact of the property tax hike.

In 2022, rents for private residential properties and HDB flats rose by 29.7% and 28.5% respectively, translating to higher average prices in 2023. Higher property AVs also meant higher property tax revenues collected in 2023.

Meanwhile, private residential rents climbed by 11.1% in the first three quarters of 2023, while HDB rents rose by 8.3% between January and October 2023. This points to further growth in AVs for 2024, despite rents showing signs of softening in the fourth quarter of 2023.

With property tax rates set to rise in 2024, residential homeowners are bracing themselves for higher property tax bills.

However, the Government also announced a 30% to 100% rebate for owner-occupied HDB flats, and a 15% rebate capped at $1,000 for owner-occupied private residential properties, to help households cope with rising living costs.

The stark difference between offering rebates for owner-occupied homes and none for non-owner-occupied properties reflects a progressive tax system. Wealthier individuals will be taxed more, and the revenue collected will be deployed to support those in greater need.

Nevertheless, the allure of investing in Singapore residential real estate lies in its potential for capital appreciation, which far outstrips the increase in property tax.

The property tax hike for non-owner-occupied or investment residential properties was initially announced in Budget 2022. In spite of this, the residential property market remained resilient, with prices rising by 8.6% in 2022. Consequently, the property tax hike is not expected to significantly derail residential real estate investments in 2024.

With private residential and HDB rents projected to trend lower in 2024, investors are unlikely to pass the increased property tax on to tenants.

As a result, higher property taxes are likely to eat into landlords' rental income.

Next year, a cooling rental market, alongside hefty Additional Buyer’s Stamp Duty (ABSD) on investment properties, elevated interest rates, and climbing maintenance costs, will lead to higher carrying costs. On top of existing stamp duties, mortgage servicing, and other holding costs, the increased property tax will be an added consideration.

Hence, buyers will likely remain budget-conscious amidst the rising cost of living, the Goods and Services Tax (GST) hike, and economic uncertainties.

The compounding effect of these factors could help keep potential runaway property prices in check. As buyers turn increasingly price-sensitive, developers will likely adopt a more cautious approach when bidding for land, which in turn will help prevent land prices from escalating further.