Taxes are an essential part of a budget structure, and their revision (increase and decrease) indicates several elements – like the financial wellbeing of the government, its people, and more. Since taxes are pretty much unavoidable, it’s better to get familiar with them and know all the nitty-gritty details. Knowing more is never bad, and it can help save money whenever applicable via taxes.
Before you think of tax changes as too hard to understand – let’s dive into the details of Budget 2022 Singapore and all that it entails for real estate.
Annual value is estimated gross annual rent of the property if it were to be rented out. There’s government sites that describe a lot better than us so here’s the link if you’re keen.
Budget 2022 Singapore is not going to impact owner-occupied residential properties that have an annual value of $30,000. However, People with property valuing more than $30,000 will see an increase in tax on the annual value exceeding the $30,000 mark. The current rate for 2022 is 4% – 16% and it will increase to 6% – 32% in 2023.
Taxes on Owner-Occupied Residential Properties
So, let’s begin with the good news, and it is for the HBD flat owners. People with HBD flats that have an annual value of $10,000 are currently paying $80 as tax. The budget change for 2023 and 2024 has kept the tax rate the same, and there will be no additional charges for these HBD flat owners to pay. Next, people that have a landed property like a suburban condominium with an annual value of $30,000 are currently paying $880 as tax. They will also be facing zero increments for the tax year of 2023 and 2024. So, people owning single properties with an annual value of $10,000 or $30,000 are safe from tax increment.
Now, let’s talk about the increase and the areas where it applies. Condominium owners in the central area with landed properties of annual values of $40,000 are currently paying $1280 as property tax. They will face an increase of 100$ in 2023 and then another increase of $100 in 2024, taking tax to $1380 and $1480, respectively.
Next are the taxes for people owning landed property of $70,000 annual worth and currently paying a tax amount of $2780. They will see an increase of $1150 in 2023 and 2024, taking their tax rate to $3930 and $5080, respectively. Lastly, very large landed property owners with an annual property worth $150,000 are currently paying $12580 in taxes. They will see an increase of $7650 and $7750 in their taxes in 2023 and 2024, taking their tax amount to $20,230 and $27,980.
Taxes on Non-Owner-Occupied Properties
Singapore property prices might change as there will be an increase in taxes on non-owner-occupied properties. The larger portion of these taxes is targeted at high-end homes. There are property trends that help in analyzing the impact of increase and more; take a look at this blog to know more about the expected property trends of 2022.
All non-owner-occupied properties will see an increase in tax rates. The current tax rates are 10% – 20% and they will move to 12% – 36%. However, this increase in taxes will particularly concern the rich as it can be called more of a wealth tax than a property tax. It should be noted that the demand for luxury homes in Singapore real estate has risen tremendously in the past 10 years.
The non-owner-occupied residential properties, as mentioned, will see a significant tax increase when compared to owner-occupied properties. An HBD Flat with an annual value of $10,000 has a current annual property tax of $1,000. It will see an increase of $100 in 2023 and 2024, taking the tax amount to $1,100 and $1,200, respectively. A suburban condominium landed property with an annual value of $30,000 currently pays an annual tax of $3,000. They will see an increase of $300 in 2023 and 2024, taking the tax amount to $3,300 and $3,600, respectively.
A condominium in a central location as a landed property with an annual value of $40,000 currently pays a yearly tax of $4,200. They will see an increase of $700 in 2023 and 2024, taking the tax amount to $4,900 and $5,600, respectively. Large landed property with an annual value of $70,000 is currently paying an annual tax of $8,500. They will see a total increase of $5,900 cumulatively in 2023 and 2024, taking their property tax to $11,550 and $14,400.
Lastly, a landed property with an annual worth of $150,000 currently pays an annual tax of $24,000. They will see a total increase of $19,200 by 2024 as they’ll pay $33,150 in 2023 and $43,200 in 2024 as property tax.
The tax increase will make an impact on luxury real estate buying and selling. However, it has been predicted that the change will not turn out to be a deal-breaker as they will still be paying modest taxes.
The increase in tax on goods and services In budget 2022 Singapore
Another area that will see a tax increase is the goods and services area. Real estate investors are likely to know the impact of an increased GST on the following areas.
- Construction costs
- Renovation costs
- Rents for residential properties, commercial properties, and industrial properties
- Sale of commercial properties
- Purchase of commercial properties
The good news is that the lease and sale of residential properties have been exempted from GST. Hence, no GST is to be paid. However, non-residential properties aren’t exempted from GST. So, it includes commercial properties and industrial properties.
An increase in the price of goods and services indicates an increase in construction and renovation costs. So, real estate construction companies will have to keep the increase in the GST and adjust their cost accordingly. Moreover, there are several maintenance costs associated with rental properties. The increase in GST can also pave the way towards an increase in the maintenance and repair costs of rental properties.
Impact of additional buyer stamp duty on the Singapore real estate
The increase in additional buyers’ stamp duty can encourage Singaporeans to sell their existing property before buying a new one. It will save them from paying a hefty amount in place of ABSD. However, the good news remains for first-time property owners in Singapore. Singapore citizens and permanent residents buying their first property will have to pay nothing on ABSD.
Citizens buying their second property were paying 12% ABSD, which has been revised and increased to 17%. Similarly, citizens buying their third property were paying ABSD of 15%, and that also has been revised and increased to 25%. We can take an example to understand this better and more comprehensively.
A buyer looking to buy a 1.3 million property while having an existing property will have to pay $221,000 in additional buyer duty stamp first. They would have to pay $65,000 less if they made this purchase before 15th Dec 21. Hence, it can be easily assumed that many people looking to upgrade their property will sell and go on rental before buying their next property.
These upgraders often worry about having enough capital and resources that can smoothen out the process of their next purchase. Leveraging is the key that can help them get their upgraded property without giving away all their liquidated resources. You can read this blog to know more about leveraging and everything it entails.
The Pros and Cons of Budget 2022 Singapore
WE WILL BE POORER. No one is a fan of taxes, but they’re something that can’t be avoided. Many people who rely on the government help sustain a living through these taxes paid by the hard earning people. Many of those relying on the government money aren’t willing to earn a better income because they’re afraid they’ll have to give up the help they receive from the government.
The most impacted areas through the budget were the property market and the increase in GST. There has been a substantial increase in taxes on residential rental homes. However, it majorly targets those at the larger end, i.e., condominiums and landed properties with the highest annual values.
The increase is substantial, but it is still termed as a progressive increase, mostly targeting people with high-value properties. Safe to say, it is not enough that it will deter seasoned investors from investing in the real estate property market and in itself a really good reason for those to enter the market? After all, its been a crazy past year of trying to play catch up on prices.
Those looking at the their first property investment have sighed a relief because they are finally given a breather. But with the macros of lack of supply and low costs of mortgages, the real question is, how long is the relief going to last?
Hedging against rising costs, inflation and constantly evolving world occurrences seems everyone’s main goal these days. And the answer to that holy grail question could be as simple as: Real Estate.
If you like some help with your foray into the Singapore Real Estate, contact us! We’d love to help.