SINGAPORE – Several property-related policy adjustments announced in Budget 2024 will help bring relief to many private residential home owners – who saw their property tax bills balloon this year – and single Singaporean seniors wanting to right-size their homes and shore up retirement adequacy.
Changes that would reduce the Additional Buyer’s Stamp Duty (ABSD) that developers have to pay if they are not able to sell out their residential projects within a prescribed timeline were also announced by Finance Minister Lawrence Wong on Feb 16.
But some question if the move goes far enough, given the still-punitive ABSD penalties and other challenges developers face in a slowing market and sluggish economic climate.
Analysts said the move to raise property annual value (AV) bands for owner-occupied homes will likely help ease many owners’ higher property tax burden arising from rent increases since 2022.
The URA Rental Index for all private residential properties saw a 35.3 per cent surge from first quarter 2022 to fourth quarter 2023, resulting in a jump in AVs, and affecting a larger proportion of owners than originally intended.
With the changes, owners of mid-tier private residential properties with AVs of between $50,000 and $100,000 will likely see a bigger drop in their property tax from Jan 1, 2025, Ms Tricia Song, CBRE’s head of research for Singapore and South-east Asia, said.
She noted that the tax payable for properties with AV of $50,000 will fall by 31 per cent, compared with the current amount payable, while the tax for those with AV of $100,000 will dip by 28 per cent and those with AV of $150,000 will drop by 21 per cent.
“Previously, those who have been living in higher-value properties but have no or lower income might have considered downgrading. But with the revised AV bands, and a 24-month interest-free instalment plan for retirees, owners may be able to pay their property taxes and hold firm to their current property,” she added.
Mogul.sg’s chief research officer Nicholas Mak noted that there is no reduction in the property tax rate for investment properties, and that the policy adjustment is a “small” help in the rising cost of living battle for middle-class home owners.
The Government will extend a concession on ABSD remission to single Singaporean seniors aged 55 and above who wish to right-size their home. Previously, only married Singaporean couples with an existing residential property can enjoy an ABSD refund on their replacement private property.
But for purchases on or after Feb 16, 2024, single seniors can claim an ABSD refund if they sell their first property within six months of buying the lower-value home, among other conditions.
Mogul.sg’s chief research officer Nicholas Mak said this “would make the ABSD regime slightly fairer, as Singaporeans who own only one residential property should not have to pay ABSD, regardless of their age or marital status”.
ERA Singapore chief executive Marcus Chu noted that these single seniors now have another housing option as “the punitive 20 per cent ABSD had previously deterred them from downgrading to private property, and restricted them to resale flats”.
Ms Christine Sun, OrangeTee Group’s chief researcher and strategist, said this adjustment is designed to help older single buyers including divorcees, widowers and widows – a growing group as Singapore’s population ages.
Smaller and older resale private homes that were once less attractive due to their shorter lease balance could get a new lease of life, she added.
Some single seniors may switch to buying such condos instead of four-room resale flats, which do not require them to observe a mandatory 15-month wait-out period after selling their private home, before they can buy the flat, she said.
But Mr Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia, pointed out that “given their age, seniors will face strict loan curbs and may still need to pay ABSD upfront”.
“And given that they are restricted to a lower-value replacement property, this could further restrict them from buying a newer home in a better location,” he said.
While revisions to the ABSD regime for land are a positive step, Ms Chia Siew Chuin, JLL’s head of residential research for Singapore, believes “the measured scale of revision is not expected to have a significant impact on developers’ land acquisition strategies”.
“The ability of developers to off-load units... hinges on numerous factors, many of which have changed since they initially acquired their sites. These include the macroeconomic landscape and policy factors that influence their ability to effectively market and sell units.”
“As such, housing developers will remain guarded, selective and strategic” in their landbanking.
Currently, developers buying land on or after Dec 16, 2021, pay 35 per cent ABSD that may be remitted upfront subject to conditions, plus 5 per cent ABSD that is non-remittable. If the developer fails to sell its residential units within five years from the date of buying the land, the 35 per cent remittable component will be clawed back with interest, regardless of the number of unsold units.
With effect from Feb 16, projects with at least 90 per cent of units sold at the five-year sale timeline will be subject to a lower ABSD remission clawback rate.
But even with the reduced rate, the ABSD penalty is still punitive, PropNex Realty chief executive Ismail Gafoor noted.
“If a developer bought a site for $400 million after Dec 16, 2021, and the project has 500 units, failing to sell the last 1 per cent or five units within the five-year sale deadline would mean an ABSD remission clawback of $100 million plus interest based on an ABSD rate of 25 per cent, compared with $140 million plus interest under an ABSD rate of 35 per cent,” he said.
The Real Estate Developers’ Association of Singapore said a fairer approach could be to use the percentage of unsold units to determine the ABSD penalty.
It hopes the Government “may consider... applying the clawback rate to the remaining value of unsold units” or extending the timeline to sell out the remaining units.
