Tuesday, November 24, 2009

Straits Times: Property tax on HDB flats going up

Nov 19, 2009 
Property tax on HDB flats going up 
One-off rebate to cushion rise; one- and two-room owners will pay nothing
By Jessica Cheam 

HOMEOWNERS: be prepared to pay higher property taxes next year.

In line with the rally in home prices, the taxman is revising upwards the value of Housing Board (HDB) homes. 

The Inland Revenue Authority of Singapore (Iras) announced yesterday that the annual values (AV) of all types of HDB flats will be raised with effect from Jan 1. 

This will mean a hike in property taxes for 2010.

The property tax rate in Singapore is currently set at 10 per cent of a property's AV, although owner- occupied residential properties enjoy a concessionary 4 per cent tax rate.

To soften the impact, a one-off rebate is being introduced to help HDB homeowners adjust to the increase. 

With this new rebate and ongoing GST rebates, low-income households who live in one-room or two- room flats will not have to pay any tax for 2010, Iras said. 

Industry analysts yesterday said that Iras's latest move was 'not totally unexpected'. HDB resale prices have risen a hefty 31.2 per cent in the past two years, and a further 3.8 per cent in the first nine months of the year.

'As HDB resale flat prices have exceeded the property peak of 2007, this was inevitable,' said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.

What was more surprising, however, was the timing of the announcement.

'There are households who are still reeling from the recession, and unemployment is still high. It could have come a bit later when the job market has recovered,' said Mr Mak.

Iras last revised AVs on Jan 1, 2008.

It said yesterday that it reviews all property AVs annually, including HDB flats, to 'ensure that they reflect prevailing market rental values for the purpose of determining property tax'. 

AVs of HDB flats were not revised last year, despite HDB rentals increasing by between 31 per cent and 37 per cent in 2008 relative to 2007, it said. 

This adjustment was deferred in view of the uncertainty in market rental trends caused by the economic recession. Iras added that there was evidence of rental value declines due to the negative economic outlook at the time.

However, market sentiment has since changed dramatically. Iras noted that HDB rentals stabilised after a moderate decline from late 2008 to the middle of this year, and have since begun to rise. 

As a result, current values of HDB rentals, as well as resale prices, are still significantly higher than levels seen in 2007. 

'The AVs of HDB flats will, therefore, have to be adjusted beyond the last revision in January 2008,' said Iras.

But to help HDB homeowners adjust to the rise, the Government is granting a new property tax rebate to all HDB owner-occupiers for property tax payable in 2010 - set at 50 per cent of the property tax payable and capped at $120. Low-income households will be assisted because flats with a property tax of $50 and below will not need to pay property tax next year.

The average three- room HDB owner-occupier will face an increase, after rebates, of $72 for the year.

The rise will be about $97 for four-roomers, $107 for five-roomers and $103 for executive HDB flat owners.

PropNex chief executive Mohamed Ismail said the rebates will help cushion the blow. He pointed out that HDB owners have enjoyed higher rentals and resale values over the past two years, so the increase in taxes was 'to be expected'.

HDB homeowner Lim Chye Boon, 48, said he had expected the tax increase to come 'at some point' so was not too bothered.

But for Mr Kenny Koh, 27, who has just bought his five-room flat in Sengkang, it was not welcome news.

'I just spent so much money buying my new home and now have to pay more again,' he said. 'But at least, the rebate helps a bit.'

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

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