Expect to pay higher property taxes next year, but the rise will come with some cushioning. The Inland Revenue Authority of Singapore (Iras) has announced that it is raising the Annual Value (AV) of Housing Development Board (HDB) flats.
The move comes on the back of rising resale prices and rents.
The tax authority noted that while rents for HDB flats have stabilised after a moderate decline between the end of last year and the middle of this year, rentals have begun to rise since.
“As a result, current values of HDB rentals, as well as HDB resale prices, are still significantly higher than levels observed in 2007. The AVs of HDB flats will therefore have to be adjusted,” said Iras.
The last time there was a revision in the AV for HDB flats was in January last year.
Even though HDB rental increased by up to 37 per cent last year relative to 2007, Iras deferred adjusting the AV for the start of this year because of the “uncertainty in market rental trends” in a recession.
To help HDB flat owners cope with the increase in January, the Government will give a one-off property tax rebate of 50 per cent of the tax payable, capped at $120. This applies to all those who live in the flats they own.
To help those in smaller flats, Iras will offset the total tax amount for households which have to pay property tax of $50 or less. This would mean that two-roomers will not need to pay property tax.
“It will help soften the blow,” said real estate consultant Nicholas Mak.
He added that owner-occupiers of HDB flats will not be affected that much as “property tax on HDB is lower than (that of) private property”.
On average, the increase will in property tax will be $72 for three-room flats, $97 for four-room flats, $107 for five-room flats and $103 for those in executive flats.
For those renting out their HDB flats and who will not receive the rebate, Mr Mak said that with demand still buoyant from the immigrant population, the “increase in rentals could offset the increase in AV”. As of March this year, HDB has approved 22,754 applications by owners to rent out their units.
The Government will have other help measures for the “down-and-out”, added Member of Parliament Ho Geok Choo, a Government Parliamentary Committee member for national development.
A higher AV may also have implications for inflation, although economists were mixed about the expectations of the impact
“It will be benign because underlying inflation is low,” said DBS economist Irvin Seah.
While others expect headline inflation to go up, unlike in Jan 2008 – when the government last raised the AV of public flats – it will not hit the heights of 6.6 per cent then.
“The housing component is a large contributor to the CPI basket and inflation might reach 2 to 4 per cent by the first quarter,” said CIMB-GK economist Song Seng Wun, who added, though, that higher food, utility and COE prices could present greater upside pressure.
Source : Today – 18 Nov 2009
Lush Dream Home 