Property tax hikes won’t depress new launch prices, may hurt luxe home demand
Property tax hikes won’t depress new launch prices, may hurt luxe home demand. According to a quarterly survey, real estate executives do not anticipate price cuts for new private home launches as a result of Singapore’s upcoming property tax increases, though some developers may try to purchase more land in the suburbs.
According to the poll results, tax increases are also likely to dampen demand for luxury condominiums and landed properties, particularly those in prime locations.
For its Q1 2022 survey, the National University of Singapore Real Estate (NUS+RE) polled 39 senior executives in Singapore’s real estate industry, including developers, about the impact of tax increases on the private residential market. NUS+RE represents the Institute of Real Estate and Urban Studies (IREUS) and the Department of Real Estate.
According to REUS deputy director Lee Nai Jia, higher property tax rates are unlikely to affect upgraders’ desire to own a private home, whereas high-income homeowners are more likely to feel the pinch.
“However, supply of high-end properties is inelastic, and prices are unlikely to adjust accordingly,” he said.
In his Budget 2022 speech this February, Finance Minister Lawrence Wong announced that the property tax rates for both non-owner occupied and owner-occupied residential properties will rise in two steps beginning in 2023.
Property tax hikes? Despite the impending price increases, approximately 85 percent of executives polled believe that housing developers will proceed with their project launches as planned, and nearly half believe that prices at new launches will remain unchanged.
Higher property tax rates, according to respondents, may cause developers to change their land acquisition strategies, such as acquiring more sites in the suburbs or outside the central region (OCR) and lowering their price expectations for land bids.
Despite the new measures, Dr. Lee believes that property launches will proceed as planned because developers must still meet the 5-year additional buyer’s stamp duty deadline.
“However, competition for OCR sites is likely to heat up, as demand is likely to be bolstered by strong upgrader demand,” he added.
According to the majority of survey responses, higher tax rates are unlikely to have a significant impact on demand for executive condominiums (ECs) and mass-market condominiums.
For ECs, which are a hybrid of public and private housing, approximately 46.2 percent of property executives anticipate no impact on demand, while another 46.2 percent anticipate a limited impact.
A little more than half of respondents anticipate a limited impact on demand for mass-market condominiums, while 38.5 percent believe there will be no impact.
Only a minority of them indicated that the new property tax rates would have an indefinite impact on the EC and mass-market condominium segments.
In contrast, a higher proportion of executives (41%) anticipate a permanent decline in demand for high-end condominiums and landed homes (38.5 per cent).
However, more than half of respondents believe that the impact on demand will be minor in both the landed and luxury non-landed segments.
Higher property taxes may have a minor impact on en bloc acquisitions and government land sales sites, with 51.3 percent and 56.4 percent of respondents opting for this option, respectively.
Fewer than a quarter believe the tax increases will have any long-term impact on land acquisitions.
According to more than half of senior executives, demand for private homes in Singapore’s prime areas or core central region (CCR) could be permanently reduced as a result of higher property tax rates.
On the other hand, the majority believe the impact will be limited for private residential properties located on the city outskirts or in the rest of the central region (RCR) and in the OCR. Fewer than a quarter of respondents expect a permanent decline in demand for RCR and OCR.
The tax rate on non-owner occupied residential property, including investment properties, will increase to 11-27 percent on January 1, 2023, and then to 12-36 percent on January 1, 2024. This represents an increase from the current 10-20%. High-end properties will see the greatest increase.
The rate for owner-occupied homes will rise from 4-16 percent in 2023 to 5-23.3 percent in 2024 for the portion of the annual value in excess of S$30,000.
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