5 Hidden Expenses to Watch Out for When Buying a Home in Singapore
5 Hidden Expenses to Watch Out for When Buying a Home in Singapore Buying a property in Singapore can be...
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TLDR
The 2024 Budget introduces changes to property tax bands, aiming to ensure fair taxation based on Annual Value (AV) of homes. Retirees in high-value properties facing financial strain can benefit from interest-free payment plans. ABSD remissions now extend to singles aged 55+ selling old properties to buy cheaper ones. Developers can enjoy ABSD discounts by selling off projects within five years. Young families under the Parenthood Provisional Housing Scheme receive rental vouchers. Overall, the Budget focuses on recalibrating existing plans, addressing inadvertent impacts, and promoting downsizing for private property owners.
The big news today was the release of the 2024 Budget. It’s got a focus on “boosting education and training”, and giving financial help to specific groups. There are some goodies you might be interested in – like $1.9 billion heading for household support (in all sorts of ways), CPF tweaks, and a hand for our Singaporean renters. But, if you’re watching the housing scene, you’ll want to pay attention to the property taxes changes. This is what you gotta know:
Exciting Updates on Property Tax!
Alright, let’s talk about a big shake-up in the housing game. Remember back in 2022, when they hiked up the property tax rates for homes? The idea was to get the high rollers with ritzy pads to cough up a bit more cash.
But here’s the thing, rents have been on the rise since 2022 and that’s had a knock-on effect. It’s bumped up the Annual Value (AV) of homes and led to tax hikes even for less fancy digs. So, despite the initial aim to target the top-tier 7% of properties, it was actually 13% of them that got hit.
So, come Jan 2025, there’s a rejig on the cards. The AV bands of lived-in homes are getting a makeover. This is to make sure those with swanky houses keep carrying the load, while the rest of Singapore might end up paying the same or even less in property taxes. Sound fair, right?
Changes to property tax
Come 2025, the yearly value ranges for taxes on homes lived in by their owners will be getting a bit of a shake-up.
| Marginal PT rate | Portion of AV (S$) | |
| Jan 1–Dec 31, 2024 | From Jan 1, 2025 | |
| 0% | From $0–$8,000 | From $0–$12,000 |
| 4% | From $8,000–$30,000 | From $12,000–$40,000 |
| 6% | From $30,000–$40,000 | From $40,000–$50,000 |
| 10% | From $40,000–$55,000 | From $50,000–$75,000 |
| 14% | From $55,000–$70,000 | From $75,000–$85,000 |
| 20% | From $70,000–$85,000 | From $85,000–$100,000 |
| 26% | From $85,000–$100,000 | From $100,000–$140,000 |
| 32% | From $100,000 | From $140,000 |
Source: MOF, MND
Here’s a curious fact. If you’re a retiree residing in a swanky pad but you’re struggling with the money flow, don’t stress. IRAS is here to help. They’ve got this cool plan where they give you a two-year interest-free payment set-up. Sounds good, right?
Discover the Potential Impact!
The government is fully aware of the predicament faced by older Singaporeans residing in high-value properties – despite their property’s worth, their personal finances might not measure up.
There exists a demographic of Singaporeans who aren’t necessarily affluent but are owners of inherited properties like landed homes, passed down from previous generations. Over the years, these properties have seen a substantial increase in value. Consequently, they come with a hefty annual value (AV) and property tax bill, which could potentially outweigh the owner’s financial capability. There’s a likelihood that, despite the provision of an interest-free installment plan, some owners might be compelled to sell their high-value properties and downsize to a more affordable option.
However, for the typical flat or condo owner in the mass market, this isn’t a considerable shift as their taxes likely remain the same or even decrease. Moreover, it’s reasonable to assume that the wealthy buyers aren’t significantly affected by this change. An individual unaffected by a 20 per cent Additional Buyer’s Stamp Duty (ABSD) would likely remain unperturbed by a six per cent hike in the annual property tax.
Exciting New ABSD Concessions Unveiled
You might have come across the term ABSD and thought it could be a game-changer, but hold your horses! This is a special opportunity that only benefits a certain set of individuals. In case you aren’t aware, married pairs, where one half is a Singaporean, can get a remission on ABSD if they manage to sell their old property within half a year of purchasing a new one. This becomes particularly relevant when you acquire a new place before letting go of your old one.
But here’s the interesting part – this perk isn’t exclusive to married duos anymore. Singles can now also join the club. There are few strings attached though – you need to be a Singaporean citizen aged 55 or more, and your newly acquired private property should cost less than the one you’re offloading. Let me give you an example:
Imagine you’re 55 and you snag an $800,000 single-bedroom property while still holding onto your $1.6 million three-bedroom place. You would have to cough up ABSD worth $160,000. But, if you manage to sell your three-bedroom property within six months, you can recover this cash.
Probable Impact Unveiled: What You Need to Know!
The alterations in property regulations significantly support older singles who have never married, a group that was formerly at a considerable disadvantage compared to their married counterparts. Devoid of ABSD remission opportunities, these individuals might find themselves compelled to sell their existing properties before purchasing another, a process that could lead to substantial expenses in the form of rentals.
Taking into account the prevalent property taxes, it seems like there’s a gentle nudge from the authorities encouraging aged private property owners to downsize, which indeed simplifies matters to a great extent. Such a move could potentially bring more private properties into the resale market, thereby increasing supply – a much-needed boost considering a growing number of HDB upgraders are now turning to resales, mainly due to being priced out of larger units in recent launches.
The debate around the age restriction imposed on singles hasn’t gone unnoticed. We too share the sentiment. A fair number of lifelong singles in Singapore are legally unable to marry, and it’s perplexing why they should be penalized or inconvenienced when looking to downsize their properties.
Exciting New ABSD Benefits for Developers
Got it, developers have to cough up ABSD too, which is a hefty 40% of the land price. But hey, there’s a silver lining – they can score a 35% ABSD discount if they manage to build and sell off their whole project within a five-year timeline.
With the current rule update, developers now qualify for the ABSD discount if they manage to sell a minimum of 90% of the units. The size of this discount can fluctuate depending on how many units are left unsold. But don’t forget, they’ve still got to finish building within that five-year window to be eligible.
What’s The Probable Impact?
This might motivate builders to incorporate a few additional spacious units, like four or five-bedroom apartments, or to increase the overall size of the units. The reason for this is often linked to the high cost associated with larger homes, which can be a hurdle for buyers.
During most property launches, smaller one and two-bedroom apartments tend to get snapped up quickly, leaving the developer with several larger or penthouse units that are tougher to sell due to a more niche market. At times, having only a small number of these unsold units can lead to a loss of ABSD remission for the developer, hence the tendency towards building smaller homes in general.
Young Families in Waiting: Rental Vouchers for Your BTO Dream
In a unique, one-off initiative, young families benefitting from the Parenthood Provisional Housing Scheme (PPHS) will receive a singular rental voucher. This voucher can be utilized to alleviate their rental expenses for any HDB flat available on the open market. The actual value of the voucher remains a mystery as of now, with an official announcement due to follow.
This comes as a welcome relief, especially after witnessing a surge in HDB rental rates, along with all other rental rates, in the wake of the Covid pandemic. It’s important to note, however, that this isn’t a standalone effort. Rather, it’s a supplement to existing strategies aimed at easing the rental burden. For instance, HDB already took strides towards doubling the supply of rental flats last year. Furthermore, the PPHS continues to offer subsidized rental alternatives to select families. So, while this isn’t a groundbreaking introduction, it certainly bolsters current policies amidst the prevailing high rental rates.
Potential Effects: Unveiling the Impact
In isolation, the impact is minimal. We’re skeptical that a single voucher will persuade individuals to opt for BTO over resale properties or cause any significant shift. Yet, it’s an integral part of a broader, ongoing strategy designed to alleviate the demand for more expensive resale flats. If we could encourage more Singaporeans to be patient during the BTO construction process, we might witness a decrease in Cash Over Valuation (COV).
On the whole, Budget 2024 appears to be more focused on recalibrating existing plans rather than introducing novel approaches. The underlying principles and objectives remain consistent with those of the previous year. However, it’s heartening to see that the government is aware of — and swift to rectify — inadvertent impacts on various segments of the population.
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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