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 expect price cuts for new private home launches as a result of Singapore’s upcoming property tax increases, though some developers may try to buy more land in the suburbs.
According to the poll findings, the tax increases are also likely to slow demand for luxury condominiums and landed properties, particularly those in prime locations.
The National University of Singapore Real Estate (NUS+RE) surveyed 39 senior executives in Singapore’s real estate industry, including developers, about the impact of tax hikes on the private residential market for its Q1 2022 survey. The Institute of Real Estate and Urban Studies (IREUS) and the Department of Real Estate are represented by NUS+RE.
Higher property tax rates, according to REUS deputy director Lee Nai Jia, are unlikely to affect upgraders’ desire to own a private home, whereas high-income homeowners are more likely to feel the pinch.
“However, high-end property supply is inelastic, and prices are unlikely to adjust accordingly,” he said.
Finance Minister Lawrence Wong announced in his Budget 2022 speech this February that property tax rates for both non-owner occupied and owner-occupied residential properties will rise in two steps beginning in 2023.
Despite the impending hikes, approximately 85 percent of executives polled expect housing developers to proceed with their project launches as planned, and nearly half believe that prices at new launches will remain unchanged.
According to respondents, higher property tax rates may prompt 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 go ahead as planned because developers are still subject to the 5-year additional buyer’s stamp duty deadline.
“However, competition for OCR sites is likely to heat up,” he added, “as demand is likely to be bolstered by strong upgrader demand.”
Property tax hikes? Higher tax rates, according to the majority of survey respondents, are unlikely to have a significant impact on demand for executive condominiums (ECs) and mass-market condominiums.
For ECs, which are a mix of public and private housing, approximately 46.2 percent of property executives expect no impact, while the remaining 46.2 percent expect a limited impact.
A little more than half of those polled expect a limited impact on demand for mass-market condominiums, while 38.5 percent expect no impact.
Only a minority of them indicated that the new property tax rates would affect the EC and mass-market condominium segments indefinitely.
In contrast, a higher proportion of executives (41%) predict a permanent decline in demand for high-end condominiums and landed homes (38.5 per cent).
However, more than half of respondents believe there will be only a minor impact on demand in both the landed and luxury non-landed segments.
When it comes to land purchases, higher property taxes may have only a minor impact on en bloc acquisitions and government land sales sites, with 51.3 percent and 56.4 percent of respondents choosing this option, respectively.
Only about a quarter believe the tax increases will have any long-term effect on land acquisitions.
More than half of senior executives believe that higher property tax rates will permanently reduce demand for private homes in Singapore’s prime areas or core central region (CCR).
The majority, on the other hand, believes the impact will be limited for private residential properties located on the outskirts of the city or in the rest of the central region (RCR) and in the OCR. Fewer than a quarter of respondents anticipate a permanent decline in RCR and OCR demand.
The non-owner occupied residential property tax rate, including investment properties, will rise to 11-27 percent on January 1, 2023, and then to 12-36 percent on January 1, 2024. This is an increase from the current 10-20%. The increase will be greater for high-end properties.
For owner-occupied homes, the rate will rise from 4-16% to 5-23.3% in 2023 and 6-32.3% in 2024 for the portion of the annual value in excess of S$30,000.
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