From January 2011, there will be a three-tier property tax rate for all home owners. The first $6,000 of ANNUAL VALUE (AV) will be exempted from property tax. The next $59,000 AV will be taxed at 4% and the balance of AV above $65,000 will be taxed at 6%.
The property tax for non-owner-occupied residential properties as well as other properties will remain at a flat rate of 10% of AV.
As a result of the rate change, all owner-occupied homes will enjoy tax savings of $240 due to the exemption of the first $6,000 of AV. Owners of high-end properties will see increases in tax payable as follows:
WORKINGS OF THE NEXT TAX RATES
|
Household A
AV of $80,000 |
Household B
AV of $120,000 |
|
1st tier
|
$6,000 = $0
|
First $6,000 = $0
|
|
2nd tier
|
$59,000 x 4% = $2,360
|
$59,000 x 4% = $2,360
|
|
3rd tier
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$15,000 x 6% = $900
|
$55,000 x 6% = $3,300
|
|
New Tax payable
|
$3,260
|
$5,660
|
|
Old Tax payable
|
$80,000 x 4% = $3,200
|
$120,000 x 4% = $4,800
|
|
New Tax Rate
|
$3,260
|
$5,660
|
|
Difference in tax
|
Household pays $60 more
|
Household pays $860 more
|
[1] REVISED PROPERTY TAX RATES
From January 2011, there will be a three-tier property tax rate for all home owners. The first $6,000 of ANNUAL VALUE (AV) will be exempted from property tax. The next $59,000 AV will be taxed at 4% and the balance of AV above $65,000 will be taxed at 6%.
The property tax for non-owner-occupied residential properties as well as other properties will remain at a flat rate of 10% of AV.
As a result of the rate change, all owner-occupied homes will enjoy tax savings of $240due to the exemption of the first $6,000 of AV.
[2] REVISED LOAN-TO-VALUE (LTV) RATIO
A home buyer will have to fork out more cash to buy a property with the latest change in the stamp duty rules. Besides, he will reap a smaller profit if he sells it within a year. Take, for example, a buyer who pays $1 million for a home before the rules changed and sold it in less than a year for $1.1million.
BEFORE THE NEW MEASURES
The buyer could enjoy LTV of 90% – so he could purchase the property with only $100,000 as a down-payment. By selling, he would have made a fast $100,000, less the stamp duty he paid when he bought the property – $24,600 under the stamp duty formula. That means he would pocket a profit of $75,400. [Return on capital: 75,400/100,000 = 75.4%]
AFTER THE NEW MEASURES
The buyer can only enjoy LTV of only 80% of the price which means a down-payment of $200,000. He would have made $100,000 minus his original buyers’ stamp duty ($24,600), and now minus an additional sellers’ stamp duty, of $27,600. This means a greatly reduced profit of $47,800. [Return on capital: 47,800/200,000 = 23.9%]
REVISED HDB POLICIES
On 5 March 2010, the Ministry of National Development introduced a series of measures to ensure financial prudence and to prevent ethnic enclaves in Singapore. This is hot on the heel of an earlier round of measures which saw the implementation of seller’s Stamp Duty for private properties sold within a year of its purchase; and the introduction of a three-tier property tax rate.
(A) In Support of an Inclusive and Cohesive Home
[A-1] EMPHASIS ON SINGAPORE CITIZENSHIP
- The amount of CPF Housing Grant is reduced by $10,000 for families with only one Singapore Citizen (SC) and at least one Singapore Permanent Resident (SPR)
- SPR can apply for a $10,000 Citizen Top-Up if they take up citizenship or if the couple has an SC child while still in ownership of the flat
[A-2] PREVENTING SPR ENCLAVES FROM FORMING
With the above objective in mind, the following policies have been introduced:
- A new SPR Quota for non-Malaysian SPR families buying resale flats
- SPR families cannot buy flats in areas that have exceeded the 8% (block) quota and 5% (Neighbourhood) quota except from non-Malaysian SPR sellers.
- The principle of SPR Quota is similar to Ethnic Integration Policy (EIP) – i.e. when the SPR quota is filled, SPR can only buy a flat from a non-Malaysian SPR
[A-3] RESPONDING TO CHANGING DEMOGRAPHICS
- For the Ethnic Integration Policy, the limits for the Indian/Others ethnic group have been increased by two percentage points to 12% at the Neighbourhood level and 15% at the Block level, in view of Singapore’s changing demographics
- See below for EIP table
|
Ethnic Group
|
Maximum Ethnic Limits
|
|
Neighbourhood
|
Block
|
|
Malays (no change)
|
22%
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25%
|
|
Chinese (no change)
|
84%
|
87%
|
|
Indians & Others
|
12%
|
15%
|
The status of changes of ethnic proportions is updated on a monthly basis.
(B) Reinforcing of Owner-Occupation among HDB Flat Owners
- The Minimum Occupation Period (MOP) for resale of non-subsidised flats (i.e. resale flats bought without CPF Housing Grant) is increased to 3 years.
- The increase in MOP is regardless of whether the buyer takes an HDB loan, a bank loan or no loan at all.
- The revised MOP policy will apply to resale transactions where applications are received by HDB from 5 Mar 2010 onwards.
- Existing lessees of non-subsidised flats will not be affected, i.e. the original MOP of 2.5 or 1 year continues to apply to them.
(C) In Support of Right-sizing and Financial Prudence
- Second-timer households are no longer required to buy bigger flats to qualify for a second concessionary loan from HDB.
- The second concessionary loan will be made available to all eligible households regardless whether they upgrade, downsize or move to the same flat type
- HDB has reduced the amount of the second concessionary loan by the full CPF proceeds and part of the cash proceeds from the sale of the existing or immediate past HDB flats.
- Flat buyers can keep half of the cash proceeds (including the cash deposit received) or $25,000 in cash, whichever is greater.
[C-1] THOSE WHO BUY THE NEXT FLAT AFTER SELLING THE EXISTING ONE
- Must use up to 50% cash proceeds from the sale of the immediate past HDB flat and all CPF balance to finance the purchase of the next flat.
- This will apply regardless of when the previous HDB flat was sold
[C-2] THOSE WHO BUY THE NEXT FLAT BEFORE SELLING THE EXISTING ONE
- HDB will first grant them a bigger loan at commercial interest rates.
- After the sale of their existing flat, they will have to redeem this loan with the full CPF refund and part of the cash proceeds.
- Upon redemption, the loan will be converted to a concessionary rate loan
(D) Lease Buyback Scheme to Benefit More Elderly HDB Households
- To enable more lessees to benefit from the Lease Buyback Scheme, HDB has extended it to those owning 4-room and bigger flats.
