Singapore plans to raise property levies for luxury homeowners as it seeks to tax wealthy residents in the city-state after the government imposed more measures to curb property speculation last month.
Singapore will raise tax rates for vacant investment properties or those that are rented out, Singaporean Finance Minister Tharman Shanmugaratnam said in his budget speech in Parliament yesterday. It will also impose higher taxes on luxury property owners who live in their own residences, making up 1 percent of such homeowners, he said.
“The property tax is a wealth tax and is applied irrespective of whether lived in, vacant or rented out,” Shanmugaratnam said, without elaborating what constitutes high-end real estate.
Those who live in the most expensive homes should pay more property tax than others.”
The higher taxes come after Singapore last month rolled out its latest set of housing measures, including an increase in levies for home buyers since it started cooling the market in 2009. Residential prices climbed to a record in the fourth quarter amid low interest and as an increase in the number of millionaires drove up demand.
“Owning high-end real estate here for investment is becoming less of an attractive proposition,” said Alan Cheong, senior director of research and consultancy at Savills (Singapore) Pte. “This may affect high-end properties owned by foreigners, who do not have a place of residence in Singapore. This will encourage them to take their capital overseas.”
The latest effort by Singapore follows Hong Kong in increasing taxes. The Hong Kong government last week doubled sales taxes on property costing more than HK$2 million (US$258,000) and targeted commercial real estate for the first time as bubble risks spread in the world’s most expensive place to buy an apartment.
For a condominium occupied by the owner in Singapore’s central region with an assessed annual rental value of S$70,000 (US$56,547), the tax will rise 5 percent to S$2,780, according to the budget statement. If that home is rented out, the tax will climb 21 percent to S$8,500. Gains in levies for properties assessed at higher rental values will also increase at a faster pace, it said.
The revised taxes will take full effect from January 2015, according to the statement.
“It is a wealth tax,” Yee Jenn Jong, a non-elected member of parliament from the opposition Workers’ Party, told reporters. “There’s been a lot of people that have made a lot of money through property and the government is using that as a way to get additional revenue to offset certain goodies they’re giving to those in the lower-income.”
The Singaporean government last month introduced curbs where home buyers have to pay between 5 percentage points and 7 percentage points more in stamp duties. It also imposed the added levies for permanent residents when they buy their first home, while Singaporeans will have the tax starting with their second purchase.
In the budget, Singapore tightened curbs on foreign labor for a fourth consecutive year, as the government seeks to reduce companies’ reliance on overseas workers amid a public backlash over the influx.
Increasing wealth in the city-state has also contributed to rising property prices. Singapore’s millionaire households rose by 14 percent in 2011, according to a Boston Consulting study.