Luxury properties hit with double whammy: Barclays

Up to 20% rate hike on high-end properties stall recovery.

According to Barclays, the Singapore Budget 2013 seeks to restructure the economy and focuses on addressing the income gap and helping the needy. 

Pertaining to the property sector, Barclays expects the imposing of heavier taxes (up to 20% tax rate from 10%) on owners of high-end residential properties to further delay the recovery of this segment, following the significant increase in Additional Buyers Stamp Duty (ABSD) in the 12 January measures. 

Here's more:

We expect minimal impact from the exclusion of the start-up tax exemption for investment holding companies and property developers incorporated after today, given the maximum exempted amount was S$200k of chargeable income.

Notwithstanding the impact from the further tightening of foreign labour inflows and increased foreign workers levies, REITs are relatively better-off from this budget given no measures on commercial or industrial properties - we like CCT (CCT SP, OW, PT S$1.87) for its proxy to a recovering office sector and attractive yield spread.

Double whammy on high-end properties. High-end investment properties will see the most significant increases in property tax rates - instead of the current rate of 10% flat, there will be new marginal tax rates of 12% to 20%.

Even for owner-occupied residential properties, the marginal tax rates are raised from the current 0%, 4% and 6%, to include 8-16%. The 0% property tax rate band, which currently applies to the first S$6,000 of annual value of properties will be widened to S$8,000.

This will enable 950,000 owner-occupied homes (c.80% of total 1.2mn homes) to enjoy tax savings (see below), but the top-end home owners to pay significantly more.

For example, a landed property in a central location for owner-occupation of for investment with an annual value of S$150,000 will see property tax increase of 69% and 60% to S$12,580 and S$24,000, respectively.