Landlords to face reduced rental income amidst looming property tax hike

For buyers, on the other hand, the tax increase may be management, said experts.

Investors planning to purchase private homes for rental income may face a couple of challenges once the hike in property taxes kicks in next year.

According to OrangeTee, the hike will affect investment properties and larger homes the most.

“For investment properties, the impact is expected to be greater for luxury condos and landed properties, as the tax increase tends to be higher for these categories of properties,” OrangeTee added.

Increased property taxes alongside high ABSD rates, elevated interest rates, and higher maintenance costs will lead to higher costs of investment and whilst some may try to pass these costs to their future tenants, OrangeTee underscored that increased competition for tenants may make it difficult for landlords to do so. 

Huttons echoed this: “With private residential rents and HDB rents estimated to soften in 2024, it is unlikely that investors can pass the increase in property tax to tenants.”

As a result, OrangeTee said the increased property taxes are likely to reduce rental income for landlords.

“However, investors who are buying properties for long-term capital appreciation may look beyond the tax increases and factor these additional costs into their future sales price,” OrangeTee added.

On home prices, OrangeTee said the tax hike will likely help prevent a potential escalation of property prices.

“Buyers may also opt for slightly smaller homes in future due to rising taxes and cost constraints. As buyers turn more cost-conscious, developers may also be more measured in their land bids, which will help to prevent land bid prices from escalating further,” OrangeTee said. 

OrangeTee also underscored that since the government will provide subsidies to help lower-income households cushion the impact of the property tax increases, the tax increases may be manageable for most Singaporeans, particularly for genuine buyers buying homes for owner-occupation.

Huttons said by offering tax rebates of up to 100% for owner-occupied properties, “the government is stepping in to help the population with the rising costs of living.”

“The clear distinction of rebates for owner-occupied properties and no rebates for non-owner occupied properties reflects a progressive tax system. The well-to-do population will be taxed more and the taxes collected will be used to assist those who need it more,” Huttons said.