In a bid to address rising cost-of-living concerns, the Ministry of Finance (MOF) and Inland Revenue Authority of Singapore (Iras) have introduced a one-off property tax rebate for owner-occupiers of residential properties in 2025. This measure aims to provide relief amidst shifting property tax rates and market dynamics.

Rebate Details for HDB and Private Property Owners

• HDB Flat Owners: A 20% property tax rebate will be extended to owners, capped at S$1,000.
• Private Property Owners: A 15% rebate, similarly capped at S$1,000, will apply to these properties.

The rebate accompanies broader changes to the Annual Value (AV) bands for owner-occupied residential property tax rates, effective Jan 1, 2025. The revised structure is designed to ensure lower or similar property taxes for most homeowners, provided their AVs remain unchanged.

Impact on Homeowners

Over 90% of owner-occupied private properties and all HDB flats are expected to benefit from reduced property taxes. For example:

• Owners of HDB flats will see their monthly property tax payments reduced significantly.
  • Three-room flats: From S$4.10 to S$1.90.
  • Five-room flats: From S$17.90 to S$15.40.
• Private property owners, such as those with two- and three-bedroom units, could save between S$214 and S$1,000 with the rebate.

However, owners of luxury properties may see higher taxes as adjustments aim to ensure equitable contributions across the tax system.

Rental Market Trends and Their Influence

Singapore’s property market has witnessed a divergence in rental trends:

• HDB Rentals: Increased demand from upgraders and limited supply has driven rents higher. Huttons Asia predicts a 4% rise in HDB rents for 2024.
• Private Rentals: A contraction in demand, partially attributed to a 3,000 reduction in Employment Pass holders in the first half of 2024, has stabilized private rental prices.

Looking ahead, the completion of private homes is set to drop by over 40% in 2025, potentially sustaining rental prices despite the slowing demand.

Changes to AV Bands and Social Support Schemes

The government has also revised AV thresholds to enhance access to social-support schemes:

• The second AV tier will increase to cover properties with AVs between S$21,000 and S$31,000, up from the current S$21,000 to S$25,000.
• This change allows more than three-quarters of residential properties, including lower-value private homes, to qualify for support.

Owners of one- and two-room HDB flats will continue to pay no property tax, while those in larger flats will remain taxed at a 4% marginal rate.

Market Implications and Investor Sentiment

Property analysts believe these measures, while offering relief, will not deter property investments.

Singapore’s residential property market remains attractive due to its potential for capital appreciation, which outweighs incremental tax increases.

The adjustments also align with broader fiscal trends: in FY2023, property tax revenue contributed 7.4% of total government revenue, amounting to S$5.9 billion, up from S$5.1 billion in FY2022.

Conclusion

The 2025 property tax rebate and AV adjustments reflect the government’s commitment to easing financial pressures on homeowners while ensuring the tax system remains progressive. By supporting lower-income households and maintaining market attractiveness, these initiatives strike a balance between economic relief and long-term fiscal sustainability.