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OWNER-occupiers of residential properties will get a one-off property tax rebate in 2025, to help mitigate cost-of-living concerns, said the Ministry of Finance (MOF) and Inland Revenue Authority of Singapore (Iras) on Friday (Nov 29).

Owners of Housing and Development Board (HDB) flats will be given a rebate of 20 per cent, and those of private residential properties,15 per cent, with the rebate capped at S$1,000.

Additionally, the annual value (AV) bands of the owner-occupied residential property tax rates will be raised from Jan 1, 2025.

“Homeowners can thus expect to pay the same or lower property taxes in each band, assuming that there is no change in their AVs and before any rebates,” said the statement.

All owner-occupied HDB flats and more than 90 per cent of owner-occupied private residential properties will enjoy lower property taxes in 2025.

Property taxes are calculated based on AVs, which are revised yearly, based on the estimated annual rent if the property were to be rented out. With the market rentals of public housing having been on the rise since 2022, AVs have risen in tandem.

Still, Huttons Asia senior director of data analytics Lee Sze Teck reckoned that the AVs of HDB flats may increase slightly this year, while that of private properties may remain flat.

He attributed this to a divergence in rents between the two markets. For the whole of 2024, HDB rents are expected to grow 4 per cent, while those of private home are likely to hold steady. 

The divergence came mainly from the rise in demand for HDB rental units, especially in the second half of 2024, when there have been more project launches.

“Some HDB upgraders may sell their flat and rent in the interim, so that they do not need to pay the ABSD (Additional Buyer’s Stamp Duty) on the second property,” he said. 

That, coupled with some supply tightness as fewer flats reached their Minimum Occupation Period, is likely to mean an increase in HDB rents this year, said Lee. 

Meanwhile, demand for private rental units dipped, as the number of Employment Pass holders shrank by around 3,000 in the first half of this year, said Lee. Rents were reduced to attract tenants, since many landlords were trying to “backfill” newly completed units while facing higher property taxes and mortgage instalments. 

Lee Nai Jia, PropertyGuru’s head of real estate intelligence, data and software solutions, also noted that median rents viewed by property seekers on the group’s online platform have stablised from their peak between the third quarter of 2023 and Q2 2024.

But this might change next year as the number of private home completions drops by more than 40 per cent to 5,348 units in 2025, from 9,103 units in 2024, said Mohan Sandrasegeran, SRI head of research and data analytics. 

“This limited availability is expected to sustain rental prices at resilient levels, as robust demand is likely to persist in the face of shrinking supply,” he said. “In this context, the one-off property tax rebate and adjustments to the AV bands are timely measures to ease the financial burden on owner-occupiers, helping them to cushion cost-of-living pressures.”

Lee added that rental prices are still elevated compared with 2022 and 2021. “This persistent elevation likely prompted the government to implement the AV adjustments to help households manage the cost of living.”

The government had announced during this year’s Budget that all AV bands of owner-occupied residential property tax rates would be adjusted from Jan 1, 2025.

The raised AV thresholds mean more people can be eligible for social-support schemes, with more than one million residential properties covered, said MOF.

These schemes now provide benefits based on two AV tiers. The first has a threshold of up to S$21,000, and the second, between S$21,000 and S$25,000. Individuals living in properties with lower AVs receive more support.

But from Jan 1, 2025, the second AV tier’s threshold will be bumped up to between S$21,000 and S$31,000.

“More than three in four residential properties, including lower-value private properties, can be eligible for social benefits,” said MOF and Iras.

The first AV tier of up to S$21,000 remains unchanged; all HDB flats continue to be covered.

Following the revision of the first AV band from S$8,000 to S$12,000, owners of all one- and two-room HDB flats will continue to pay no property tax next year.

Owners of three-, four- and five-room flats, as well as executive flats, will continue to be taxed at the marginal rate of 4 per cent.

With the tax rebate and revision of AV bands, all HDB owner-occupiers can expect lower property tax bills in 2025, said the authorities.

The monthly average property tax payable in 2025 for owners of three-, four- and five-room flats will be S$1.90, S$11.95 and S$15.40, respectively. This is down from the current S$4.10 for three-roomers, S$12.80 for four-roomers and S$17.90 for five-roomers.

The average property tax payable for executive flats will be S$17.15 a month, down from the current S$22.30.

As for private homeowners of two- and three-bedroom units, ERA key executive officer Eugene Lim said the one-off tax rebate could mean savings of between S$214 and S$1,000.  

For instance, the owner of a three-bedder unit in the city fringe will pay S$4,658 in property tax, based on the median annual rent of S$72,000. This translates to a property tax rebate of S$699 for the homeowner in 2025, said Lim. 

Luxury property owners, on the other hand, are likely to get little relief. For them, property taxes could instead go up, said SRI’s Sandrasegeran. “However, these changes are calibrated to ensure that luxury homes continue to contribute proportionately to the tax system.”

In any case, Lee of Huttons noted that property tax rebates have been offered before and will not dull the appeal of investing in Singapore’s residential properties. 

“The appeal of (doing so) lies in the potential for capital appreciation, which far outweighs the increase in property tax,” he said. Lee suspects that the adjustment of the AV bands and increased property taxes for some homeowners are therefore unlikely to have a significant impact on residential property investment next year. 

In FY2023, government revenue from property taxes accounted for 7.4 per cent of revenue collected, or S$5.9 billion. This was almost S$900 million more than the S$5.1 billion earned in FY2022.