While a lower property tax can help, retirees still need to consider the cost of private housing.
Property tax changes
The announcement by Finance Minister Lawrence Wong in Budget 2020 that the Residential Property Tax Rates for Owner-Occupiers will be Raised, likely brought a sigh to many home owners’ throats.
As of Jan 1, 2025, AV’s lower threshold will rise to S$12,000 (from S$8,000), while its highest band will go from S$100,000.00 up to S$140,000.00. Bands between them will be adjusted in a similar manner.
The AV for buildings is an estimate of the gross annual rent if the property were to be rented. This excludes furniture, furnishing and maintenance fees.
Inland Revenue Authority of Singapore also offers a 24-month instalment payment plan without any interest for retirees with higher-end properties, who are having cash flow problems paying their property tax bills.
Due to the new AV bands, property tax bills for many private homeowners will be lower in 2025.
Take an owner-occupier whose AV has increased 30 percent, from S$54,000 at the beginning of 2022, to S$70,000 by 2024.
By adjusting the AV bands, if the AV is S$70,000 by 2025, the annual property taxes are reduced from S$5,080 down to S$3,720.
The owner-occupier’s tax bill in 2025 will be S$2,080, which is double what it was in 2022.
Some Singaporeans older than 60 years old are rich in assets and poor in cash flow. A local retiree over 60 years of age could own a private residence that has seen a significant increase in price.
It is possible that the retiree’s main asset, his owner-occupied residence, lacks a reliable cash flow. He may also struggle to pay costs of owning a property, such as taxes.
This situation can be viewed a ‘first world problem.
The retiree in question could rent a space to generate regular income.
A retiree who is taking in a rental tenant may still be concerned about the safety of their home and their privacy. Or perhaps the retiree would like to make sure that their grandchildren and children have a place for them to stay when they come.
You can certainly save money for the retiree by downgrading to a HDB (Housing and Development Board) flat.
HDB flats come in all sizes and locations. HDB towns often have excellent transport connections and comprehensive amenities like healthcare and recreational facilities.
It can be stressful to move home, particularly for people in their 70s and older. Can they adapt to a new situation? Will the move affect their mental health?
When moving from one home to another, you will incur costs like stamp duty, lawyer fees, relocation fees, and renovation expenses.
Owner-occupier rates for homes increased from 0-16% in 2022 to between 0-23% and 0-32% respectively in 2023. The tax rate for homes with higher AVs is higher.
The government views property tax as one of the most effective ways to tax wealth. Property tax works because it is very difficult to avoid. Taxing the wealth of those with higher means is vital to fighting inequality.
In Budget 2024 the AV band for residential property tax rate rates of non-owner occupants was unchanged.
Don’t forget to continue raising the residential property tax rate to fund healthcare and other expenses.
Any future rate increases on property taxes will likely affect non-owner-occupied and expensive homes.
There may have not been a need to reduce property tax for top-end home owners. Owner-occupiers of high-end homes with AVs of S$150,000 can expect to see a reduction in property taxes of 21 percent in 2025, from S$27.980 down to S$22.220, due to the changes in AV bands.
Costs associated with owning a home
Residential property tax rates may increase in the near future for owner-occupiers. Property tax rates will rise if the AV (value of home) increases.
For aging with dignity, having a paid-up house when you retire is essential.
CPF Life also offers fixed annuities to cover retirement expenses.
Even so, retirees that own private residences should pay attention to the potential rising costs of home ownership. These include higher property taxes.
When expenses increase, it can be difficult to rely solely on a pension annuity.
If you are planning your retirement, it’s important to assess whether you have the financial means to hold on to your private residence.
If you are still able to move home, then right-sizing an owner-occupied house can be a great way to mitigate property tax increases and age with dignity.
Hopefully, the rates of property tax for homes owned by owners can remain affordable. Many people want to be able to stay in their homes and enjoy their golden ages.
After working for years, people who are able retire comfortably and in their own private homes in Singapore may inspire other locals to also work hard in order to reach this goal.
