By Lynda Hong | Posted: 26 February 2013 2358 hrs

SINGAPORE

Landlords of private homes may see the rental market softening when higher property taxes kick in next year, as these investors grapple with higher holding costs.

Owning luxury or investment homes will incur higher property taxes starting January 2014.

For private homes not occupied by owners, new marginal property tax rates of 12 to 20 per cent will be levied in addition to the current 10 per cent.

Coupled with the growing number of vacant apartments, industry players say Singapore’s rental market is likely to soften.

Colin Tan, research head at Chesterton Suntec International said: “With the taxes especially, on vacant properties, which means you cannot seek relief from the taxman, investors now have to be a bit more cautious in trusting what the agents or sellers are telling them. What the tax does is to increase holding costs for investors.

“Going forward, I see rentals could soften because even at today’s statistics – end of last year – there have been 12,000 vacant apartments. Can you imagine under the new tax regime, the landlord will have to start to look for tenants. And that makes a big difference.”

The top one per cent of owner-occupied homes, about 12,000 units, will pay more taxes. This is on top of the various stamp duties imposed from the seven rounds of cooling measures.

But experts say Singapore properties remain attractive long-term investments for foreign buyers.

Kelvin Tay, regional chief investment officer at Southern APAC, UBS, said: “The number of foreign buyers as a proportion of total buyers, has actually dropped to 7 percent.

“If you are talking about the very high-end properties, you are talking about competition from other top global cities like London, San Francisco, New York, and not just Singapore. So you have to compare the real returns from the perspective of all these jurisdictions. Then you’ve got to think about the regulatory regimes, the taxes that are in place.”

Edmund Leow, head of tax and wealth management at Baker & McKenzie.Wong & Leow, said: “We have to look at income tax, property, capital gain tax, estate duty and all kinds of other taxes. On an overall basis, Singapore is still fairly attractive to other foreigners; most other countries are also introducing similar measures.”

– CNA/xq