Yesterday in parliament, as part of Budget 2010, Finance Minister Tharman Shanmugaratnam announced a progressive property tax structure for all owner-occupied residential properties. While all owner-occupied residential properties were taxed at a flat 4% previously, the new scheme would see a zero per cent tax rate for the first $6,000 of a property’s Annual Value (AV), 4% for the next $59,000 and 6% for the amount exceeding $65,000.

This would result in $240 savings per household for all homes with an AV of $65,000 or less, which are a majority of Singaporean homes.

“The Government has done well in taking a page from the Income Tax book,” commended PropNex CEO Mr Mohamed Ismail. “The progressive tax rate is a fairer method of taxing residential properties, which will benefit many Singaporeans while not having a negative impact on the property market.”

Ismail explained that AV is derived from the annual rental value of a property. To exceed $65,000 in AV, a property would therefore need to be able to command over $5,400 in monthly rental, which is limited to a minority of the properties here.

With the progressive property tax rate, and taking into account the 0% tax rate for the first $6,000, only properties with an AV exceeding $77,000 will see an increase in their property taxes; this equates to a mere 3% of private property owners or 0.4% of all property owners in Singapore.

“Overall, these tax rates are still lower than other international cities which will help maintain the attraction of this city state to foreign property investors,” commented Ismail.

On that note, Ismail expects the sales price and volume of properties here to be minimally impacted by the new tax structure, if at all.

“As mentioned previously, the progressive tax structure only affects the top 0.4% of all property owners in Singapore,” he reiterated, “so we should not see any impact on property prices or sales volume.”