Low property taxes are helpful, but retirees need to be aware of the costs associated with owning a private home

Home ownership costs

The residential property tax rates for owners-occupiers are likely to rise in the future. The property tax rate will increase if the value of the home increases.

It is crucial to age in dignity if you own a house that’s fully paid up when you retire.

CPF Life can also provide a fixed income annuity that will help you fund your retirement.

Retirees who own their private homes must be mindful of rising costs, such as higher property tax.

It can be insufficient to rely on a fixed-income annu

The scenario above can be seen as a “first-world” problem.

Renting a room could be a way for the retiree to earn recurring income.

However, the retiree could be worried about safety and privacy concerns when taking in a renter. Or, the retiree could want to reserve a certain area for their children and grandchildren when they visit.

Sure, this retiree can raise more money by converting his private house into an HDB flat.

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HDB flats can be found in many locations, and they are all spacious. HDB towns offer good transportation connectivity, comprehensive amenities such as healthcare and recreational facilities and are located in desirable locations.

Even so, moving can be stressful. This is especially true for those who are in their 70s, 80s, or older. Can they adjust well to a different environment? Will moving homes affect their mental well-being?

The costs of moving from one owner-occupied property to another are also high. These include legal fees, stamp duty and agent fees.

Property Tax changes

When Finance Minister Lawrence Wong, announcing in Budget 2024 the increase of the owner-occupier residential tax rates, many private home owners, particularly retirees, breathed a huge sigh.

On Jan 1, 2025 the threshold for the lowest band of AV (S$8,000) will be raised to S$12,000. The highest band of the AV (S$100,000.00 and above) will be raised by S$140,000. Bands in between will receive corresponding adjustments.

The AV is the estimated gross rental income of a building if it was rented, excluding furnishings, maintenance and furniture.

Inland Revenue Authority of Singapore offers a 24-month payment plan with no interest for retirees in luxury residential properties who have difficulty paying their property taxes.

In 2025, many homeowners will pay less in property tax due to changes to AV banding.

Take for example the owner of a condo unit whose AV increased by 30 percent from S$54,000 per year in 2022 to S$70,000 per year in 2024.

If the AV in 2025 is S$70,000, the property tax will be reduced by 27 per cent to S$3,720.

In the example above, the owner occupier’s property tax bill will be S$2,840 by 2025. This is more than double the S$1,840 bill from 2022.

Owner-occupier home tax rates rose from 0-16% in 2022 up to 0-23% by 2023. Then, 0-32% by 2024. Tax rates are higher for homes with a higher AV.

Property tax is seen by the government as an important source of revenue. Property tax has a high rate of effectiveness because it is difficult to avoid. Taxing wealth helps fight inequality and is fair because those who have more money contribute more.

In the Budget for 2024, there were no changes to the AV bands that apply to residential property taxes on non-owner-occupiers.

Do not ignore the need to increase residential property tax rates to help fund rising healthcare costs and other expenditures.

The future increases in property taxes could fall primarily on homes that are not owned by the owner and those with higher prices.

It may not have even been necessary to lower property taxes for those who own top-end private residences. The property tax for an owner-occupier who owns a high-end house with AV at S$150,000 is reduced from S$27.980 in 2025 to S$22.220 because of the change in AV band.

ity for retirement expenses if expenses rise.

It is crucial to plan for retirement by evaluating whether or not you can afford your own home.

When you have the energy and motivation to move, right-sizing a home that is owned by an owner can reduce the chance of property tax increases while also allowing one to age in dignity.

Hopefully, rates of property taxes for owners-occupied homes will remain affordable for many. Some may want to continue to live in their private homes for as long as possible to fully enjoy their golden age.

The fact that people can retire in Singapore in comfort in their homes after working hard for many years could inspire young Singaporeans to work harder to achieve the same dream.

Some Singaporeans over 60 are wealthy in assets, but cash-flow poor. A retiree who is older than 60 could have a private house that was bought many years ago, and which has increased in value.

A retiree whose main asset is an owner-occupied house may have limited cash flow, and find it difficult to cover costs related to home ownership, such as the property tax.

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