Tax blow for high-end developers

The move to abolish the tax vacancy refund will put more pressure on individuals and companies, particularly those with high-end residential asset portfolios.

This, combined with progressive tax rates which will see the government raising property tax rates for high-end residential homes with the largest increases applying to investment properties, means that high-end developers could potentially be hit with a double whammy.


On the one hand, developers can no longer apply for tax rebates for vacant units, thus raising their holding costs. On the other, the higher tax rates make these properties less attractive as investments.

Currently, residential properties that are fit for occupation and intended for owner-occupation but undergoing building works can get full property tax refund for a maximum period of two years. Under the new treatment, however, such properties will no longer enjoy the tax refund.

Owners can apply to the Inland Revenue Authority of Singapore to be taxed at the owner-occupier residential property tax rate for the duration of building works (up to a maximum of two years).

High-end residential developers with unsold inventory, including Wing Tai, City Developments Limited, Wheelock, Ho Bee and Keppel Land, are likely to be impacted. These developers, which have unsold units largely in the prime to high-end segment, might find it even harder to sell units.

Separately, the removal of the tax refund concession is likely to put pressure on rental for high-end properties as more investors lower rental expectations and seek to quickly rent out their properties to offset the property taxes.

This is a double blow to a sector that has already experienced consolidation in recent years due to the economic slowdown and weaker demand from foreigners.

Source: Business Times –27 February 2013