Singapore's flexible property tax
This article does not have high-level policy recommendations, and there is no detailed policy interpretation. Just through the three sets of houses with different attributes that the author has learned, I will share with readers the experience and experience of an ordinary middle-class Singaporean family in paying property tax.
The author bought a home for the first time in Singapore at the beginning of 2009. At that time, the pessimistic mood of the global financial crisis did not restrain the author's newlyweds. Like most middle-class families in Singapore, the author chose to resell government HDB flats for her first home purchase. There are three main types of residential houses in Singapore, including government flats, private apartments, and landed houses (villas). The so-called HDB flats are similar to the concept of affordable housing in China. They are planned and built by the government and then sold to the people at preferential prices. Singapore’s unique HDB housing policy has basically made Singapore a “home ownership”. Currently, Singapore has more than 1 million HDB flats on the island, and more than 80% of the population lives in government HDB flats.
First experience of real estate tax
The author moved into a HDB flat in August 2009 and received the first notice of property tax payment in his life from the tax bureau in early December. Singapore property tax is calculated once a year. Generally, at the end of the year, the government will notify the amount of property tax to be paid next year. The calculation formula is very simple, the property tax paid is equal to the annual value of the house multiplied by the property tax rate. The formula is the same whether it is a government flat or a private apartment and villa. However, the two variables of annual value and property tax rate will be determined according to the nature of the house and the function of the house. Therefore, it is basically impossible for ordinary residents to accurately predict the property tax that their homes need to pay in the next three years.
Let's first look at the property tax rate. Singapore's property tax rate is mainly divided into two types: owner-occupied and non-occupied, of which investment, lease or vacant are both non-occupied. In 2009, the self-occupied tax rate was 4% when the author first bought a home, while the non-self-occupied tax rate was 10%. Looking at the annual value again, the annual value of the Singapore property tax is calculated based on the rent of the same type of house in the same area. Simply put, it is not the house price that determines the annual value, but the rent rented out by the neighbors. At the end of 2009, the tax bureau estimated that the annual value of the HDB flat for the author was 9,300 yuan. According to the self-occupation tax rate of 4%, the property tax to be paid in 2010 was 372 yuan, but the government gave the HDB flat self-occupied tax deduction in that year, plus For consumption tax deductions, the actual property tax that needs to be paid is 227 yuan. It should be said that for any ordinary middle class, a property tax of 227 yuan a year is affordable.
The author did some homework when buying a house and was psychologically prepared for the real estate tax, but found that the real estate tax calculated by the government was much lower than expected. The main reason here is that the annual value of the house is much lower than expected. The monthly rent implied by the government's annual value of 9,300 yuan is only 775 yuan, which is far lower than the market rent at that time, or even less than half. Later, the author carefully checked the explanation of the tax bureau and realized that the tax bureau's estimate of the annual value is based on the rent of the house without decoration and furniture. Based on the author's later experience in participating in private housing, Singapore’s tax authorities are conservative in estimating the annual value of government HDB flats, and this kind of conservativeness actually reduces the pressure on HDB residents for property taxation.
Robbery of the rich and the poor by property tax
Since 2010, the Singapore government has reformed the property tax. The property tax rate for self-occupation is adjusted to a progressive tax rate. If the annual value is less than 6000 yuan, the tax rate is zero, 4% within the range of 6000 yuan to 65000 yuan, and the portion exceeding 65000 yuan is increased to 6%.
At the end of 2010, the author was pleased to find in the letter from the tax bureau that the annual value remains unchanged at 9,300 yuan, the amount of property tax that the author needs to pay in 2011 has dropped from 227 yuan in the previous year to 132 yuan.
Singapore’s property tax reform has not stopped. Since 2014, Singapore’s property tax has been more refined. The number of property tax for self-occupation has been increased from the original three to eight, but one year later, in 2015, it will be eight. The gear is reduced to seven gears. In addition to the tax rate breakdown, the tax allowance has also been increased from the original 6,000 yuan to 8,000 yuan. The property tax for high-value luxury homes has been further increased. Among them, the property tax rate for properties with an annual value of more than S$130,000 will reach the highest rate of 16%. In addition to owner-occupied housing, the tax rate for non-owner-occupied housing has also been changed to a progressive tax rate since 2014. Rental or vacant properties with an annual value of more than S$90,000 will be taxed at 20%.
The current property tax rate in Singapore follows the progressive tax system implemented in 2015. Low- and middle-income residents living in two-bedroom or one-bedroom HDB flats benefit from the progressive tax allowance and do not need to pay any real estate tax. The property tax that investors in luxury homes need to pay has increased significantly. For example, a private apartment that is rented out or vacant with an annual value of 90,000 yuan will reach 12,000 yuan per year. The progressive real estate tax rate played a role in robbing the rich and helping the poor. For the author, the author also benefited from the new progressive system. After that, the self-occupation tax paid in this set of flats never exceeded the 2009 level of 227 yuan.
Real estate tax
Singapore's property tax adjustment has two valves, in addition to the tax rate, there is also an annual value. Since the annual value is calculated from the rent, the annual value is positively correlated with the economic cycle. After the 2008 global financial crisis, benefiting from the support of the global central bank’s unconventional monetary easing, the Singapore real estate market experienced a deep V rebound. Housing prices rebounded rapidly after bottoming out in mid-2009 and peaked at the end of 2013. Then housing prices were under pressure from the government Retreated under policy suppression. In this bull market, the author’s annual value of HDB flats has also been continuously increased, from 9,300 yuan in 2010 and 2011 to 12,300 yuan in 2013. However, due to the reform of the property tax rate described above, although the annual value It has been increased, but the real estate tax paid by the author has declined.
Since rents change with the economic cycle, real estate taxes are not limited to rising. After 2014, with the adjustment of immigration policy, rising housing supply, and the slowdown of global economic recovery and other superimposed factors, Singapore's rents began to decline, and the annual value fell. In the latest year of 2018, the author's annual government housing value has been adjusted back to 10980.
Due to the welfare nature of HDB flats, their annual value fluctuates little. More volatility is borne by residents of private houses with better economic conditions. A relative of the author bought a private apartment to participate in real estate investment after the market rebounded sharply in early 2010. At the time of purchase, the annual value of the apartment was only 21,600 yuan, but just after the completion of the transaction in mid-2010, a letter from the tax bureau stated that the annual value would be increased to 26,400 yuan from the second half of 2010. At the beginning of 2011, the real estate fever was not refundable. In March, the relatives of the author received a letter from the tax bureau less than two months after just paying the 2011 real estate tax, stating that the annual value of the property had been raised to 32,400 yuan again, so the property needs to be paid. tax. The author’s relatives took over the apartment for less than a year, and the property tax (10% tax rate for non-self-occupiers) was significantly increased from 2,160 yuan to 3,240 yuan, an increase of 50%. However, looking back now, the government had a foresight to adjust the annual value. In this bull market, the monthly rent of the apartment rose from 3,200 yuan per month when it first took over in 2010 to a maximum of 4,500 yuan per month in 2013. It can be seen that by adjusting the annual value, the government can get a share of the real estate bull market, and the more wealthy private housing contributes, the more tax burdens on public housing residents can be reduced.
The cost of holding in the "rich zone"
In 2016, as the author's children grew up, the author also joined the ranks of Pindi. In order to give the children a chance to sign up for a lottery in elementary school, the author bought a private apartment next to a famous traditional school in Singapore. The community where this elementary school is located belongs to the traditional community where high-ranking officials from European and American companies live. Although the overall rent in Singapore has dropped significantly in the past few years, the rent in this area is still not low, which has pushed up the annual value of the author’s community. From the point of view of the unit price per square foot, the house purchased by the author is not much more expensive than the house purchased by the author’s relatives, but the large difference in annual value means that the property tax is much higher. In the case of Singapore, the property tax is sometimes not directly proportional to the unit price when buying the house. It can be seen that to squeeze into the so-called "rich people's zone" not only higher transaction costs, but also higher annual holding costs. But isn't this exactly the role played by secondary distribution!
Transparency is responsible to taxpayers
In the blink of an eye, the author has paid property taxes in Singapore for nine years, and paying taxes on time each year has become an indispensable part of life. However, I am gratified that every time the tax bill is listed, the government will thank the taxpayers for their contributions to national construction. The Singaporean government, which has always been known for its cleanliness and transparency since last year, has raised transparency to a new level. It directly stated in the tax bill that the property tax will enter a pool of funds along with other taxes to support Singapore’s development, including infrastructure and medical care. Education, national defense, and family building. The author also joked with friends. After reading the tax payment notice from the government, I feel that tax payment is glorious.
Since the 2008 global financial crisis, Singapore has been the most successful in real estate regulation relative to international metropolises dominated by Chinese such as Hong Kong, Shanghai and Taipei. In addition to the various taxes in the transaction link, the author believes that the property tax in the holding link in Singapore also plays an important role in stabilizing housing prices. In 2017, Singapore’s tax revenue reached S$60.2 billion, of which property tax contributed S$4.4 billion, accounting for about 7.3% of the total tax revenue. Since the financial crisis, after a series of reforms, real estate tax revenue has risen from 1.99 billion yuan in 2009 to 4.4 billion yuan in 2017, an increase of 121%, which has contributed to the Singapore government's basic expenditures on infrastructure and education.
After years of practice, the author has discovered that Singapore’s property tax has three main characteristics. First, the progressive design allows the property tax to play a role of robbing the rich and helping the poor in the secondary distribution. Secondly, real estate tax is not static, it has the characteristics of going on the market, and it is positively related to real estate and the economic cycle. Finally, the author found that real estate taxes are not necessarily proportional to housing prices. The design of property tax has never been done once and for all, and the perfect property tax mechanism has not fallen from the sky. Several reforms of the property tax system in Singapore in the past nine years have also shown that the property tax system that crosses the river by feeling the stones can completely play a role in secondary distribution that takes into account fairness and efficiency.