Last week, Finance Minister Tharman Shanmugaratnam gave his Budget Speech for 2013. Amongst the main themes of the speech, the most glaring to me was the re-distribution of costs from the lower-income/lower-wealth group to the higher-income/higher-wealth group. This is a natural progression in a maturing economy and should be expected. Of the items listed as part of this theme, those that pertain to the property market are:

1. Property tax on owner-occupied residential properties will be revised to have a bigger 0% band from the first $6k of Annual Value (AV) to $8k. This reduces property tax on basically all HDBs and most (typical) suburban condominiums.

2. Additional bands of property tax on owner-occupied residential properties. See table below:

Annual Value	Tax Rates from 1 Jan 2014	Tax Rates from 1 Jan 2015
First $8,000	0%	0%
Next $47,000	4%	4%
Next $5,000	5%	6%
Next $10,000	6%	6%
Next $15,000	7%	8%
Next $15,000	9%	10%
Next $15,000	11%	12%
Next $15,000	13%	14%
AV in excess of $130,000	15%	16%

3. Property tax on investment/non-owner-occupied residential properties will be increased on properties with AV above $30,000, as below:

Annual Value	Tax Rates from 1 Jan 2014	Tax Rates from 1 Jan 2015
First $30,000	10%	10%
Next $15,000	11%	12%
Next $15,000	13%	14%
Next $15,000	15%	16%
Next $15,000	17%	18%
AV in excess of $90,000	19%	20%

4. Concessions of property tax on vacant property will be abolished from 1 Jan 2014.

The measures, once fully implemented, are expected to give a net increase in tax revenues of at least $50 million.

Just looking at the numbers, it doesn’t seem to be significant. The top 1% of owner-occupied residential is about 12,000 households and contribute $25 mil in increased revenue. This is an average of $2,083 per household. As for the tax increase on investment property, doing some back-of-the-envelope calculations, I estimate that the average increase is about $360 per unit, with the increase skewed to the high-end. With landed property in central locations expected to have tax increase of about $10k, I really don’t think that it would make all that much of a difference. If the property is rented out, the increased tax can be covered in less than 1 month’s rent.

Some analysts also talk about the increase in supply of rental units due to the abolishment of property tax concessions on vacant properties. While I think there might be some increase, I don’t think the numbers will be significant. Just imagine, there are people out there who have made a decision not to rent out their property, forgoing income. I’ve met some people who have left their properties vacant for years. I really don’t think an increase in a few thousand dollars tax will make much of a difference to them.

All in all, the property-related items in the Budget seems reasonable, taking more money from the owners of higher-AV properties to benefit owners of lower-AV properties.