AAM analyzes Property Tax & Property Cooling Measures in Singapore Property Management in 2021
AAM analyzes Property Tax & Property Cooling Measures in Singapore Property Management in 2021
According to what AAM learned this year, if a property tax is introduced and forced to be implemented, some cooling measures may also have to be pushed back. The talk about property taxes has been growing since the pandemic became more severe, leading to the recent travel restrictions. Therefore, the implementation of cooling measures is to promote an inclusive society by finding additional sources of government revenue to fund various altruistic programs. The shift from income taxation to wealth taxation is perhaps one way, but not the only means, of achieving that goal. From the public forums, the form in which wealth tax is being considered here seems to be centered on the taxation of property or inheritance income.
AAM recognizes that the post-pandemic economic situation will lead to another property tax, requiring cooling measures to balance the current Singapore property management market.
Also, according to the information available to AAM, we will look at whether a property tax on private residential properties is ideal, discuss some alternatives, and if the tax If it is levied on residential property, a proposed form should be applied. With an appropriate measure of the current Singapore property management market, this analysis will look back 20 years ago to the periods H1/2001, H1/2011 and H1/2021. To begin with, we studied how the Lorenz curve for private residential transaction values has evolved over time. (The Lorenz curve is a graphical representation of income or wealth inequality.) And with the analysis obtained, we can calculate the Gini coefficient for the trading market.
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AAM explains the Gini coefficient and how to cool down in the Singapore property management market
According to the a AAM, this interpretation of the Gini coefficient is slightly different from that used to describe household income. That is shown in the point that the seller of the property receives cash in the form of equity or any profit from the transaction. The larger the Gini coefficient, the larger the disparity in sales — and the corresponding purchasing power of buyers — in the transaction value curve relative to the uniformly priced private housing market. Optically, the Lorenz curves for the three periods do not seem to have changed too much.
At the same time, we have also considered Gini coefficient for the private residential transaction value market and national household income. For private residential transaction values, it fluctuated between 0.255 and 0.304, well below the 0.375 to 0.433 range for household incomes for these three periods over the past 20 years. At this point, the ratio of the two shows that the inequality in private residential transaction value varies from 0.61 to 0.77 over these three periods.
Through Gini coefficient analysis, AAM has shown the change in value of real estate transactions in Singapore property management over the years.
Next, the top income quintile has increased, and the number of households in the top income quintile has increased sharply in the first half of this year. However, the increase in the number of the highest income subgroups did not translate into increased private residential property prices. Private housing prices have increased at a very modest compound rate over the past 10 years. While prices have not dropped in the luxury segment, they have instead. From 2010 to 2020, median household income grew at a compound annual growth rate (CAGR) of 3.8%, while nominal gross domestic product (GDP) grew at a CAGR is 3.7%. That has outstripped private property price growth at a CAGR of 1.2%.
Move on to those in the highest income quintile. Using land prices for Good Grade Bungalows (GCBs) as a proxy for their housing choice, we find that it is negatively correlated with the Gini Coefficient of national income. The negative correlation is good because it means that even though the rich are reaping capital gains - as GCB's land prices increase at a CAGR of 3.8% between 2010 and 2020 - the income disparity in general is also being narrowed.
AAM answers the question of whether property tax on real estate is appropriate at this time?
The slower price appreciation for private properties across the island and the negative growth rate for the luxury segment can be attributed to a series of cooling measures implemented over the last decade. This raises the question of whether a property tax on real estate is justified. Here are some possible ideas. In fact, there is already a form of property tax on private residential property. That comes in the form of Additional Buyer's Stamp Duty (ABSD) applied to people who are likely to buy more than one home. There is also a form of capital gains tax labeled as the Seller's Stamp Duty (SSD).
According to AAM, property tax on real estate can be implemented but needs to have a balanced method in Singapore property management, otherwise it will lead to deflation in the long run.
- 1. If property taxes are levied on private residential real estate, the ABSD and SSD may have to be adjusted to offset the tax. Because levying a wealth tax on top of these two will inevitably strangle the market and possibly lead to deflation in the long run.
- 2. If a property tax is levied on the most valuable private properties - for example, on GCB - the question is how much will the total amount be? In 2020, about S$2.5 billion GCB was traded. For comparison, the nominal GDP for the service industry in 2020 amounts to S$313.7 billion. Taxes levied at the top of the housing food chain will not add much to government revenue.
- 3. Technology can be a double-edged sword. While it offers countless benefits, it can also easily make many jobs redundant and skills unsuitable. In addition to functioning as a roof over one's head, the house also serves as an investment that one can draw upon when life's fortunes go wrong. At a time when technology is increasingly central to the economy and society, structural unemployment may come sooner for many. Housing may need to be downgraded. The equity and profits released in such a move can be a lifesaver for some and should ideally not be taxed.
According to the AAM, the property tax on private residential real estate is seen as a form of low-hanging fruit that can add additional revenue to the government. It is attractive because it seems to achieve the goal of transferring wealth from the upper classes of society to helping those in the lower classes. However, when it comes to giving a more complete picture of the private housing market, the idea of direct taxation needs to be discussed much more seriously.
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Did you know that as the population ages, we also find that many of them are living in private residences. Given the low rise in private home prices over the past 10 years, careful consideration should be given to whether a property tax on private residential real estate could reduce the amount of unlock cash. Elderly people may want to move down to cheaper housing to have cash for consumption or medical expenses. AAM with in-depth experience in the property and real estate management market, believes in bringing the best deal value and experience to customers. Discover more guides and latest news on the Singapore brokerage market and the information we have put together, you may find something that interests you.
With flexibility and professionalism, AAM assesses and updates market trends quickly and conveniently, effectively bringing customers' entrustment with Singapore property management portfolio.
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AAM is confident that the professional competence of our experts will be the best place to support customers in Singapore property management in every segment.
According to the AAM, for those in the middle to upper middle income class, whose careers could be impacted by technology or the crisis, their best help is downgrading their housing. . If the last thing is to implement a property tax, then some cooling measures may have to be rolled back to bring the market slack back to a flat state. In addition, we trust the intuitive judgment of people more than machines and technology. With the current situation of Singapore asset management, it can be seen that the efforts of experts will really revive many customers' concerns. Hope you have a need to invest in real estate in Singapore will want to cooperate and contact us.
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