ST : Timing of HDB tax hike 'avoids bigger increases later'

Nov 23, 2009

Timing of HDB tax hike 'avoids bigger increases later'

By Sue-Ann Chia, Senior Political Correspondent

THE property tax of HDB flats is being raised next year partly to avoid having to introduce a bigger increase later should home prices continue to rise, said Acting Minister for Information, Communications and the Arts Lui Tuck Yew.

He gave the reason yesterday, after being asked at a dialogue with Aljunied-Hougang residents whether the Government could delay it, as the recession has just started to ease.

Noting that the adjustment had been delayed once, Rear-Admiral (NS) Lui said: 'The problem is, the longer you defer it, the larger the increase will be...if HDB prices continue to go up.'

He also pointed out that the Government is taking steps to soften the impact of the tax rise early next year. It is giving HDB homeowners a one-off rebate, set at 50per cent of the property tax payable and capped at $120. This means low-income families with homes whose property tax is $50 and less will not have to pay any such tax next year.

The property tax rate is 10 per cent of a property's annual value, although homes that are owner-occupied enjoy a concessionary 4 per cent tax rate. The annual value has increased with rising property prices.

HDB resale prices have risen a hefty 31.2per cent in the past two years, and a further 3.8per cent in the first nine months of this year.

Hence, the Government has decided to raise the property tax 'to reflect the prevailing movement of HDB prices and also to give rebates', said Rear-Adm Lui.

He also addressed residents' concerns about the affordability of HDB flats.

Noting that existing owners gain from their asset's increasing value, he said: 'If they eventually need to sell...(it) releases more money for their old age.'

But the anxieties of those planning to buy a flat are not lost on him. He assured them that an HDB flat would not be beyond their means, saying that the Ministry of National Development has matched the prices of different flat types against the salaries of different groups of people in the population. 'It tries to make sure that for every group, there is a flat type that meets their needs,' he said.

In doing so, it aims for homeowners to pay no more than 30per cent of their salary every month towards their home loan.

More than 75per cent of HDB dwellers use only the contributions to their CPF savings to make their monthly loan payments, he said, urging residents to buy what is affordable.