*This article is three of five in our Singapore Budget 2022 series. Links to the other articles can be found at the bottom of this page.
Finance Minister Lawrence Wong highlighted a SGD500m Jobs and Business Support Package during Budget 2022. As part of this package, a Small Business Recovery Grant for SMEs that have been most affected by the pandemic will be provided. Sectors which will benefit from this include tourism, hospitality and retail sectors. SMEs in eligible sectors will receive a payout of SGD1,000 per local employee, up to a cap of SGD10,000 per firm. We expect this to provide continued support for tenants of retail REITs.
The increase in GST will be delayed to 2023. This will happen in two phases, with GST rate to increase from 7% to 8% on 1 Jan 2023, and from 8% to 9% on 1 Jan 2024. We believe this will help to lift the overhang on the retail sector and retail REITs, as there were concerns that the GST increase could happen this year. The increase in GST from 2023 might result in consumers bringing forward their big-ticket item purchases to this year before the higher rate kicks in. Furthermore, there will be a top-up of SGD640m to the Assurance Package, which would lead to payouts to Singaporeans over the next five years and help to partially offset the higher GST rates to come.
Budget 2022 also placed strong emphasis on the transition towards net zero emissions. In order to achieve Singapore’s reduced timeline to achieve its net zero target by or around 2050, Singapore’s carbon tax will be raised to SGD25 per tonne of greenhouse gas emissions in 2024 and 2025. It will be further increased to SGD45 per tonne in 2026 and 2027, with the view of reaching SGD50-80 per tonne by 2030. The current tax of SGD5 per tonne will remain unchanged until 2023. We had highlighted before that the real estate sector has a high carbon footprint, and that real estate companies with a relatively lower proportion of energy efficient green buildings in their portfolio and show little or no effort to reduce their carbon intensity will likely bear reputational risks, coupled with higher operating costs and potentially weaker demand for their properties.
Singapore will also aim to strengthen digital capabilities, which would entail upgrading its broadband infrastructure and investment in future technologies such as 6G. To achieve this aim, the Singapore government will set aside an additional SGD200m over the next few years to enhance schemes that build digital capabilities in businesses and workers. We expect this strong focus on building up Singapore’s digital economy to have positive spill-over effects on the data centre industry, as it will enhance Singapore’s competitiveness in establishing a data centre ecosystem and attract key players such as hyperscalers.
The main announcement affecting the residential sector came in the form of higher property taxes for both owner-occupied and non-owner-occupied residential properties. For the former, the property tax rates for the portion of annual value in excess of SGD30,000 will be increased from 4-16% currently, to 6-32%. This increase will impact the top 7% of owner-occupied residential properties, with a larger impact on the higher-end segment. For non-owner-occupied residential properties (including investment properties), the tax rate will be increased from 10-20% currently, to 12-36%, with bigger impact also on the higher-end segment.
The relatively muted announcement on new measures will come as a welcome relief for the Singapore developers, as there were some concerns that other potential tax increases such as capital gains tax would be announced. We believe Budget 2022’s new measures took into account the higher Additional Buyer’s Stamp Duty (ABSD) rates which were announced in Dec 2021.
Links to other articles in the Singapore Budget 2022 series:Disclaimer applicable to recommendation
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