Zit Seng's Blog

A Singaporean's technology and lifestyle blog

On Rental Rebates

The Singapore government announced a 15% property tax rebate on qualifying commercial properties, expecting savings to be passed on to help shopping mall tenants. Tenants, meanwhile, are complaining that landlords are dragging their feet. I’m not at all surprised.

The idea that the 15% property tax rebate offered by the government to landlords of commercial property will translate to rental rebates is flawed. No, I don’t doubt that it should translate into some savings. The question is, how much savings would that be? Is it even meaningful at all?

Don’t expect anything in the region of a 15% rental reduction coming out of that property tax rebate. If you were thinking that, well, fat hope. It’s impossible.

The rent collected by a landlord goes into paying for a lot of costs. There’s upkeep of the property, managing agents, marketing, utilities, and a whole slew of other costs. Property tax is just one component of that long list of things that a landlord has to pay.

If, for discussion sake, the property tax amounts to, say, 10% of the landlord’s cost, then the 15% property tax rebate gets you a 1.5% rental reduction. Better than nothing, I suppose? Perhaps. But if your business cannot even do without that 1.5%, then perhaps it is doomed already, anyway.

That 15% property tax rebate may have sounded very generous, but in reality, it is quite meaningless to downstream businesses.

Landlords are obviously dragging their feet because they’re trying to figure out what it is they’re supposed to do.Do you want them to pass on that 15% property tax rebate? Sure. That’s easy. That’ll be quite a joke though.

Landlords have bee goaded to do more. To do something meaningful will mean they’ll have to dig into their own operating margins. Some people think landlords have been profiteering too much. Maybe. That it’s time for rents to be recalibrated. Maybe.

The easier things that landlords will prefer to do is to help indirectly. E.g. give free parking, or shopping vouchers. The idea is to entice crowds to come back to the mall, so that foot traffic returns, and business goes back to normal for mall tenants.

I don’t think you’ll see meaningful, direct, rent reductions from the landlords.

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