Annual Value (AV)
The annual value of a property is an estimation of how much rental income it can fetch on the open real estate market should it be rented out, excluding furniture, furnishings and maintenance fees, with the final figure used as a basis to calculate property tax by IRAS.
As most property owners are residents of the house themselves, it would not be surprising to find that you don’t know your annual value as you have never rented out the house.
In such cases, which is the majority, market data of comparable property will be used to determine the annual value.
For example, a very similar apartment in the opposite flat in terms of size and physical attributes can be used to estimate the AV of a property that is owner-occupied.
In some cases when the house is actually rented out to tenants legitimately, there can still be instances where a considerable variance is observed between rental determined by AV and actual rental collected by the landlord.
This situation is almost certainly due to a low rental charged by the landlord compared to market rates.
It can be because of a long term tenant who is enjoying low rental from a long term stay, or that the market has picked up significantly since the commencement of the current tenancy agreement.
One major reason why actual rental charged is not a major factor towards estimating annual value is the potential for fraud.
Because if actual rental is used instead of one that is based on market demand and supply, an unethical property owner can easily rent out the place to a relative at $100 a month and use that figure as a basis for AV.
You can actually check the annual value of your home here.
When the difference in AV and what you consider as the actual value is too big for you to ignore, do contact IRAS to understand more about how your AV was determined.
Different annual valuation methods are used for specialised properties, land and development sites.
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