IRAS uses the annual market rent of comparable properties to determine the AV instead of transacted sale prices because:

1. There are generally more rental transactions than sales transactions. A higher number of transactions gives a more accurate picture of market activity.
2. The movements in sale prices are more volatile than rentals prices. Hence, using rental transactions to derive the AV helps to keep property tax more stable for property owners. Other countries like Hong Kong and Malaysia also adopt the same practice of using market rents to determine the AV.
3. Using historical purchase price to determine AV would be inequitable towards newer owners. This is because the prices of similar and comparable properties can change over time. For instance, newer owners may have a higher AV than those who bought properties in the past if properties prices increase over time.

This information is sourced from IRAS