Buying Property In Singapore: Beginners Guide For Citizens and Foreigners

Singapore is one of the few countries in the world with high homeownership rates. More than 90% of people in the country own homes. Even with the high homeownership rate, people are still buying properties in pursuit of rental income among other reasons.

While foreigners can also own property in the country, they must adhere to strict regulations that involve seeking approval from the government. The fact that the country is one of the most business-friendly in the world, means more foreigners are increasingly looking for ways to be part of the country’s booming real estate sector.

Buying property in the country can be challenging, not only, to foreigners but also to locals. In addition to committing to pay the actual home price, potential buyers must also agree to extra responsibilities and costs. Such responsibilities include agreeing to home maintenance repairs and long-term commitment.

While homeownership is a dream for many Singaporeans, cost and effort that goes into owning a property can be overwhelming. The first step in making a smart decision when it comes to property ownership involves knowing what to expect.

Below is a step by step guide to owning property In Singapore.

 

Carry out a Detailed Research

The first step to owning a property involves taking time to research on locations that would be ideal for acquiring property. Come up with a shortlist of the things you think matter as this will go a long way in helping make informed decisions prior to visiting actual sites for prospective properties.

Some of the things to take into account include the most appropriate neighborhood, the commuting time to and from work as well as nearby amenities. It is also important to come up with a list of the things a prospective property should have.

The number of bedrooms that would perfectly suit your family and lifestyle should also be on top of the list. If you are a family man or woman, you may have to pay close watch on how big your kitchen should be as well as a playground for kids outside.

 

What Property Can You Own

After figuring out the neighborhood and the type of house that would perfectly fit your needs, it would be important to understand the various types of property you can buy in Singapore.

There are two basic types of properties in Singapore: Public Housing or HDB and Public-Private Hybrid

 

Public Housing or HDB

Public or HDB properties are apartments built and maintained by the Housing development Board. These properties are only available to Singapore Citizens. Foreigners cannot purchase them. In addition to being a Singapore Citizen, a prospective buyer must include another citizen or permanent resident to form a family nucleus, in order to purchase these properties.

HDB flats are usually located in self-contained towns with additional amenities such as clinics, schools, supermarkets, sports and recreational facilities as well as food centers.

 

Public-Private Hybrid

Executive Condominiums are properties that foreigners can buy. However, they can only be bought 10 years after completion of construction. The properties also come with a 5 year minimum occupation period.

What this means is that one has to live in the house for at least 5 years before selling them on the open market.

 

Private Residential Housing’

Private residential Housing can be divided into two: Landed Property and Condominiums/apartments

Condominiums/apartments target private property enthusiasts as they are the luxurious version of the HDB flats. Unlike a public-private hybrid, they don’t have restrictions on foreign ownership.

 

Landed Properties

Landed properties are made up of bungalows, houses cluster houses, terrace houses and slop houses. While unrivaled when it comes to size, spacious living, and privacy, these properties require a lot of maintenance.

Singaporeans can purchase these properties without any restrictions. Foreigners, on the other hand, must seek approval from the Singapore Land Authority’s Land Dealing Unit, before tabling any bid.

 

Understand Your Budget and How Much You can afford

After gaining clear understanding of the type of properties you can buy, it may be time to play close watch on how much you can spend without straining yourself financially. There are a number of calculator tools available online that provide vital information on how much can spend depending on financial position

The calculator tools factor in government regulations to check on the amount of loan one can afford as well as taxes and duties required.

Properties in Singapore are not cheap as the cost per square meter for a good quality apartment can go for as much as SGD 2,254. While older properties can be cheap, one also needs to factor in renovation costs that can average between S$40,000 and S$50,000 for a HDB flat.

Next, you will need to know the amount of down payment you will need to pay. The amount designated as down payment goes a long way in determining the overall budget. Houses in Singapore can require down payment of as much as 20% of the full purchase price.

 

Taking a Property Loan

It is common practice for people to take a property loan to fund the remainder of the purchase price, after making a down payment. There are calculators online that could come in handy, in calculating how much interest one would end up paying, on taking a property loan to supplement cash at hand.

 

Find a good Real estate Agent

Given the intricacies that come into play in pursuit of properties in Singapore, getting a good experienced real estate agent could be the difference in getting the best deal. A good real estate agent would go a long way in providing clear-cut information, about properties, perfect for making informed decisions.

A good agent would be able to provide insight about unknown neighborhoods that aren’t easily accessible to the public, but with a good value proposition. Their knowledge about home buying process negotiating skill and a familiarity, should help alleviate some of the stress that may come into being when looking for a property to buy.

 

Negotiate for the Best Offer

Once you have settled on a property you believe meets all your needs and requirements, it would be wise to negotiate for the buy process instead of agreeing to the initial offer. Here is a where a reputable and trusted real estate agent would come in handy thus ensure you end up with the right value for a given property.

Before tabling your final offer, take time to find out whether the seller has been trying to sell the house or is in hurry. If that is the case, then it is likely that he will accept a lower offer just to avoid the long process

 

Sales & Purchase Agreement

Once the purchase price has been agreed upon, agreeing to a sales and purchase agreement is the next step to finalizing the transaction. Some of the things to look out for in a sales and purchase agreement include:

• A precise legal description of the property must be stated in the agreement. The description should be detailed as possible with the inclusion of all legal identification

• The purchase price should be explicitly stated in the sales and purchase agreement both in text and numbers, to avoid potential confusion.

• Information about the mortgage being used to finance the property should also be included in the agreement along with other contingencies.

• Full and correct names of all parties involved in the transaction should also be included in the agreement. The names should include any hyphens designations and aliases where applicable.

Engage a Property Solicitor/ Lawyer

Prior to starting the negotiation process, it would be wise to engage the services of an experienced property solicitor/ lawyer. Such professionals understand the country’s regulations when it comes to real estate investments and purchase.

A solicitor would come in handy in communicating with the seller to ensure the sales and purchase agreement is in order. The solicitor may also provide insights on a counter offer worth tabling, upon reviewing the documents.

A solicitor would also help in analyzing a title deed to ensure there are no hidden encumbrances.

 

Stamp Duty

For a property transaction to be legally binding and complete, there are fees that must be paid to the taxman in the form of stamp duty. The three layers of stamp duty in Singapore are:

Buyers Stamp Duty levied at:

1% for the first S$180,000

2% for the next S$180,000

3% for the remaining amount

Buyers stamp duty is applicable regardless of one being a citizen, permanent resident or foreigner.

 

Additional Buyers Stamp Duty

Additional Buyers stamp duty is only applicable to the residential property, whereby foreigners pay 15% tax duty, regardless of volume. Singapore citizens and permanent residents, on the other hand, pay 0% and 5% respectively

The two taxes must be paid in full, 14 days upon signing of the sales and purchase agreement.

 

Certificate of Title

The final step to purchasing a property in Singapore involves the transfer of ‘Certificate of Title’ upon the buyer making all the necessary payments as agreed in the sales purchase agreement.

Singapore Land Authority issues the Certificate of Title which is the only legal document that proves property ownership in the country

 

How to Buy a Property In Singapore: Foreigners Guide

While the process of buying properties for citizens and permanent residents is straightforward, foreigners have to contend with an additional set of regulations and requirements. Even though Singapore is known for, being business-friendly foreigners cannot directly buy landed property in the country

Buying Landed Property

A landed house is a terrace/detached/ semidetached house as opposed to an apartment or condo

Foreigners who wish to buy landed property in the country must first seek authorization from the government. The authorities will go through an application to ensure it meets the following requirements, before issuing the green light.

An application will only be approved:

• if one has resided in the country for a minimum of 5 years and boasts of a permanent residency status

• One also needs to be an entrepreneur/ investor with a significant contribution to the economy

Buying a Condo

Foreigners who don’t meet the requirements for buying a landed property may opt for a condo. Condo or apartments are easier to buy, given that they don’t have strict requirements.

 

Property Tax for Foreigners

Foreigners have to contend with a different tax structure when it comes to purchasing property in the country. The rates are as follows

In case, a tenant occupies the property:

10% for the first S$30,000

12% for the next S$15,000

14% for the next S$15,000

16% for the next S$15,000

In case the annual value exceeds 20%, you will have to pay S$90,000

Property tax for foreigners residing in the purchased property

0% for the first 8,000

4% for the next S$47,000

6% for the next S$5,000

6% for the next S$10,000

8% for the next S$15,000

 

How to Pay For Property in Singapore

The financial aspect is the most important consideration when it comes to property purchase. When it comes to buying property in Singapore some of the expenditures you will have to keep in mind include:

Option Fee: Paid to a seller to secure a unit of choice pending entering into a sales and purchase agreement. The fee is usually 1%-5% of the purchase price

Deposit upon exercise of the option

Stamp Duties

Purchase price.

 

How To Finance A Property Purchase In Singapore

If you happen to be among the many people who are not able to pay the entire purchase price of a property, then looking for alternative sources of finance would have to come in hand.

Some of the notable sources of funding for property purchases in Singapore are Cash, CPF savings, and Bank Loan

Cash

To be able to use CPF savings in property purchase one must first use a certain percentage of cash towards a given property. For example, 20% of the property purchase must be paid for one to be able to get a bank loan and be able to use CPF savings.

CPF Savings

CPF Savings are only used in certain circumstances, of which property purchase is one of them. Funds from CPF Ordinary Account can be used to cater for Legal Fees, Stamp Duties, Purchase Price and monthly repayments of bank loans.

However, it is worth noting that any funds withdrawn from CPF savings account must be returned, together with accrued interest.

 

 

 

 

(By Neha Gupta)

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