Property Buyer’s Guide Singapore:
How to buy an apartment or house as an expatriate , foreigner or permanent resident in Singapore
Buying versus Renting
Many expatriates decide to make Singapore their permanent home rather than leaving for good after their assignment or returning for retirement back home. The advantages of applying for the Singapore equivalent of the US Green Card – Permanent Residency -are mainly relating to taxes or the Singapore Central Provident fund.
Note: as a PR (permanent resident) you are entitled to use your CPF savings for financing a home.
But even if you are not a PR you are entitled to buy non-landed property as Singapore is a very liberal market compared to other countries in the region. Non-landed refers to properties such as apartments and condominiums.
Above all, you basically need to consider the options available relative to your financial background and lifestyle you intend to lead. You need to determine if you should consider buying a property to stay in, for investment purposes (buy to let) or to dispose of it at the end of your assignment in Singapore.
We have listed the pros and cons of buying a property below:
It is always a desire in most of us to eventually ‘nest’ and make our home somewhere. Buying provides you the opportunity to do so and provides you with the satisfaction of knowing that it belongs to you. Unfortunately, the rapid increase in values in the property market in recent years has pushed home ownership to a point where purchase is available to the selected few.
Home ownerships is a long term goal and investment and requires planning, budgeting and saving strategies. However, not everyone is willing to make sacrifices, hence you need to be aware of the advantages and disadvantages of such a commitment.
We have highlighted your decision criteria below:
Property Sales Terms
Get to know the “property sales jargon” used in information provided by Singapore property agents.
Restriction on Foreign Ownership
The Singapore Government has imposed restrictions on foreign ownership of private residential property in Singapore. Such ownership is governed by the Residential Property Act (RPA).
What is restricted residential property under the Residential Property Act
Foreigners including foreign companies cannot acquire or purchase restricted property unless he obtains prior approval from the relevant authority. Such property includes:
- vacant land
- landed property such as detached houses, semi-detached houses, terrace houses
- landed property in strata developments which are not approved condominium developments under the Planning Act
What is non-restricted residential property under the Residential Property Act
What is non restricted residential property under the Residential Property Act
Foreigners are not restricted from acquiring:
- any apartment within a building
- any unit in an approved condominium development under the Planning Act ( foreigner is not allowed to acquire all the units within a building in a condominium development without the prior approval from the relevant authority)
- a leasehold estate in restricted residential property for a term not exceeding 7 years including any further term which may be granted by way of an option for renewal
Financing your Property
Banks do grant loans to foreigners up to 60%-70% of the valuation or purchase price of the property, whichever is lower. If one has a good credit standing with the banks or has evidence of established funds, banks are willing to loan at a higher quantum (case by case basis).
As a Singapore citizen and if you are eligible for the subsidized loans you can enjoy the subsidized mortgage rates of the HDB. The HDB can grant a subsidized loan to first time home buyers and also to second time home buyers who upgrade to another HDB flats.
Beginning of January 2008 ,the Singapore Inter bank offered rate (Sibor) has fallen again and is at its lowest since three years. Analysts believe it is going to sink further during 2008. The Sibor is the rate at which bank lend to each other and influences what you pay for a mortgage. Statistics shows however, that local and foreign banks in Singapore do not pass on the savings at once but rather in a time frame from about two months.
Basically there are two types of interest rates offered by the banks
- floating rates
- fixed rates
However, banks might offer a mixture of floating and fixed rates on different or various situations.
Usually there is a minimum lock-in period of 3 years i.e. penalty on early redemption. Interest rates and mortgage packages vary from bank to bank and are subject to changes.
Keep in mind that property with a limited lease may be more difficult to finance as the shorter the lease period the higher is the interest rate applied.
Check the indicative valuation for the property you intend to purchase as valuation directly affects the amount of loan you can get from the bank for the property. For a foreigner, major banks or financial institutions in Singapore can only loan up to 70% of the valuation or purchase price (whichever is lower)
Note: as a prospective purchaser (owner-to-be) you can apply to view the architectural plans and structural plans of a property. A photocopy of Notice of Transfer or duly exercised copy of Option to Purchase (the portion of “Acceptance Copy” duly endorsed) is needed.
Purchase under company name
In the case of purchasing under company name, the interest rate will be 1% higher per annum as compared to purchasing under personal name.
Note: The company has to be a Singapore Registered Company. Local banks rarely give loans to foreign registered company. However, local banks may consider granting loan approvals to a (British Virginia Island) BVI company but a personal guarantor may be required.
The following additional fees are involved in a property transaction:
There are a number of taxes to consider and there is a distinction in tax rates for resident individuals and non-resident individuals. In general you will be treated as a non resident when you are in Singapore less than 183 days in a calendar year. For details check with a tax consultant and visit the websites below.
Property tax is levied on the registered owner of a property and is payable to the government.
Property tax is imposed on immovable properties and is payable in advance and pro-rated till the end of the fiscal year. The tax payable in respect of a property is calculated base on it annual value. The Annual Value is the estimated yearly rent the property can fetch it it were rented out and is determined by Inland Revenue Authority Singapore (IRAS).
The prevailing tax rate is 10% of the Annual Value.
However, for an uncompleted project, property tax is payable only when the project is completed. For details check with a tax consultant and visit the websites below.
Note: There is no capital gains tax in Singapore
Taxation on Rental Income:
Net rental income earned by non-residents is taxable. Total rent includes charges on the property, the furniture and fittings and service charges. Property tax, insurance, maintenance and repairs are all deductible from the gross rental income. For details check with tax consultant and visit the websites below.
Inheritance Tax/Estate Duty
Estate duty is a tax levied on the aggregate market value of the deceased’s assets as at the date of his death. Be aware of possible conflicts with your country of origin and check with your lawyer and a tax consultant and visit the websites below.
If you sell your property to a non resident you are required by law to withhold a percentage of that payment and remit it to the Comptroller of Income Tax. For details check with a tax consultant and visit the websites below.
Purchase Step-by-Step Guide
Purchase from an individual owner
You have decided to purchase a property from individual owners – private treaty
|Prepare 1% (Option Fees) of the purchase price (as a consideration) in exchange for the Option to Purchase from the seller.|
|Option to Purchase is prepared by the seller’s solicitor or property agent.|
|Org anise your finance (if any)|
|You are usually given 14 days to decide whether to proceed with the purchase. If you decide to proceed, exercise the Option to Purchase by signing in your solicitor’s office and forward to your solicitor another 4% or 9% (agreement between the seller and purchaser) of the purchase price. This amount is usually held by seller’s solicitor as stakeholders.|
|If one decides not to proceed with the sale after receiving the Option to Purchase from the seller, the 1% option fees paid will be forfeited.|
|From then on, leave it to your solicitor to complete the sale which will be completed around 8 to 10 weeks (agreement between the seller and purchaser). Your solicitor will:|
|Info: Progressive Payments|
Purchase from a housing developer
You have decided to purchase a property from housing developers. Payment will be by progressive (stages payment)
|Prepare 5% (Option Fees) of the purchase price (as a consideration) in exchange for the Option to Purchase from the developer.|
|Option to Purchase is prepared by the developer’s solicitor.|
|Info: Progressive Payment|
|Info: What to check when buying a second hand home|
- lf walls and ceilings have been recently painted, be careful as this is a means to hide leaking of water from bathrooms/balconies of upper floors (especially
The prices below are the maximum and minimum values of the median unit prices per square foot (psf) of the various districts in the different market segments
The values indicated are in Singapore Dollar.
In General the purchase price depends on the following circumstances:
You have heard it all before:selecting the right location is the key to successful property investment. Watch out for homes in the new and upcoming areas of Singapore
Marina Bay: district 1 is the future heart of the lion city and the centerpiece of the efforts to seemingly extend the existing city into the new downtown.The 360ha development is becoming the home of the highly anticipated integrated resort with world-class hotels, the casino Marina Bay Sands by the developer Las Vegas Sands Corporation, convention, leisure and entertainment facilities and residential and commercial developments A garden. There is a huge park planned at Marina Bay South and off course a Golf course! The Singapore Flyer – a sister of the London Eye – is already up and running providing visitors with a breathtaking radial view over Singapore, Malaysia and Indonesia.
Orchard Road :districts 9,10,11 are the present most prestigious areas close to the famous Orchard road – the shoppers’ paradise of Singapore and a showcase for one continuous street of shopping malls, entertainment and lifestyle. There are a number of high profile projects in the Orchard Road area which are expected to fetch even higher prices than those in Marina Bay. The developers expect foreigners to represent 50- 60% of the buyers. The 40 million rejuvenation of Orchard Road is well on its way and will probably attract more than 7 million tourists each year. Three zones have been identified to have enhanced road and pedestrian mall lighting, featuring either a flower theme, forest theme or fruit theme ensuring it remains a world class pedestrian friendly shopping experience.
Sentosa Cove: this island is marketed as the world’s most desirable address for a reason as it combines living in lush tropical settings in a modern convenient lifestyle as close to a vibrant city as you can possibly be. Sentosa Cove is set at the Eastern coast of Sentosa island off the South Eastern tip of Singapore mainland.
Where else can you watch international sport events such as the Formula One Singapore Grand Prix or the Volvo Ocean Race practically from your doorstep while you enjoy Sentosa Island’s ‘ many tourist attractions and the beach, resorts and hotels and a casino. With your office set in the new financial district in Marina Bay commuting time is reduced to a few minutes across the bay and a short drive let’s you to set off from Singapore’s Changi Airport to any destination in the world.
Resale Step-by-Step Guide
You property has appreciated and you decided to sell.
|Engage a property agent. If you are represented by an agent, you need not be around at any viewing.|
|Appoint a solicitor.|
|You have accepted an offer|
|Sellers do not pay stamp duty or capital gain tax.|
|Agency commission is paid solely by the seller which varies from 1% to 2% of the selling price.|
Case Study Reference
The following table shows estimated costs when
Case 1 : Unit is purchased for own stay
Case 2 : Unit is purchased for investment purposes (ie. Lease/Let out)
Case 3 : Unit is to be disposed or sold off
Capital Gain Tax
There is no capital gain tax in Singapore
If you sell your property to a non resident you are required by law to withhold a percentage of that payment and remit it to the Comptroller of Income Tax. Check with your lawyer!
The local payer in Singapore is required to withhold tax at:
- 15 percent of the gross income/fees payable to the non-resident professionals or
- The non resident rate if the non-resident professional elects to be taxed on net income