Key Considerations for Buying a Property in Singapore

If you are buying a property in Singapore, there are a number of important factors to consider. This will include the eligibility to purchase a property as a Singapore Citizen or a Foreigner.

Investing in a Singapore property is a huge financial commitment. Yet, Singapore has the third highest home ownership in the world at 91%, out of which more than 80% live in public housing. Despite being ranked highest in Asia in terms of home ownership, it does not mean owning one is easy. Singapore is the second priciest housing market in the world with the average price of a property hitting US$874,372 (approx. S$1,183,025) in 2019. This can be attributed to Singapore’s dense population and limited land area, among other factors.

In this guide, we will touch on the following factors when buying a property in Singapore:

• What is your main objective for buying a property?
• What types of Singapore property to buy?
• Residential property rules and regulations.
• Budget and relevant entry price.
• Location of the property.
• Micro and Macro Factors of Property.
• Housing Loans.
• Usage of CPF Funds.

For quick access to the various sections of the post, please click on the links in the Table of Contents below.

What is your main objective for buying a property in Singapore?

What is the main objective of buying a property in Singapore? Are you buying it for own stay or investment? This question matters as it would determine the type of property you buy, its size and location, as well as capital appreciation potential, among other factors. In other words, the ideal home you have in mind may not have the best investment potential. Or it may have good investment potential, but it doesn’t suit your current needs. Let us give you two examples below.

Example 1: If you are a Singaporean with young children, you may wish to buy a reasonable size property near a reputable school that also has good investment value. But the properties around the area are expensive and you can only afford a small unit which is not ideal for your family size. Hence, to afford a bigger unit, you may have to consider other areas where its investment potential may not be as attractive.

Example 2: If you are an expatriate family, you may prefer a property that is close to town and also near an international school where your children can study in. But such a property is likely to be very expensive and may be beyond your budget. Hence, you will need to find a compromise, such as moving slightly further away from the town where properties are less pricey, but its investment potential may be less promising.

The above are just two simple illustrations. Buying a property in Singapore is never straightforward as there are many considerations involved, like knowing the various property policies governing Singapore's real estate market and finding out what financing options are available. You have to decide what is your main objective for your property and what are compromises you are willing to make.

Note: Whether a property offers great investment potential depends on many factors, not just its distance from town. You can find out more about this in “Singapore Property Investment – 7 Key Factors”.

Determine What Property to Buy

Obviously, one of the most important factors to determine what property to buy will be your budget. So, let us examine the options available.

HDB Flats - HDB or Housing & Development Board flats are public housing built by the government and more than 80% of the population lives in them. However, they are primarily for Singaporeans while Singapore permanent residents (SPR) must meet certain criteria before they can buy a resale flat (SPR is not eligible to buy new HDB flats). As for foreigners, they are completely barred from buying HDB flats.

Executive Condominiums (EC) – These are public-private hybrid properties which are similar to private condominiums. However, only Singaporeans can buy a new EC and they have to meet the 5-year Minimum Occupancy Period (MOP) before they are eligible to sell it in the open market to Singaporeans and Singapore Permanent Residents (SPR). Foreigners can only buy them after 10 years from the completion date of the project. If a SPR wants to buy a new EC, he/she must be married to a Singaporean. Find out why executive condos can be good investment properties. If you are interested in buying an EC, you must meet certian eligibility criteria. More information can also be found in our EC FAQs.

Private Condominiums - Private condominiums are non-landed strata developments. They consist of one or more blocks containing many residential units. Some of them are freehold, but most are leasehold up to 99-years since the government no longer sells freehold land for residential developments. Residents in private condominiums share many common facilities such as swimming pools, tennis courts, gymnasiums, clubhouses, 24-hour security, etc. These are popular with foreigners and expatriates since they have no restrictions on ownership.

Landed Properties - Landed properties include bungalows, detached houses, cluster houses and terrace houses. They are usually more exclusive and larger, which also means they tend to be the most expensive of the four housing types listed, ceteris paribus. However, only Singaporeans can purchase landed properties. Singapore permanent residents and foreigners must seek approval from the Land Dealings Authority Unit (LDAU) before they can purchase them unless the house is part of a larger condominium project. An exception is Sentosa Cove, where such properties will be granted fast-track approval from LDAU. The eligibility conditions can be found in “Singapore Property Rules for Foreigners”

Of the above-mentioned properties, HDB flats are the most affordable. For newly married couples looking to buy their first Singapore property, they can enjoy generous subsidies and grants offered by the government if they opted for public housing. These subsidies and grants can be reinvested in private properties in the future, if so desired, after the completion of the 5-year Minimum Occupancy Period (MOP). For more information on this, you can refer to “Is Investing In HDB Flats A Good Option?”

Buying A Property In Singapore: Residential Property Regulations

HDB flats are governed by the Housing and Development Act, while private properties come under the Residential Property Act.

Under Singapore’s residential property rules and regulations, foreigners are not eligible to own HDB flats as they are primarily for Singaporeans. However, Singapore permanent residents can buy HDB resale flats under certain conditions. They must form a family unit and have gained permanent residency for at least 3 years. They are not allowed to buy new HDB flats though.

For Singaporeans buying HDB flats, they must be at least 21 years old and form a family nucleus. If unmarried, they are only allowed to buy HDB flats when they turn 35 years old. This is to encourage Singaporeans to get married and work towards nation-building. Singaporean buying HDB flats will enjoy government subsidies and grants, but the quantum will be subjected to their household income levels. More information on the eligibility conditions to purchase HDB flats can be found here.

For foreigners, some Singapore properties they are eligible to buy without approval include: i) condominiums; ii) flats; iii) strata landed houses in an approved condominium development and; iv) executive condominiums which are at least 10 years old.

But they are not allowed to buy landed properties without approval from the Land Dealings Approval Unit (LDAU). Even with approval, there are restrictions in place. They can only own one property and it must not exceed 15,000 sq ft. The property cannot be sold within 5 years and it also cannot be rented out.

However, the restrictions are less stringent for Sentosa Cove. There is no Minimum Occupation Period (MOP) and they can resell their properties to other foreigners, who must likewise satisfy the same ownership conditions. To purchase a property, you may refer to "A Complete Guide - Buying A Resale Private Property In Singapore".

But, should you require more guidance on buying a property in Singapore, please feel free to contact us.

Property Stamp Duties

Property stamp duties are the taxes payable on all property transactions, regardless of whether they are public or private housing. They will substantially add to your property investment cost. Hence, you must take them into account when determining your budget. The three main stamp duties are the Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD) and Seller’s Stamp Duty (SSD).

BSD is payable on any property purchase, and it is calculated based on the following rates:

ABSD is imposed on Singaporeans buying their second and subsequent property, as well as Singapore permanent residents and foreigners buying their first and subsequent property. This makes ownership of a second Singapore property very onerous for most. One way to reduce the financial burden is to undertake decoupling. Learn more about this in "Decoupling and How to Avoid or Reduce Additional Buyer’s Stamp Duties (ABSD)".

The ABSD rates charged are indicated below:

Seller’s Stamp Duty (SSD) is imposed to prevent property speculation. Any sellers who dispose of their properties within three years will incur SSD, which is computed as follows:

For a more detailed explanation, please refer to “How To Calculate Singapore Property Stamp Duties?”

Budget and Relevant Entry Price

Once you have a budget in mind, find out the relevant entry prices for the Singapore property in different areas. Singapore is broadly divided into three main regions:

• Core Central Region (CCR) - Properties in the prime postal districts of 9, 10, 11, Downtown Core and Sentosa.
• Rest of Central Region (RCR) – Properties still within the CCR but outside the postal districts of 9, 10, 11, Downtown Core and Sentosa.
• Outside Central Region (OCR) - All other areas outside of the OCR and CCR.

To help you visualize better, please refer to the illustration below.

CCR, RCR and OCR Demarcation

Obviously, the most expensive properties are found in the CCR, followed by RCR and OCR, be they public or private housing. If you prefer a home in the CCR, be prepared to pay substantially more or, settle for a smaller unit unless you are rich.

Besides the area, the relevant entry price also reflects the state of the property. More often than not, there are reasons why a resale property is priced below its market value. For example, a property with hidden defects that will cost a bomb to repair, one having bad “fengshui” or directly facing the afternoon sun.

What constitutes a “bargain” may not necessarily be a good buy if you have problems selling it in the future. Do your due diligence and find out as much information as possible before you commit to any property.

Don’t get us wrong though. We are not saying there are no genuine bargains, but you may need a little patience and luck. Occasionally, you may find some urgent sales due to property owners migrating overseas or facing financial difficulties, for example.

Hence, when buying a property, don’t simply judge its entry price point. Another example is a new launch condominium versus a resale in the same area with a similar size. The former may cost more, but so is its capital appreciation potential. And if you are a first-mover, you may snag a choice unit with great resale value. Sometimes, you may also benefit from developers giving discounts trying to sell their units fast in order to meet deadlines imposed by the government.

For example, during the period from 2017-2018, there has been a slew of new Singapore property launches following aggressive bids by housing developers in government land and en-bloc sales. These property projects are required to be completed and all units sold within five years of acquiring the land. If they fail to meet the deadline, there will be an ABSD charge of 25% (revised upwards to 30% from 16 December 2021)based on the purchase price of the land. In order to avoid the punitive penalty, developers will be competing to sell all their units, which will provide an opportune time for property hunters to enter the market. If you need any recommendations, please contact us.

Location of the Property

The location of the property and the future transformation of the area are important factors in property investment. But, picking the ideal location requires both knowledge and foresight. Get it right, your property will naturally enjoy good capital appreciation.

Other than looking at the appeal of the property now, such as whether it is well-served by public transportation and essential amenities such as shopping centres, supermarkets and schools, we must also consider what the future holds for the area. For example, some exciting future developments to look out for with good investment potential include the following:

• Greater Southern Waterfront
• Jurong Lake District
• One-North
• Kallang River
• Paya Lebar Airbase
• Punggol Digital District
• Woodlands Regional Centre

Of these, perhaps the area that has generated the most buzz is the Greater Southern Waterfront, which will extend from Pasir Panjang to Marina East. It will transform the area into a major gateway for urban living along Singapore’s southern coast. The investment potential there could be huge! Take the Sail @ Marina Bay for example. Launched in 2004, a 1,033 sq ft unit sold at $987 psf has shot up to $2,150 psf, a 118% capital appreciation.

However, the development will only take place in phases, starting with the former Pasir Panjang Power District, Keppel Club and Mount Faber in the next 5 to 10 years. But that does not mean we cannot take advantage of the exciting transformation early. Speak to us and let us share our strategies with you.

Micro and Macro Factors of Property

When doing your property research, there are micro and macro factors to look at. Both will have a significant impact on the value of properties.

On the micro level, find out what is the size of the development. A small development usually means more exclusivity and may command a premium over a large development due to the effect of demand/supply.

On the macro level, find out the number and type of developments in the area. This will give you an idea of the competition you will face when you decide to sell your property.

You may also want to find out what are the unique attributes of the area, such as being near water-bodies or nature parks. In addition, survey the surroundings for tell-tale signs - are there vacant land parcels? What are their likely uses? What is the URA Master Plan regarding the future development of the area?

After doing your property research, you will be more informed about buying a property in Singapore. Unfortunately, many people tend to be guided by their emotions, resulting in buyer’s remorse. Never allow your own preferences, sentimental attachment or bias in any particular area to affect your decision.

Home Loans

For most, buying a property in Singapore will involve taking up a home loan. After paying your downpayment, the balance of the property price has to be financed through a housing loan. If you buy a HDB flat, you can choose either a HDB or a bank loan. But if you buy a private property, you can only take a bank loan. Whatever loan you take, hunt around and do your due diligence as they come with different terms and conditions.[Note: For buyers of Executive Condominiums (EC), they can only take a bank loan]

HDB Loan – For taking a HDB loan, at least one applicant must be a Singapore citizen and the gross monthly household income must not exceed $14,000. The current interest rate is fixed at 2.60% (pegged at 0.1% above the prevailing CPF interest rate of 2.50% per annum). The maximum loan tenure is 25 years. You can find out more of the criteria in Eligibility Conditions for HDB Housing Loan.

Bank Loan - A bank loan has fewer restrictions. There is no income ceiling but be prepared to undergo a credit check. Banks offer both fixed-rate and floating-rate loans. The maximum loan tenure is 30 years for HDB flats and 35 years for private properties.

So, which housing loan is better? It depends and there are pros and cons. Some other important factors you must consider are:

• HDB offers a fixed-rate loan of 2.60%, lower than bank loans of around 3% or higher. As mentioned earlier, banks offer both fixed-rate and floating-rate loans. Fixed-rate loans are usually more expensive, but provide peace of mind and certainty over monthly loan repayments. Floating-rate loans may fluctuate over time and may end up being more expensive should interest rates rise.
• HDB does not charge an early repayment penalty while some banks charge 1.5% penalty on the repayment amount. Hence, you need to find out the terms and conditions before committing.
• An HDB housing loan can be refinanced with one from a bank. However, once refinanced it cannot be refinanced with HDB again. Some banks allow you to refinance your loan after 3-years or what is known as a lock-in period. Some even allow you to refinance your loan after every 2-4 years, but any savings could be wiped out by legal or valuation fees imposed. So, do your sums!
• Borrowers are subjected to the Mortgage Servicing Ratio (MSR) for loans to buy HDB flats and the Total Debt Servicing Ratio (TDSR) for bank loans to purchase private properties. MSR capped the loan repayment at 30% of the borrower’s gross monthly household income while TDSR capped the sum of total debt repayment at 55% of the borrower’s gross monthly household income. More information can be found here.
• Both HDB and bank loans provide up to 75% of the Loan-to-Value (LTV) of the purchase or valuation price of your property, whichever is lower. For an HDB loan, the balance of 25% can be paid by cash or CPF monies. However, for bank loans, the balance of 25% must be paid in cash (5% minimum) and CPF Ordinary Account (OA) monies. Please refer to the infographic below.

LTV Ratio

Usage of CPF Funds

Under the new rules announced on 9 May 2019, the usage of CPF funds for a property purchase will depend on the extent to which its remaining lease can cover the youngest buyer to the age of 95. If it can cover the youngest buyer until age 95, CPF funds can be used to pay for the property up to its Valuation Limit (VL).

However, if the remaining lease of the property can’t cover the youngest buyer to age 95, the use of CPF funds will be pro-rated. Please refer to “Change in CPF Usage And Housing Loan Rules”

To purchase of more than one property, CPF members must set aside their Basic Retirement Sum (BRS) if they have at least one property bought using CPF funds or the property they are buying can cover them till age 95. However, they must set aside the Full Retirement Sum (FRS) if they do not have a property that can cover them till age 95.

For properties with a remaining lease of 20 years or less, CPF funds can’t be used. The new Singapore property rules regarding the use of CPF funds are to ensure Singaporeans have a home for life and a basic level of retirement income.

Buying A Property In Singapore - Consult A Real Estate Agent

Property investment in Singapore can be complicated and time-consuming. Besides finding out what suitable properties are available, there are many rules and regulations to navigate as well. When it comes to buying a property in Singapore, to ensure a trouble-free and efficient home-buying experience, it is advisable to consult a real estate agent. Meanwhile, here is a guide to Singapore's property agent commission structure.

A professional real estate agent will guide you through the entire buying process from start to finish. The services provided include:

• Helping find your ideal property
• Providing property investment advice through exclusive in-house research.
• Negotiating the best deal when buying a resale property.
• Recommending conveyancing lawyers and housing loans at competitive rates.

If you require any assistance in buying a property in Singapore, please Email or WhatsApp Us for an obligation-free consultation.

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