Private Property Buying Guide
Real estate in Singapore is very much sought after by both locals and foreigners. From Mercer’s 2017 Quality of Living Survey, Singapore came in as the top Asian choice for its quality of living. With a stable political climate and an open economy that attracts economic investments and business activities, it has attracted foreigners to own an asset class in Singapore, in particular, a residential home.
Some key information to know before you embark on your search
Restrictions on Foreign Ownership in Singapore
Do take note that there are restrictions on foreign property ownership in Singapore. If you are a foreigner, you are not allowed to purchase landed homes except those located along the exclusive and luxurious SENTOSA Cove. For apartments and condominiums, generally foreigners are eligible to purchase. For more information on foreign ownership, do check out with your preferred real estate professionals.
Your Time Horizon for your property purchases
Like most immovable assets, you will need to look at your property purchase over a longer time horizon. To prevent runaway prices, the government has introduced cooling measures since 2009. These measures have stabilized the prices in the real estate market, preventing speculators and individuals from being over geared.
Having a more stable residential real estate market now, the government has relaxed the restriction on Sellers’ Stamp duty in March 2017. Residential property owners who purchase a property after this period and keep them for a minimum of three years will not be taxed when they sell their property after the third year. Details can be found below, or from IRAS website.
Preserving your Asset and looking for Capital Gains in longer time horizon
As Singapore is a relatively small country with limited land, prime locations are very much sought after. Properties in good locations (primarily homes in Singapore’s Core Central Region) do generally offer good long-term capital appreciation for homeowners. With relatively lower barriers of entry for local and foreign buyers, and a transparent ownership system, the real estate market has become very vibrant.
One of the most attractive incentive for foreign buyers is that there is NO CAPITAL GAINS TAX when sellers dispose of their property in Singapore. Hence, one can understand why whilst locals aspire to own multi properties and, foreigners love to buy holiday homes or investment homes in Singapore.
Buying a Home. What do I need to pay for?
Be it buying a first home or an investment property, this big financial commitment should be planned carefully. Working out your financials is essential even before the home search begin. Check out your affordability on cash upfront, monthly mortgage instalments, conservancy charges, property taxes, stamp duties , income taxes (for investment properties).
A real estate professional, solicitor and mortgage specialist are key people you would need in a real estate transaction. Most of the time, your real estate professional can link you up with a reputable solicitor and an experienced mortgage specialist to ensure a smooth transaction.
Here is what you can expect from a good real estate professional:
• Understand your needs, purchase intention and range of budget
• Your lifestyle, preference type of housing, surrounding environment
• If a loan is required, introduce you to a mortgage specialist to get in principal approval for your loan quantum and loan tenure
• Within the given guideline, search for the best suited homes for your preview
• Present you with the market comparable prices of the selected homes for review
• Once you have selected your home, guide you in the negotiation process, checks on ownership, assist you to secure the best price
• Assist you in the transaction process, connecting you with the solicitor and banker
• If buying as an investment home, to be able to follow up with you to assist you in leasing out and managing your apartment, especially for foreign owners.
Guide on Securing a Property Loan
Subject to credit assessment, local first-home buyers can secure up to a maximum loan of 80%, Foreigners/PRs can possibly secure about 70% of the valuation price of the property. For your second property, you can secure up to 50% of the valuation price of the property.
The loan tenure largely depends on your age, subject to a maximum of 30 years or not exceeding 65 years of age. The bank will assess your Total Debt Servicing Ratio (TDSR), to ensure your monthly mortgage repayment does not exceed 60% of your monthly income.
Banks offer different packages based on Fixed Deposit Interest Rates, Floating Interest Rates, SIBOR rates etc. There are also other terms and conditions such as cancellation fees etc, which your mortgage specialists will highlight to you. Your real estate professional would be able to recommend you good qualified mortgage specialists to facilitate your purchase.
Buying a Resale Private Property – Transaction guide
Option Fee / Option to Purchase : From 1% to 10% - This Option Fee is basically a booking fee to the owner to confirm your interest to purchase the selected property. In exchange for your 1% cheque, the seller gives you the Option to Purchase, indicating key information such as buyers and sellers names, price agreed upon, sales completion date, solicitors representing both parties, and any other specific terms. The Law Society of Singapore’s Conditions of Sale 2012 is the governing guide for sales and purchase agreements relating to Singapore properties.
Option Exercise Fee/ To Exercise the Option to Purchase - Subject to mutual agreement, but generally within a period of two weeks, buyers will need to proceed to exercise the Option to Purchase if planning to go ahead with the purchase. Buyers will need to go to their solicitors’ office, have them explain the terms of purchase, witness the exercise of Option to Purchase, and pay for the Stamp Duties to have their documents stamped, via their solicitors. Your solicitor will also liaise with your bank for the activation and release of the bank loan to the Vendor.
Completion of Sale - Most resale transactions are completed within 8 to 12 weeks, dates subject to mutual parties agreement. Completion will take place at your appointed solicitors office, once the full amount is released to the Vendor’s solicitors through a cashiers’ order.
Buying a Property Under Construction
For properties under construction, a booking fee of 5% is paid upon selection of unit. Upon receipt of the Sales and Purchase Agreement from the developer, the purchaser will have to exercise it within three weeks, and pay 15% and the applicable relevant stamp duty. There will be a penalty should the purchaser back out of the deal.
As property under construction needs to follow the Building and Construction Authority (BCA) guideline for progressive payment, your solicitor will advise you the payments according to the stage of progress of the development. Your real estate professional will review with you on the progressive payment schedule so that you can prepare your funds accordingly should you intend to use cash to settle your purchase. Your solicitor will then keep you informed once the developer call for payment at the relevant stages of construction.