Because Singapore has a dense population on a small island, the government has taken measures to reduce the number of foreigners able to buy ‘landed’ property there, and to curb property speculation. The Residential Property Act states that anyone who is not a Singapore citizen, company, limited liability partnership or Society must obtain government approval in order to buy residential property in Singapore, and approval will be restricted to those who make adequate economic or social contribution to Singapore.This approval must be obtained for:
• Vacant residential land;
• Terraced houses;
• Semi-detached houses;
• Bungalow/detached houses;
• Strata landed houses which are not within an approved condominium development under the Planning Act (eg. townhouse or cluster house);
• Shophouses (for non-commercial use);
• Association premises;
• Places of worship; and
• Worker’s dormitories/service apartments/boarding houses (not registered under the provisions of the Hotels Act).
However, there are a number of purchases that foreigners may make without seeking approval:
• Condominium units
• Flat units;
• Strata landed houses in approved condominium developments;
• Leasehold estates in landed residential properties for a term not exceeding 7 years, including any further term which may be granted by way of an option for renewal;
• Shophouses (for commercial use);
• Industrial and commercial properties;
• Hotels (registered under the provisions of the Hotels Act); and
• Executive condominium units, HDB flats and HDB shophouses.
Property in Singapore is expensive. Commercial properties start at S$300,000, and small apartments in suburban areas will cost roughly S$500,000. A studio flat will start at almost S$300,000.
The Housing & Development Board (HDB) offer housing loans at a concessionary rate, and the downpayment can be as low as 10%, either as cash or as a bank loan. However, eligibility for the HDB loans are strict, with the first criteria being that at least one of the buyers is a Singaporean citizen. After that, income ceiling limits apply and the applicant’s history of property ownership is examined. Priority is given to first-time buyers.
Buying property with a bank loan rather than an HDB loan requires a downpayment of at least 20% of the purchase price; at least 5% must be cash. This amount will depend on how much the bank is willing to lend.
The amount you can borrow is assessed under the Total Debt Servicing Ratio. All debt obligations, including loans for mortgage, education, cars and credit cards, must not exceed 60% of your monthly income. This means the mortgage lender cannot by law lend you an amount which would take you over the limit; they will advise you of the limit after reviewing your financial circumstances in detail.
For those able to gain approval for purchasing a residential property, be approved for a mortgage, find the downpayment, cover the option fees, stamp duty, legal costs and housing agent fees, there are three main types of mortgage available.
Whether to take a fixed rate mortgage, SIBOR-linked floating rates mortgage (SIngapore Interbank Offered Rate) or fixed deposit-linked floating rates with DBS Bank or OCBC Bank will depend on the buyer’s circumstances, for which they should seek financial advice.
Singapore has defined ‘Estate Agents’ under the Estate Agents Act as estate agency businesses (sole proprietors, partnerships and companies) and ‘salesperson’ as the individuals who perform estate agency work. The Council for Estate Agents (CEA) grants licenses to estate agent firms, and registers the salespersons; they maintain a Public Register of those who have been accepted, which is mandatory for anyone running an Estate Agency or working as a salesperson in the industry. The Public Register identifies companies and individuals who have either been disciplined by the CEA or won awards from them. Anyone considering the purchase of a property should check the CEA Public Register before contacting Estate Agents, by checking online.
If you are buying a private residential property, you do not pay the Estate Agent. They will receive some of the commission paid by the seller to their own Estate Agent.
A valuation of the property will be required by the bank offering a mortgage, and it will cost the property purchaser about S$350-S$500 to have this valuation undertaken.
Many banks will refer the property purchaser to their panel of lawyers; the legal work will cost about S$3,000-S$4,000. There are a small number of legal firms who are on the panels of several banks, so if a property purchaser has to change banks during the process, they do not also have to change lawyers and begin the expensive legal process completely from the start again. Alternatively, seek independent firms of your own choice.
The Ministry of Law monitors access to training places for the legal profession. A number of UK law degrees have recently been dropped as acceptable qualifications for entry to the Singapore Bar, as a response to oversupply. The Ministry of Law has a Legal Services Regulatory Authority which all lawyers should be registered with.
The lawyers will check the Property Title and Tenure, any encumbrances, name of the registered proprietor and the manner of ownership holding. The lawyers of both buyer and seller will negotiate the Option to Purchase Contract, and the Sale and Purchase Agreement. When the option is signed by the parties, the Option Fee, usually 1% of the agreed purchase price, will be paid. If the buyer decides to pull out after this stage, they will lose their money.
When the property is declared in good physical shape and the finances have been arranged, the buyer will pay the Option Exercise Fee of 5%-10% of the agreed purchase price, less the Option Fee already paid.
When the Sale and Purchase Agreement is signed, the lawyer will normally lodge a caveat on the property with the Singapore Land Authority. It alerts third parties to the sale, and prevents any further legal transactions happening on that property, so although a caveat is not compulsory it should be created. The rest of the downpayment is made and placed in a Conveyancing Account.
A Singapore Citizen who is buying their first residential property pays 1% Buyer’s Stamp Duty (BSD) on the first S$180,000, 2% on the next S$180,000, and 3% on the remainder. If they are buying a second property, then they pay the BSD plus the ABSD at 7%. If they buy a third or subsequent property, they pay BSD plus ABSD at 10%.
Singapore’s Permanent Residents (PR) pay 1% Buyer’s Stamp Duty (BSD) on the first S£180,000, 2% on the next S$180,000, and 3% on the remainder. They also pay ABSD at 5% for their first residential property and at 10% for their second or subsequent residential property.
Foreigners and ‘entities’ pay 1% Buyer’s Stamp Duty (BSD) on the first S£180,000, 2% on the next S$180,000, and 3% on the remainder. They also pay ABSD at 15% for any residential property, even if it is for their first and primary residence.
An entity means a person who is not acting in a legal capacity as an individual, and includes the following:
• An unincorporated association
• A trustee for a collective investment scheme when acting in that capacity
• A trustee-manager for a business trust when acting in that capacity
• The partners of the partnership whether or not any of them is an individual, where the property conveyed, transferred or assigned is to be held as partnership property
If the purchaser has applied for PR or citizenship, the lower rates of ABSD will only apply if their new residency status was approved in writing before the purchase was made. If a purchase is being made by more than one individual who have different residency status between them, the ABSD will be charged in total at the highest rate applicable to any of the individuals concerned.
If a residential property is being purchased on behalf of a beneficiary, then it is the residency status of that beneficiary, and not the person organising the purchase, which is used to determine the ABSD rate.
If you are buying a property with a mortgage, you will also pay a further Stamp Duty of 0.4%, capped at S$500.
The seller gives vacant possession of the property. The purchaser should thoroughly check the empty property and alert their lawyer immediately if they discover defects. If everything is in order, the buyer receives a certificate of title, a transfer form and keys to the property.