Singapore is definitely one of the most attractive destinations for real estate investments for foreigners. Do you know that the real estate investment activity nearly doubled in merely the first half of 2021?
Indeed, it’s not really surprising that so many foreigners are now interested in buying a property in Singapore.
However, it is not going to be easy. The thing is, Singapore has implemented some rules and restrictions on the properties foreigners can buy. So, if you do not want to go through any unnecessary hassles or complications, it is best that you find out more about these rules.
Keep in mind that there are rules and restrictions even for foreigners who have become Singapore Permanent Residents (PR). So as lucrative as real estate investment is in Singapore, it can also be complicated as it involves quite a lot of steps. Yes, foreigners can own properties in the country as per the Residential Property Act, but it is not that simple. So, let’s find out more about what foreigners should know if they intend to buy a property in Singapore.
Basically, being a foreigner in Singapore, you can either be a non-Singapore PR or a Singapore PR. Being a non-Singapore PR, it is inevitable that you have the least advantage when come to buying property as compared to being a Singapore PR.
Let’s take a deeper dive into buying property in the public housing market and private property market as a foreigner.
What You Should Know About Buying Property in The Public Housing Market as A Foreigner
The public housing market is managed by the Housing and Development Board (HDB). There are categorized restrictions in place to buy properties within this market. A few factors have to be considered to determine the eligibility criteria.
- Are you buying as a Singapore PR or as a foreigner?
- Are you buying alone?
- Are you jointly buying with someone else?
It makes a significant difference in what you can buy in the public housing market based on the above criteria.
If You Want to Buy a Property Alone
- As a Foreigner
Being a foreigner looking to buy property alone in Singapore you are not allowed to purchase resale HDB flats. You are only allowed to buy executive condominium which is more than ten years old and are privatized. Executive condo is developed by private developers yet restricted by HDB rules during the first five years after key collection and gets privatized from the eleventh year onwards where it will be treated like a private condo.
- As a Singapore PR
Even Singapore PRs who intend to buy real estate alone cannot purchase HDB flats, either direct from HDB or from the resale market. But they are allowed to buy resale EC after it has reached its minimum occupation period (MOP) of five years under a single name.
If You Are Jointly Buying Property with Another Individual
You will find restrictions somewhat relaxed in this case. And that is because the rules are not as stringent for couples or families who want to purchase property in Singapore.
1. Both individuals are foreigners
- Executive Condo: You can only buy executive condos which have been privatized and are more than ten years old.
- Resale HDB: You are not allowed to buy or resale HDB.
2. One individual is Singapore PR while the other is a foreigner
- Executive Condo: You are allowed to buy an executive condo once it has reached its MOP of five years or privatized one which is more than ten years old.
- Resale HDB: You are not allowed to buy resale HDB
3. Both individuals are Singapore PR
- Executive Condo: You are allowed to buy a resale executive condo once it has reached its MOP of five years or privatized one which is at least ten years old.
- Resales HDB: You must make sure that you have held your PR status for at least three years before you are allowed to buy resale HDB in the resale market.
4. One individual is Singapore PR while the other is a Singapore Citizen
- Executive Condo: You are allowed to buy a new executive condo from the developer. Similarly, you can choose to buy a resale one once they hit MOP or are privatized.
- Resale HDB: You can buy resale HDB from the resale market
- Build to Order HDB: You are allowed to buy new HDB directly from HDB.
5. One individual is a foreigner while the other is a Singapore Citizen
- Executive Condo: You are allowed to buy a resale executive condo once it reaches its MOP of five years provided that your spouse is not included as part of the ownership. If you choose to include your non-Singapore PR in the ownership, you can only look for a privatized executive condo.
- Resale HDB: You can buy resale HDB
- Build to Order HDB: You are only allowed to buy 2 Flexi flat types directly from HDB.
What Should Foreigners Know About Buying Property in The Private Housing Market?
Here is some respite for foreigners interested in real estate in Singapore. Irrespective of your residential status, you will find that the restrictions relating to the purchase of private housing are much more relaxed.
Most foreigners will prefer to buy private condominiums because it is much more straightforward than buying a landed property.
Of course, you still have the option to purchase landed property in Singapore. But remember, you will still have to abide by certain restrictions placed by the government. This holds true for properties even in Sentosa Cove.
For the purchase of landed property, you will need approval from our Singapore Land Authority, specifically the Land Dealings Approval Unit. The department evaluates each application on a case-to-case basis, taking into account various factors. Here are some of them.
- The applicant should have a Singaporean PR status for at least five years
- The applicant should have contributed significantly to the economy of Singapore. Your employment income tax is also considered in this.
Even if your application is accepted, you will have to face some restrictions. For instance, foreigners are not allowed to own residential properties exceeding 15000 sq. ft. Additionally, the property shouldn’t be within a good-class bungalow area.
If you want to apply for properties beyond these limitations, you will have to meet more strict qualifying criteria.
How Much Would It Cost a Foreigner to Purchase Property in Singapore?
Before you think of buying a property in Singapore, you will have to plan your budget. And while doing so, you must keep in mind that it is not only the cost of the property that you will have to bear. There are some additional expenses too. Here are some of them.
Buyer’s Stamp Duty (BSD)
These is among the first few expenses you will have to bear if you want to acquire a property in Singapore. The good thing is that this tax is relatively low in Singapore compared to other countries.
- For property that is less than S$ 1M: 3% x purchase price – $5,400
- For property that is above S$1M & less than $1.5M: 4% x purchase price – $15,400
- For property that is above S$1.5M & less than $3M: 5% x purchase price – $30,400
- For property that is $3M and above: 6% x purchase price – $60,400
Below is a simple illustration of how much BSD you are paying for:
| Calculation of Buyer’s Stamp Duty | ||
| Property Value | BSD % | Amount (Based on a formula) |
| S$999,999 | 3% | S$999,999 x 3% – S$5,400 = S$24,600 |
| S$1,300,000 | 4% | S$1,300,000 x 4% – S$15,400 = S$36,600 |
Additional Buyer’s Stamp Duty (ABSD)
This tax is introduced by the government in 2011. It is based on the rising demand in the real estate market in the country. The rate of additional buyer’s stamp duty varies between Singaporean citizens, non-Singaporean PRs, and Singaporean PRs.
For non-Singapore PRs buying property in Singapore
A foreigner will have to pay 30% ABSD from the first property that he acquires. This is in addition to the BSD that he will need to pay as well.
Note that ABSD is not applicable to residents of the US, Norway, Switzerland, Iceland, and Liechtenstein.
As for a Singapore PR, he will have to pay a 5% ABSD on his first property. The rate increases to 15% on the purchase of the second property. And from the third property onwards, the duty rate is 30%.
How Can Foreigners Apply for Mortgages to Buy Property in Singapore?
Naturally, very few people have the total amount to buy a property. Fortunately, foreigners are able to apply for mortgages or bank loans to buy property in Singapore. But expectedly, they will have to adhere to some regulations.
For starters, foreigners must consider the loan to value limits before taking a mortgage loan. The loan-to-value ratio basically ensures that there is a joint capital contribution between the lenders and the banks towards the property. This reduces the risk for lenders and also makes sure that investors don’t have a reason to be apprehensive about their investment.
|
Loan to Value (LTV) |
|||
| 1st Home Loan | 2nd Home Loan | 3rd Home | |
| Individual Borrower | 75% | 45% | 35% |
The table above applies mainly to Singapore citizens and Singapore PR. For foreigners, the % may changes because the bank will require other forms of supporting document to substantiate the loan amount applied due to the absence of local income earned.
Other Expenses
Some other costs you must consider before buying a property include the charges to hire a real estate lawyer. This can cost you an average of $2,500 to $3,000.
The Steps Foreigners Must Go Through to Buy a Property in Singapore
By now, you have a good idea of the numerous restrictions foreigners have to face if they want to buy a property in Singapore. So how should you go about the whole process? Knowing the drill beforehand can save you from a lot of trouble. Here is how you should proceed if you are interested in buying a condo in Singapore.
Evaluate Your Affordability
This is the most obvious first step. After all, you have your budget to consider. So, before you start looking at properties to buy, evaluate your finances to figure out how much you can put in for the purchase.
Seller’s Stamp Duty (SSD)
Keep in mind that there is a 4% to 12% SSD payable who sell their property within three years of purchase by the Inland Revenue Authority of Singapore. The amount to calculate is based on the selling price or current market value. While determining your budget, also think about how long you are likely to hold onto the property.
| Seller’s Stamp Duty | |
| Within the 1st year of purchase | 12% |
| Within the 2nd year of purchase | 8% |
| Within the 3rd year of purchase | 4% |
| More than 3 years | No seller’s stamp duty payable |
Get Ready for All the Stamp Duties
We have already discussed the stamp duties you will have to buy to purchase your property. So, make sure that you have made arrangements for this.
Apply For a Bank Loan
You can approach any bank in Singapore for a home loan. For instance, UOB, OCBC, DBS, Citibank, CIMB, Standchart, and Maybank. However, the final amount of the loan that will be approved will depend largely on the bank’s lending requirements and the financial proof that you are able to provide as well.
Decide Whether You Need an Agent
So now all your finances are in order. It’s time to start looking at properties. But before you do so, you have an important decision to make. Should you get a real estate agent to make this purchase, or will you be able to handle it all on your own?
No agent’s commission is payable when you engage a real estate agent to help you source for property as the agent representing the seller will share his commission with your agent.
The advantage of engaging a professional real estate agent is that he/she is familiar with the local property market. They are in a good position to provide you with relevant advice based on your needs and wants.
If you don’t want to hire an agent, you should start looking at local property portals. You will find a list of available properties for sale here with details like price, location, and amenities mentioned so you can decide what suits your interest.
If you decide to hire an agent, you can go to the Council of Estate Agents (CEA) website, where you will find a list of all the licensed real estate agencies and agents. Remember, before you proceed to work with anyone, you must ensure that their license is valid. The information is updated on the website daily, so this part shouldn’t be too difficult.
Hire A Local Property Lawyer
While it is possible to complete your purchase without a real estate agent, the same cannot be said about a real estate lawyer. If you don’t want to get in any legal trouble, hiring a qualified lawyer should be your priority. Remember that this lawyer should be from your bank’s panel list.
The lawyer will need to conduct a diligent check on the seller and make sure that everything is done as per the protocol and that there are no lapses at any step.
Time To Secure the Property
Get your bank’s In-Principle Approval. This is their commitment that they will provide you with the home loan needed to purchase the property. This approval will tell you how much money the bank is willing to provide you with.
Once you are confident that you have adequate funds for the purchase of the property, you can sign the OTP. Keep in mind that if you sign the OTP without waiting for IPA, you might find yourself in a lurch at the last minute. There is a chance that the bank will not give you the required amount, and you will not be able to meet payments for the property. This will lead to you losing your option money.
The option money is around 1% to 5% of the property price, depending on whether you are buying a resale private property or a brand-new condominium.
For resale private property (including resale executive condos), the option money given to the seller is 1% in exchange for the Option to Purchase. The option exercise period given is usually 14 days.
In other words, you have up to 14 days to consider whether you have to go ahead to purchase this property. If you do, you will pay another 4% at your law firm and exercise your OTP. At this stage, you are deemed to enter into a legally binding agreement with the seller on the purchase of this property.
However, if you choose not to exercise your OTP and let it expires, your 1% will be forfeited by the seller and the deal will be called off.
Subsequently, it will take about eight to twelve weeks for legal completion. In between, you will be asked to make payments like BSD, ABSD, etc.
For a new condo, a 5% deposit is given to the developer. You will then receive a Sale and Purchase Agreement within two weeks. You have up to three weeks to exercise this Sale and Purchase Agreement at the law firm. Legal completion for such a purchase will take longer, depending on the estimated completion date set by the developer.
At completion, keys will be collected and you are the legal owner of a property in Singapore, just like you wanted.
Should Foreigners Buy a Property in Singapore?
There’s no denying that the rules regarding property purchases in Singapore are pretty stringent. However, it is precisely these rules that have played a significant role in the success of the housing market. There is a reason that foreigners consider Singapore an ideal place for real estate investment.
Make sure that you know exactly what you are signing up for when you decide to buy a property in Singapore. If you prepare for everything beforehand, you wouldn’t really find it much of a hassle.
