Looking to Settle Down in Singapore? Check out this Property-Buying Guide



If you intend to settle down in Singapore, you may have a preference towards purchasing a home rather than renting one. However, as you shop around for Singapore real estate on Property Guru, you do need to keep a couple of things in mind. The expatriate guide to owning property in Singapore below provides you with a basic overview of the purchase process, taxes, costs and more.

Understanding the Legal Framework

 As an expatriate, the first thing you should check is your eligibility to purchase property you are interested in. Bear in mind that there might be a few restrictions on properties a foreigner can purchase. According to the 1973 Residential Property Act, that regulates foreign land and housing ownership, the following property types are classified as restricted:

 

  • Vacant land for residential use
  • Housing developments not classified as approved condominiums officially
  • Landed property

 

Before you start purchasing Singapore property, you also need to have permission from the Land Dealings Approval Unit. Foreigners can purchase apartments or condominiums in smaller building units as well as leasehold properties under specific conditions. Public housing, however, is subject to restrictions. If you intend to purchase an HDB flat, you have to get in touch with the Housing Development Board.

singapore-989047_1920

What About Financing?

 If you are looking to finance your purchase, you have the option of borrowing up to 80 percent of the property price – or estimated value, depending on which is lower – from the local banks. For already property owners in Singapore, the amount drops to 60 percent. Several banks have loan packages for foreigners keen on making Singapore their new home. Speak to a financial consultant about your intention and personal situation to learn more about Singapore mortgage conditions.

Also consult with the professional if you are considering purchasing property as a capital investment. If you are looking to resell or rent out your new apartment for a profit, take into account the market situation.

First, the current rental yields in Singapore are low – at about three percent – compared to other Asian countries. The second consideration is that the government of Singapore is currently introducing a number of measures meant to curb real estate sector prices. Indeed, property buying prices are rising slowly, but further developments are yet to be realized.

Remember, this is a complex field; it depends very much on your finances and investment goals. Talk to a financial advisor in Singapore about purchasing property before you commit to anything.

Buying Property in Singapore – The Steps

 Once you find an apartment on Property Guru that you are interested in, the steps to owning that property are as follows:

 

  1. Contact estate agent or seller to register your interest and negotiate the price
  2. Have a lawyer draw up the “Option to Purchase,” and one percent of the price offers you the exclusive right to buy the property for two weeks
  3. The “Option to Purchase” document also indicates a second deadline for paying 10 percent of the asking price, and indicates that you are serious about purchasing the property. Normally, the sum is forwarded with the signed option.
  4. Have your lawyer prepare property transfer documents. Upon the advice of your legal representation, pay the balance to complete the entire sale.

The Costs of Purchasing Property

 Buying property in Singapore will obviously entail a few costs. They include:

VAT of 18 percent charged on properties built within a year

  • Three percent of property value as stamp-duty for first purchase
  • Legal fees of around 0.3 percent of property price for your property lawyer
  • Real estate agent fee of one percent
  • Official ownership transfer registration fees

Tax on Your New Property

 Apart from maintenance costs, you should budget for taxes on your Singapore property. Property tax is multiplying the property’s annual value multiplied by tax rate.

The property annual value is an estimate of annual rent you would be earning from the property. The figure is adjusted annually to reflect market conditions at the time. It does not matter whether you do let the property or if the actual rent differs from assumed value. The tax rate is dependent on amount of the annual value. In owner-occupied apartments, tax rate is lower at about four to six percent.

Rental Income Taxation

 Lastly, if you are going to earn income from a Singapore rental property, you have to declare your income tax return. Find rental income in the taxation form under the “Other income: rent from property” section.

Taxable rent income is deductible costs from annual rent. Other rental income deductibles in Singapore are:

 

  • Home loans interest paid
  • Property taxes
  • Fire insurance
  • Fittings, replacement furniture, repairs and maintenance costs
  • If not under the tenant, utility bills

 

While local residents pay an income tax of zero to 20 percent, non-residents are taxed a flat 20 percent rate. However, fiscal residency status is applied to permanent residents, including foreigners who have been in Singapore for 183 days of a tax year.

If you intend to settle down in Singapore, you may have a preference towards purchasing a home rather than renting one. However, as you shop around for Singapore real estate on Property Guru, you do need to keep a couple of things in mind. The expatriate guide to owning property in Singapore below provides you with a basic overview of the purchase process, taxes, costs and more.

Understanding the Legal Framework

As an expatriate, the first thing you should check is your eligibility to purchase property you are interested in. Bear in mind that there might be a few restrictions on properties a foreigner can purchase. According to the 1973 Residential Property Act, that regulates foreign land and housing ownership, the following property types are classified as restricted:

• Vacant land for residential use
• Housing developments not classified as approved condominiums officially
• Landed property

Before you start purchasing Singapore property, you also need to have permission from the Land Dealings Approval Unit. Foreigners can purchase apartments or condominiums in smaller building units as well as leasehold properties under specific conditions. Public housing, however, is subject to restrictions. If you intend to purchase an HDB flat, you have to get in touch with the Housing Development Board.

What About Financing?

If you are looking to finance your purchase, you have the option of borrowing up to 80 percent of the property price – or estimated value, depending on which is lower – from the local banks. For already property owners in Singapore, the amount drops to 60 percent. Several banks have loan packages for foreigners keen on making Singapore their new home. Speak to a financial consultant about your intention and personal situation to learn more about Singapore mortgage conditions.

Also consult with the professional if you are considering purchasing property as a capital investment. If you are looking to resell or rent out your new apartment for a profit, take into account the market situation.

First, the current rental yields in Singapore are low – at about three percent – compared to other Asian countries. The second consideration is that the government of Singapore is currently introducing a number of measures meant to curb real estate sector prices. Indeed, property buying prices are rising slowly, but further developments are yet to be realized.

Remember, this is a complex field; it depends very much on your finances and investment goals. Talk to a financial advisor in Singapore about purchasing property before you commit to anything.

Buying Property in Singapore – The Steps

Once you find an apartment on Property Guru that you are interested in, the steps to owning that property are as follows:

1. Contact estate agent or seller to register your interest and negotiate the price
2. Have a lawyer draw up the “Option to Purchase,” and one percent of the price offers you the exclusive right to buy the property for two weeks
3. The “Option to Purchase” document also indicates a second deadline for paying 10 percent of the asking price, and indicates that you are serious about purchasing the property. Normally, the sum is forwarded with the signed option.
4. Have your lawyer prepare property transfer documents. Upon the advice of your legal representation, pay the balance to complete the entire sale.

The Costs of Purchasing Property

Buying property in Singapore will obviously entail a few costs. They include:

• VAT of 18 percent charged on properties built within a year
• Three percent of property value as stamp-duty for first purchase
• Legal fees of around 0.3 percent of property price for your property lawyer
• Real estate agent fee of one percent
• Official ownership transfer registration fees

Tax on Your New Property

Apart from maintenance costs, you should budget for taxes on your Singapore property. Property tax is multiplying the property’s annual value multiplied by tax rate.

The property annual value is an estimate of annual rent you would be earning from the property. The figure is adjusted annually to reflect market conditions at the time. It does not matter whether you do let the property or if the actual rent differs from assumed value. The tax rate is dependent on amount of the annual value. In owner-occupied apartments, tax rate is lower at about four to six percent.

Rental Income Taxation

Lastly, if you are going to earn income from a Singapore rental property, you have to declare your income tax return. Find rental income in the taxation form under the “Other income: rent from property” section.

Taxable rent income is deductible costs from annual rent. Other rental income deductibles in Singapore are:

• Home loans interest paid
• Property taxes
• Fire insurance
• Fittings, replacement furniture, repairs and maintenance costs
• If not under the tenant, utility bills

While local residents pay an income tax of zero to 20 percent, non-residents are taxed a flat 20 percent rate. However, fiscal residency status is applied to permanent residents, including foreigners who have been in Singapore for 183 days of a tax year.