Since 1973, the Singapore Land Authority has imposed restrictions on foreign ownership of private residential property in Singapore, governed by the Residential Property Act, which seeks to strike a balance between giving Singaporeans a stake in the country while attracting foreign talent. Despite the restrictions, demand for property in the country has remained extremely high and the market is flooded with foreign buyers who are forcing property prices to reach record-breaking levels. Frustratingly for both expats and locals alike, the majority of these properties sit empty and are simply used as a means of investment for extremely rich overseas business people. In December 2011, the government took further drastic actions to try and subdue the property market and implemented measures that penalized people who bought more than one property in Singapore or who are not permanent residents in the country. These new rules have made it extremely hard for expatriates to afford the deposits needed to buy property.
However, foreigners are able to purchase properties as long as they meet certain criteria of the Residential Property Act. Foreigners with Permanent Resident status will find the purchasing and financing of homes in Singapore significantly easier that those with non-permanent status. Furthermore, there are restrictions on certain types of properties, which cannot be acquired without special permission.
Eligibility to Buy Private Residential Property
Under the Residential Property Act (RPA), foreigners are allowed to buy residential properties in accordance to the following stipulations by property type:
Non-Restricted Residential Properties:
Foreigners are not restricted from acquiring:
- Any apartment within a building
- Any unit in an approved condominium development under the Planning Act (Note: A foreign person is not allowed to acquire all the apartments within a building or all the units in an approved condominium development without the prior approval of the Minister for Law)
- A leasehold estate in restricted residential property for a term not exceeding 7 years, including any further term which may be granted by way of an option for renewal.
Restricted Residential Properties:
Foreigners cannot acquire or purchase restricted residential property without prior approval of the Minister for Law. Such property includes:
- Vacant residential land
- Landed property (detached house, semi-detached house, terrace house)
- Landed property in strata developments which are not approved condominium developments under the Planning Act
Note: If you are a foreigner and wish to purchase a restricted residential property, download the application form at https://www.sla.gov.sg/. Submit the form together with the relevant supporting documents to: Land Dealings (Approval) Unit No. 8 Shenton Way, #27-02 Temasek Tower, Singapore 068811.
Housing Development Board (HDB) properties are not under the purview of the Residential Property Act; thus, intended purchasers are advised to enquire directly with the HDB regarding their eligibility for:
- An HDB flat purchased directly from HDB
- A resale HDB flat
- An HDB Executive Condominium
Generally, non-citizens are not allowed to purchase HDB properties directly from the HDB and only permanent residents who meet the other age, income, and family criteria can purchase HDB flats and executive condos up for resale.
Resources: Singapore Land Authority (SLA), http://www.sla.gov.sg
Procedures for Purchase
It is absolutely essential to engage a property company or agent when negotiating a purchase. They will be able to help you sort out your eligibility, costs, documents and other time-consuming administrative and legal issues. Without an agent, all of these tasks would take extensive time, research and determination, with dealings complicated by the fact that you in unfamiliar territory. Most property companies share the same database for property listings, so it is best to engage just one agent. Engaging multiple agents only leads to confusion for everyone. Moreover, it is highly likely you will be shown the same properties repeatedly because of their shared databases.
The documentation required for purchase includes the following:
Option to Purchase : You have decided to purchase a property. Prepare 1% of the purchase price (as a consideration) in exchange for the Option to Purchase from the seller. Option to Purchase is usually prepared by the seller’s solicitor or property agent. You are usually given 14 days to decide whether to proceed with the purchase. If you decide to proceed, exercise the option by signing it in your solicitor’s office and forward it to the seller’s solicitor together with another 4% – 9% (as agreed between the seller and purchaser) of the purchase price within 14 days. If you fail to do so you will forfeit the 1% deposit that has already been paid. Once the option to purchase is complete, the owner is prohibited from selling the property to anyone else. Your lawyer will instruct the Singapore Land Authority to investigate the owner’s right to sell the property and, once this has been confirmed, the details of the mortgage will be finalized.
Offer to Purchase : Alternatively, you can ask your realtor to prepare the Offer to Purchase, which is a detailed plan for buying the property, and an Attention to the Seller, which is a summary of the plan, clearly stating the price, sales completion date and others. Terms and conditions can be drafted by your solicitor or your realtor.
Completion of Sale : From then on, leave it to your solicitor for the completion of the sale, which will take around 8 to 10 weeks. Your solicitor will lodge a caveat on the property, coordinate with financial institutions and the CPF board (if applicable), and prepare the mortgage documents.
For HDB flats, there is also an option period of 14 days for the buyer to consider the intended purchase, verify eligibility, and evaluate financing and other issues. If the buyer does not wish to buy the resale flat, he can let the option expire and loses only the option fee. To ensure a standardized practice, HDB has the following guidelines for the Option Fee, Deposit and Option Period:
- Option Fee – An amount not exceeding $1,000
- Deposit – An amount not exceeding $5,000 (including the Option Fee)
- Option Period – 14 calendar days
The buyer can request and state clearly in the Option to Purchase for permission to inspect the property before the completion of the sale. Check the fixtures, fittings, and other items the seller had agreed to include with the property. For HDB flats, HDB will do the inspection on your behalf. They will check for unauthorized renovations, as the seller must reinstate the flat into the condition allowed before HDB will approve the sale.
For private properties, the agent’s commission is paid solely by the seller, which varies from 1% to 2% of the selling price. For HDB properties, the seller will pay around 1% to 2% of the selling price, whereas the buyer will usually pay around 1%.
Stamp Duty
Stamp Fees are payable to Inland Revenue Authority of Singapore within 14 days upon exercising the Option to Purchase or signing the Sales and Purchase Agreement when you buy from a property developer. The current stamp duty rates are as follows and are based on the purchase price or market value, whichever is higher
| Profile of buyer | BSD rates | ABSD rates (old)^ from 8 Dec 2011 to 11 Jan 2013 | ABSD rates (new)^ from 12 Jan 2013 | |
|---|---|---|---|---|
|
Foreigner and entity buying any residential property |
Every $100 or part thereof of the first $180,000 Every $100 or part thereof of the next $180,000 Thereafter, every $100 or part thereof |
$1.00
$2.00 $3.00 |
10% |
15% |
|
Singapore PR buying first residential property |
Nil |
5% |
||
|
Singapore PR buying second and subsequent residential property |
3% |
10% |
||
|
Singapore Citizen buying first residential property |
Nil |
Nil |
||
|
Singapore Citizen buying second residential property |
Nil |
7% |
||
|
Singapore Citizen buying third and subsequent residential property |
3% |
10% |
||
^ ABSD payable to be rounded down to the nearest dollar.
Financing for Buying
Housing loan packages in Singapore can be broadly defined into two categories: fixed rates or floating (variable) rates. Fixed rates packages in Singapore are normally offered for up to 3 years. There are a few lenders that extend up to 5 years or even 10 years. This is, however, quite different from many Western countries where rates can be fixed throughout the loan’s tenure.
Floating rates in Singapore can be further classified into published rates or board rates. Published rates, such as the Singapore Interbank Offered Rate (SIBOR) or Singapore Swap Offer Rate (SOR), are basically rates that are published daily based on supply and demand for funds in the Singapore interbank market. Board rates differ, as they are determined by the individual bank or financial institution.
Generally, there are no restrictions on expatriates taking up housing loans in Singapore, though loans are approved far less to non-permanent residents than for PRs. Do take note of the following:
Loan to Value : The maximum loan to value (LTV) in Singapore is 90% of the purchase price or valuation, whichever is lower. Housing loan packages for 90% financing are limited, as some lenders do not offer maximum LTV to expatriates. Loan approval for 90% financing is also stricter than for LTV 80% and below. For a foreigner, major banks or financial institutions in Singapore can only loan up to 70% or 80% of the valuation or sale price (whichever is lower). Ability to obtain a loan or amount of loan also depends on one’s credit status and income proof.
Income Proof : Your latest income tax assessment or a letter of appointment from your local employer is required to get approval for a housing loan application. Tax assessments from some countries may not be accepted by local mortgage lenders.
For a complete list of documents required for a housing loan application, please refer to https://www.finko.com.sg/. Eligibility stipulations for private property housing loans include:
- Applicant(s) should have a minimum income of S$24,000 per annum or a combined income of S$36,000 per annum (Bonuses, commission, overtime and other income sources can be taken into consideration at the banks’ or financial institutions’ discretion)
- Most lenders have a minimum age requirement of 21 and maximum of 65
Costs Involved
- Stamp Duty :See above.
- Deposit: A deposit of at least 20% of the value of the property will be required to secure a mortgage.
- Legal Fees : Legal fees usually cost between S$1750 to S$5000, depending on factors such as property type and choice of lawyer. Where applicable, the Central Provident Fund (CPS) can be used to pay the legal fees, which are billed upon completion of your mortgage and/or purchase.
- Cash Outlay Due To Difference Between Purchase and Valuation Price : If the bank’s or financer’s valuation is lower than your purchase price, you will have to pay the difference in cash before any loan can be disbursed.
- Fire Insurance : All lenders require you to insure your property against fire. The value is determined by an appraiser, and the premium is paid annually. At present, all banks and most financial institutions’ packages come with free fire insurance for 1-5 years.
- Lawyer’s Fees : A solicitor is needed for the following purposes, and fees will vary: Purchase and financing of property (acting on your behalf), housing loan application (acting on behalf of the bank or financial institution if you are taking a loan), withdrawal of funds from the CPF Board (when applicable)
You will need to pay the legal fees charged by the lender’s lawyer as well as the CPF Board lawyer. There is no need to appoint three different lawyers. Generally, home purchasers appoint lawyers who can act for the CPF Board as well as the particular bank or financial institution from which they are seeking financing.
Required Documentation for Home Loans
- Latest pay slip
- Latest income tax assessment or CPF contribution history (minimum past 2 years for self-employed)
- Letter of appointment (customers without payslip or on overseas posting)
- Option to Purchase (applicable to new purchase)
- Sale & Purchase Agreement of existing property (if applying for a bridging loan)
- CPF Statement of Account (if using CPF Funds)
- Statement of CPF withdrawn under Residential Properties Scheme (RPS) (if upgrading from private property)
- Statement of CPF withdrawn under Public Housing Scheme (PHS) (if upgrading from HDB)
- Past 6 months housing loan statements from mortgage lender (if refinancing)
- Past 6 months personal account bank statements (not mandatory)
- Photocopy of N.R.I.C (front and back) or Passport (foreigners)
- Valuation report (applicable for HDB resale)
- Home loan application
Home loans are most often sought from Singapore’s major banks including the following:
- DBS, http://www.dbs.com.sg
- HSBC, http://www.hsbc.com.sg
- OCBC, http://www.ocbc.com.sg
- Maybank, http://www.maybank.com.sg
Home loans for private properties are typically made on average conditions as follows:
- Fixed Rate Mortgage Averages: 1-yr tenure, 1.61%; 2-yr tenure, 2.72%, 3-yr tenure, 3.75%
- Flexible Rate Mortgage Averages: 1-yr, 1.59%, 2-yr tenure, 2.38%, 3-yr tenure, 3.4%
- Loan To Value Ratio: 80%
- Max Tenure of Loan: 30-35 Years
Buying to Rent
Expatriates are allowed to purchase property that they intend to rent to a third party. Rental income is subject to the same taxes as employment income.
