The Property Banks Buyers Guide to Singapore
The process for buying property in
Singapore for expatriates, foreign residents living in Singapore and
overseas investors is slightly convoluted and confusing as many
exceptions, exemptions and requirements exist.
This is a general guide about how to buy property in Singapore and
details the main specifics of the process. However a potential
purchaser should seek personalized legal advice before entering the
market to ensure that they are aware of any restrictions or
permission requirements that they will have to be aware of or fulfil
in order to buy property in Singapore.
Overseas buyers are generally freely permitted to purchase an
apartment in a building which has at least six stories, a housing
unit in an ‘approved condominium development’ or alternatively a
leasehold property a building which has at least six stories. All
other properties may be available for sale to an investor but they
have to seek the permission of the Singapore Land Authority before
proceeding to purchase.
In many emerging property markets investors have to seek legal
permission to purchase from the local government and this process is
simply par for the course and never a real hindrance to the buyer;
in Singapore the situation is very different. Many properties are
deemed ‘restricted’ and are unavailable for sale to a foreign buyer,
therefore anyone looking at properties for sale in Singapore needs
to be aware of this fact and have a good property specialist lawyer
on board from the start to quickly assess whether any real estate an
investor sets their sights on is legally for sale to them.
Interest rates in Singapore are currently relatively low which is
helping to attract more buyers to the property market. Home
financing can be quite affordable and if an investor decides they
want a mortgage to buy their investment property in Singapore they
should have this agreed in principal before making any offer to buy
otherwise the sale could fall through and the potential buyer could
lose up to a 10% deposit. Restrictions exist especially where an
investor is hoping to buy an investment property with a Ltd lease –
generally the shorter the lease period the higher the interest rate
applied to any loan and the more difficult it will be to obtain
financing. Anyone who requires a mortgage to purchase must keep this
in mind.
With any mortgage required having been pre-approved and with a real
estate lawyer standing by, an investor should begin their search for
suitable properties in Singapore to match their investment
objectives. Local estate agents are used to dealing with foreign
buyers and are generally very well versed in the complexities of the
property buying process in Singapore so should be well able to
assist an investor locate suitable properties for sale.
As soon real estate has been located that an investor believes will
meet his requirements he can secure an ‘Option to Purchase’ the
property by paying a non-refundable 1% of the purchase price to
effectively take the property off the market and allow the
investor’s solicitor to have time to check out whether all is in
order with the property and whether the investor will require
permission to buy it.
The ‘Option to Purchase’ is valid for a 14 day period after which
time a buyer either forfeits his 1% and the property goes back on
the market or the buyer pays a further 9% of the purchase price to
make up a 10% deposit. At this stage the property buying process
moves forward and a preliminary contract is signed by the vendor and
buyer.
Any further surveys, searches and permission seeking will take place
before the final contract is signed and the property is exchanged.
There is usually a 1% fee payable by the buyer to the estate agent
in Singapore and the property investor also has to pay stamp duty
which amounts to a further 3%. Lawyer’s fees and any charges
attributed to acquiring permission to buy property in Singapore or
securing a mortgage are extra.
It’s worth pointing out that short term property speculation is not
really an option for a property investor in Singapore because if
they resell their real estate within one year of purchase they will
become liable for 100% capital gains tax. This drops by 33% a year
for the next two years therefore anyone who wishes to profit from
equity accrual needs to wait at least three years before reselling
their property assets.