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Property Buyer's Guide Singapore:

How to buy an apartment or house as an expatriate , foreigner or permanent resident in Singapore

Introduction: Buying versus Renting

Many expatriates decide to make Singapore their permanent home rather than leaving for good after their assignment or returning for retirement back home. The advantages of applying for the Singapore equivalent of the US Green Card - Permanent Residency -are mainly relating to taxes or the Singapore Central Provident fund.

Note: as a PR (permanent resident) you are entitled to use your CPF savings for financing a home.

But even if you are not a PR you are entitled to buy non-landed property as Singapore is a very liberal market compared to other countries in the region. Non-landed refers to properties such as apartments and condominiums.

Above all, you basically need to consider the options available relative to your financial background and lifestyle you intend to lead. See the case study , to determine if you should consider buying a property to stay in, for investment purposes (buy to let) or to dispose of it at the end of your assignment in Singapore.

We have listed the pros and cons off buying a property below:

Why buy?

It is always a desire in most of us to eventually ‘nest’ and make our home somewhere. Buying provides you the opportunity to do so and provides you with the satisfaction of knowing that it belongs to you. Unfortunately, the rapid increase in values in the property market in recent years has pushed home ownership to a point where purchase is available to the selected few.

Home ownerships is a long term goal and investment and requires planning, budgeting and saving strategies. However, not everyone is willing to make sacrifices, hence you need to be aware of the advantages and disadvantages of such a commitment.

We have highlighted your decision criteria below:

PROS

Financial Criteria Capital Gains If invested wisely, in purchasing a property may run you 100% profit within a year. See Quarterly Reports by Knight Frank on the development of the property market in Singapore. Saving: Making repayments on your mortgages like a type of forced savings. The more you pay off, the more of your home you will own. Investment: As long as your property is appreciating or maintaining its value, you are growing an equity (ownerships) in your property. This equity can later be used to secure further loans and will also provide security in retirement.   Capital Gains Tax There is no such tax in Singapore and all your investment profits are free of tax. Tax Incentive: If you purchase a property and rent it out for investment purposes ( you become a landlord), the interest on your mortgage payment is tax deductible.

Security Criteria Owning your own home brings sense of satisfaction, security and stability. There are no lease conditions to worry about and you are not subject to the whims of a landlord who has control over the length of your tenancy and the rent.

Lifestyle and Status Criteria: The satisfaction of knowing you are part of the selected few who owns a home is most gratifying. Owning a property in Singapore is defined as one of the 5 important "c": career, car, condominium, credit card, club membership :Provide you with a permanent home which you can find tune and sculpt to compliment your lifestyle. Restriction in leased property restrict you from doing so. Also, additions and alterations to the premises may enhance the value of your property at the same time.

CONS

Financial High cash outlay Depending on the market you are hoping to buy in, initial cash deposit may run into hundred of thousand which could be used for alternative investments High costs: Home-ownership can be more expensive than renting because you are responsible for the mortgage, maintenance and repairs of the property, the insurance, paying maintenance charges plus any improvement you intend to make. Low Liquidity Should you decide to liquidate this asset, it may take up to 3 months to process the sale documents not to mention the time spend in marketing for sale. Price Depreciation Like any investment, there is a possibility that market will depreciate and the resale value may be lower than your purchased price. decide to sell. Interest rates/currency fluctuations Your mortgage is subject to variable interest rates which makes it difficult to anticipate future commitments. You may be forced to fund your mortgage in your home country currency which may undergo unpredictable changes. Taxes: You may be taxed with property gains tax in your home country when reselling the property and moving away from Singapore.

Lifestyle Location bound: Some people like to move around regularly whether is for career advancement or lifestyle thus the thought of being bound to one place can seems boring. Moving regularly is expensive in itself and the transaction costs in buying and selling within a few years is likely to cancel out any appreciation of the property.

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Return of Investment

The decision to invest into property depends on the what you have in mind to achieve a return on your investment.

The following table shows and overview and estimated costs applicable when

Case 1 : Unit is purchased for own stay

Case 2 : Unit is purchased for investment purposes (ie. Lease/Let out)

Case 3 : Unit is to be disposed or sold off

Properties in Singapore are sold either on a freehold or leasehold tenure.

Freehold Properties

A freehold title enable owner to hold the property in perpetuity. The free hold property lasts for generations. However, the price tag may be considerably higher than for a leasehold property.

Leasehold Properties

A leasehold title confers possession upon the purchaser for the duration of the lease. On expiry of the lease, the title in the property revert to the State. There are two types of leasehold land tenure, 999-year leasehold or 99-year leasehold.The more common type is the 99-year leasehold land, which is essentially land leased from the government for 99 years. The owner who receives a lease rent which may be paid monthly, quarterly, annually or in lump sum for the entire period of the lease. Once the lease expires, the lease reverts back to the owner.

Landed Property

In 2007 there were over 4,800 property transactions of landed homes with terrace houses being the hottest selling properties. The average price of those was SGD 1,5 million. A semi- attached house had an average price tag of SGD 2.23 million. Detached bungalows were selling with an average price of SGD $4.75 million.

The following types of homes are available in Singapore

Info:

Bungalow/Detached Semi-Detached Terrace House (Intermediate & Corner terrace) Townhouse Cluster housing (detached, terrace or townhouse style) Shop house Colonial House (Black & White)

For more information and explanation see our rental guide

Non-Landed Property: Condominiums and Private Apartments

There are legal differences between a condominium and a private apartment.

When you are the owner of a private apartment, you are a lessee under the 99 year lease the housing developer has created for each apartment. You would not own any part of the common property - such as the car park or the pool - as these belong to the lessor, who can charge a separate fee for using those facilities. As an apartment owner you have certain rights and obligations spelt out under the lease. However, you are not able to participate in the management of the facilities.

A condominium is created under the Land Titles (Strata) Act, Chapter 158 and is also known as a "strata title property". As a condominium owner you own a share of the common property. Under the same Act a Management Corporation needs to be created to manage the the common property. As an apartment owner (or Subsidiary Proprietor) in a condominium you can be voted into the management council to have a say in the management of the common property.

You can download an excellent 50 pages guidebook on Strata Living in Singapore at the website below.

Further differences between condominium and apartment in Singapore context are:

Condominium

1. development must have a minimum land size of 40,000 sq ft.
2. development must have facilities like pool, gym, tennis optional

Apartment

1. flatted dwellings with total land area less than 40,000 sq ft
2. no facilities

Info: Why buying a condo

The lease is not expiring. A condo is for generations to come. The maintenance of a condo is taken care of and cost are shared> A condo is a practical solution You buy into luxuries such as a pool or gym which you may not be able to afford on your own With a condo you buy into a community to socialize and find new friends A condo has a high resale price as the lease does not expire.

Get to know the "property sales jargon" used in information provided by Singapore property agents.

The Singapore Government has imposed restrictions on foreign ownership of private residential property in Singapore. Such ownership is governed by the Residential Property Act (RPA).

What is restricted residential property under the Residential Property Act

Foreigners including foreign companies cannot acquire or purchase restricted property unless he obtains prior approval from the relevant authority. Such property includes:

- vacant land

- landed property such as detached houses, semi-detached houses, terrace houses

- landed property in strata developments which are not approved condominium developments under the Planning Act

What is non-restricted residential property under the Residential Property Act

What is non restricted residential property under the Residential Property Act

Foreigners are not restricted from acquiring:

- any apartment within a building

- any unit in an approved condominium development under the Planning Act ( foreigner is not allowed to acquire all the units within a building in a condominium development without the prior approval from the relevant authority)

- 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

If you are a foreigner and are interested in purchasing a restricted residential property, you need to download an application form from the Singapore Land Authority's Website . Complete the form and submit together with the relevant supporting documents to the Land Dealings (Approval) Unit.

Banks do grant loans to foreigners up to 60%-70% of the valuation or purchase price of the property, whichever is lower. If one has a good credit standing with the banks or has evidence of established funds, banks are willing to loan at a higher quantum (case by case basis).

As a Singapore citizen and if you are eligible for the subsidized loans you can enjoy the subsidized mortgage rates of the HDB. The HDB can grant a subsidized loan to first time home buyers and also to second time home buyers who upgrade to another HDB flats.

Interest rates

Beginning of January 2008 ,the Singapore Inter bank offered rate (Sibor) has fallen again and is at its lowest since three years. Analysts believe it is going to sink further during 2008. The Sibor is the rate at which bank lend to each other and influences what you pay for a mortgage. Statistics shows however, that local and foreign banks in Singapore do not pass on the savings at once but rather in a time frame from about two months.

Basically there are two types of interest rates offered by the banks

- floating rates

- fixed rates

However, banks might offer a mixture of floating and fixed rates on different or various situations.

Usually there is a minimum lock-in period of 3 years i.e. penalty on early redemption. Interest rates and mortgage packages vary from bank to bank and are subject to changes.

Keep in mind that property with a limited lease may be more difficult to finance as the shorter the lease period the higher is the interest rate applied.

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Check the indicative valuation for the property you intend to purchase as valuation directly affects the amount of loan you can get from the bank for the property. For a foreigner, major banks or financial institutions in Singapore can only loan up to 70% of the valuation or purchase  price (whichever is lower)

Note: as a prospective purchaser (owner-to-be) you can apply to view the architectural plans and structural plans of a property. A photocopy of Notice of Transfer or duly exercised copy of Option to Purchase (the portion of "Acceptance Copy" duly endorsed) is needed.

Purchase under company name

In the case of purchasing under company name, the interest rate will be 1% higher per annum as compared to purchasing under personal name.

Note: The company has to be a Singapore Registered Company. Local banks rarely give loans to foreign registered company.  However, local banks may consider granting loan approvals to a (British Virginia Island) BVI company but a personal guarantor may be required.

The following additional fees are involved in a property transaction:

Info

Stamp Fees (Stamp Duty) and legal fees 3% of the purchase price. The stamp fees are chargeable by the government. Maintenance/Service Fees It depends on the size of the property and varies from developments. Property Tax see below

There are a number of taxes to consider and there is a distinction in tax rates for resident individuals and non-resident individuals. In general you will be treated as a non resident when you are in Singapore less than 183 days in a calendar year. For details check with a tax consultant and visit the websites below.

Definition of a Non Resident
Definition of a Tax Resident

Property Tax

Property tax is levied on the registered owner of a property and is payable to the government.

Property tax is imposed on immovable properties and is payable in advance and pro-rated till the end of the fiscal year. The tax payable in respect of a property is calculated base on it annual value. The Annual Value is the estimated yearly rent the property can fetch it it were rented out and is determined by Inland Revenue Authority Singapore (IRAS).

The prevailing tax rate is 10% of the Annual Value.

However, for an uncompleted project, property tax is payable only when the project is completed. For details check with a tax consultant and visit the websites below.

Note: There is no capital gains tax in Singapore

Taxation on Rental Income:

Net rental income earned by non-residents is taxable. Total rent includes charges on the property, the furniture and fittings and service charges. Property tax, insurance, maintenance and repairs are all deductible from the gross rental income. For details check with tax consultant and visit the websites below.

Inheritance Tax/Estate Duty

Estate duty is a tax levied on the aggregate market value of the deceased’s assets as at the date of his death. Be aware of possible conflicts with your country of origin and check with your lawyer and a tax consultant and visit the websites below.

Withholding Tax

If you sell your property to a non resident you are required by law to withhold a percentage of that payment and remit it to the Comptroller of Income Tax. For details check with a tax consultant and visit the websites below.

Purchase from an individual owner

You have decided to purchase a property from individual owners  - private treaty

	Prepare 1%  (Option Fees) of the purchase price (as a consideration) in exchange for the Option to Purchase from the seller.
	Option to Purchase is prepared by the seller’s solicitor or property agent.
	Org anise your finance (if any)
	You are usually given 14 days to decide whether to proceed with the purchase. If you decide to proceed,  exercise the Option to Purchase by signing in your solicitor’s office and forward to your solicitor another 4% or 9% (agreement between the seller and purchaser) of the purchase price. This amount is usually held by seller’s solicitor as stakeholders.
	If one decides not to proceed with the sale after receiving the Option to Purchase from the seller, the 1% option fees paid will be forfeited.
	From then on, leave it to your solicitor to complete the sale which will be completed around 8 to 10 weeks (agreement between the seller and purchaser). Your solicitor will:
• lodge a caveat on the property   • coordinate with the financial institution   • prepare the mortgage documents Stamp fee will be payable to Inland Revenue Authority of  Singapore within 14 days after exercising the Option to Purchase. Stamp fee payable will be 3% of the purchase price minus S$5,400. On legal completion date, the seller must hand over the property as agreed. The property can be sold with existing tenants or vacant possession.

Purchase from a housing developer

You have decided to purchase a property from housing developers. Payment will be by progressive (stages payment)

	Prepare 5% (Option Fees) of the purchase price (as a consideration) in exchange for the Option to Purchase from the developer.
	Option to Purchase is prepared by the developer’s solicitor.
	You will:
• within 2 weeks from date of Option to Purchase,  receive Sales & Purchase Agreement from the developer’s solicitor   • within 3 weeks from date of receiving the Sales & Purchase Agreement to proceed with the purchase by exercising the Sales & Purchase Agreement by signing in your solicitor’s office.   • within 8 weeks from date of Option to Purchase to forward to your solicitor another 15% of the purchase price Stamp Duty will be payable to Inland Revenue Authority of  Singapore within 14 days after executing Sales & Purchase Agreement.  Stamp fee payable will be 3% of the purchase price minus S$5,400. If one decides not to proceed with the sale after signing the Option to Purchase, the developer will only return 75% of the option fees paid.

Info: What to check when buying a second hand home

If walls have been painted recently, check if there is a hidden leakage of water from bathrooms/balconies of upper floors or seepage of rain water from outer walls. Ask for the minutes of meetings of the Management Corporation and look for problem areas repaired during the last years. Check the funds requested from owners. Check the "repair" history of the apartment with the management. Check for unauthorized extensions and get proof that extensions are structurally sound and safe Check electrical wiring and circuit breakers Check floor tiling for cracks Check for termites and white ants Check if your lawyer has informed IRAS via a notice of transfer of the changed ownership of your new home

• lf walls and ceilings have been recently painted, be careful as this is a means to hide leaking of water from bathrooms/balconies of upper floors (especially

The prices below are the maximum and minimum values of the median unit prices per square foot (psf) of the various districts in the different market segments

The values indicated are in Singapore Dollar.

In General the purchase price depends on the following circumstances:

Info

Location Tenure Quality of development Profile of developer

Top Locations

You have heard it all before:selecting the right location is the key to successful property investment. Watch out for homes in the new and upcoming areas of Singapore

Marina Bay: district 1 is the future heart of the lion city and the centerpiece of the efforts to seemingly extend the existing city into the new downtown.The 360ha development is becoming the home of the highly anticipated integrated resort with world-class hotels, the casino Marina Bay Sands by the developer Las Vegas Sands Corporation, convention, leisure and entertainment facilities and residential and commercial developments A garden. There is a huge park planned at Marina Bay South and off course a Golf course! The Singapore Flyer - a sister of the London Eye - is already up and running providing visitors with a breathtaking radial view over Singapore, Malaysia and Indonesia.

In September 2008 the Formula One Singapore Grand Prix will be held at night on public roads around Marina Bay. See here for more info.

Orchard Road :districts 9,10,11 are the present most prestigious areas close to the famous Orchard road - the shoppers' paradise of Singapore and a showcase for one continuous street of shopping malls, entertainment and lifestyle. There are a number of high profile projects in the Orchard Road area which are expected to fetch even higher prices than those in Marina Bay. The developers expect foreigners to represent 50- 60% of the buyers. The 40 million rejuvenation of Orchard Road is well on its way and will probably attract more than 7 million tourists each year. Three zones have been identified to have enhanced road and pedestrian mall lighting, featuring either a flower theme, forest theme or fruit theme ensuring it remains a world class pedestrian friendly shopping experience. Works are expected to be competed beginning of April 2009.

Sentosa Cove: this island is marketed as the world's most desirable address for a reason as it combines living in lush tropical settings in a modern convenient lifestyle as close to a vibrant city as you can possibly be. Sentosa Cove is set at the Eastern coast of Sentosa island off the South Eastern tip of Singapore mainland.

Where else can you watch international sport events such as the Formula One Singapore Grand Prix or the Volvo Ocean Race practically from your doorstep while you enjoy Sentosa Island's ' many tourist attractions and the beach, resorts and hotels and a casino. With your office set in the new financial district in Marina Bay commuting time is reduced to a few minutes across the bay and a short drive let's you to set off from Singapore's Changi Airport to any destination in the world.

What is a quality development

You can judge the quality of a development by the following criteria:

	type of fittings and fixtures : are they from a brand name supplier
	what facilities does the development offer: pool, tennis, gym or others
	what is the building facing? Is there a nice view? How do the neighboring buildings look like?
	How many floors does the development feature and on which floor would be the property you aim to purchase? Is your apartment facing the pool or the car park?

What to watch when selecting a developer

	is the developer public listed
	does the developer work with international brands like Ritz Carlton, St Regis

Potential launches in the next 3 months January to March 2008

You property has appreciated and you decided to sell.

	Engage a property agent. If you are represented by an agent, you need not be around at any viewing.
	Appoint a solicitor.
	You have accepted an offer
	• your solicitor or your agent will draw up an Option to Purchase. This Option to Purchase is to be signed by you and to be given to the purchaser in exchange for a deposit of 1% (Option Fees). • The purchaser has 14 days to decide whether or not to proceed with the purchase and to org anise finance. • There will not be a caveat lodge on it at this stage but the seller can’t sell to anyone else. • Once the purchaser has decided to proceed, they will then exercise the Option to Purchase and put down another 4% or 9% (agreement between the seller and purchaser) of the purchase price. This amount is usually held by your solicitor as stakeholders. • If one decides not to proceed with the sale after receiving the Option to Purchase from the seller, the 1% option fees paid will be forfeited. • Once the Option to Purchase has been signed it is unconditional on both sides. • Complete of Sale & Purchase will be around 8 to 10 weeks (agreement between the seller and purchaser). • On legal completion date, the seller must hand over the property as agreed. The property can be sold with  existing tenants or vacant possession.
	Sellers do not pay stamp duty or capital gain tax.
	Agency commission is paid solely by the seller which varies from 1% to 2% of the selling price.

Case Study Reference

The following table shows estimated costs when

Case 1 : Unit is purchased for own stay

Case 2 : Unit is purchased for investment purposes (ie. Lease/Let out)

Case 3 : Unit is to be disposed or sold off

Capital Gain Tax

There is no capital gain tax in Singapore

Withholding Tax

If you sell your property to a non resident you are required by law to withhold a percentage of that payment and remit it to the Comptroller of Income Tax. Check with your lawyer!

The local payer in Singapore is required to withhold tax at:

• 15 percent of the gross income/fees payable to the non-resident professionals or
  
• The non resident rate if the non-resident professional elects to be taxed on net income

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