Buying property in Singapore as a foreigner

Guide to Buying Property in Singapore as a Foreigner

Singapore, often regarded as Asia’s financial heart, is home to many global firms and a vibrant community of expats. This well-developed, diverse city offers everything one could need, making it an attractive place to settle down. However, buying property in Singapore as a foreigner comes with challenges, including high prices and regulatory restrictions. In this comprehensive guide, we’ll walk you through everything you need to know before diving into Singapore’s real estate market, covering everything from market conditions to detailed steps for purchasing a property.

The Singapore Property Market

Despite economic challenges during the Covid-19 pandemic, the Singapore property market has remained remarkably resilient, with property prices continuing to rise. This trend is primarily driven by high demand and a limited supply of new properties. During the last quarter of 2020, property prices rose by 2.08% compared to the previous quarter. Even when adjusted for inflation, prices increased by 1.67%. This steady rise in property values highlights the strong fundamentals of the Singaporean real estate market.

Singapore is widely recognized for its political stability, world-class infrastructure, and business-friendly policies, making it a favored location for investors. Its stability and reputation as a financial hub make it a relatively safe place to invest in property, although returns may not be as significant as other higher-risk markets. Foreign investors are often attracted to Singapore not only for its potential returns but also for its safe, secure environment, both in terms of legal structure and political stability.

In recent years, the Singaporean government has also taken steps to moderate property prices to ensure housing affordability for its citizens. As such, property cooling measures have been introduced, including higher taxes and limits on loans. This has contributed to a more balanced market, although prices remain high compared to regional counterparts. For foreign investors, these regulations mean that careful planning and understanding of the property landscape are crucial before making a purchase.

Can Foreigners Buy Property in Singapore?

Yes, foreigners are allowed to buy property in Singapore, but there are certain restrictions under the Residential Property Act of 2005. Foreigners can purchase apartments in buildings with less than six stories without needing additional approval, which means smaller residential buildings or walk-up apartments are accessible. However, for high-rise properties, such as apartments in buildings exceeding six stories, government approval is required. For vacant land, buyers need to obtain permission from the Singapore Land Authority (SLA). The restrictions ensure that landed properties and other housing types that are in limited supply are reserved primarily for Singapore citizens and permanent residents.

On the other hand, there are no restrictions for foreigners purchasing condos, which makes them the most popular option among expatriates. Condominiums in Singapore offer a range of amenities, including swimming pools, gyms, security, and even communal entertainment spaces, making them a convenient choice for many foreign homebuyers. The purchasing process for a condo is also typically more straightforward compared to landed properties.

Engaging a local real estate agent or lawyer is highly recommended to help navigate the process correctly and comply with all regulations. A professional can help with the paperwork, offer insights into the local market, and ensure that the transaction is smooth and compliant with local laws. Singapore has many reputable real estate agencies that specialize in dealing with expatriate buyers, which can be especially helpful if you are new to the country.

Minimum Age Requirement

The minimum age to buy property in Singapore is 21 years. This requirement applies across the board, whether you are a Singaporean citizen, permanent resident, or a foreigner. However, if parents wish to purchase a home for their child, they can do so by setting up a trust in the child’s name. The child will become the legal owner once they turn 21. This arrangement is commonly used by families wanting to secure a property for their children’s future.

Setting up a trust is a legally binding process, and it’s advisable to consult with a lawyer who specializes in trusts to ensure that the arrangement is executed correctly. Trust purchases can be particularly beneficial for those looking to take advantage of current market prices while planning for future needs.

Step-by-Step Guide to Buying Property in Singapore

Buying property in Singapore is a structured process that requires attention to detail and a good understanding of the local market. Here is a step-by-step breakdown of the process:

1. Set the Price and Secure Financing: Once you’ve found a property and agreed on a price with the seller, you need to arrange financing if required. Foreigners can apply for a mortgage with a local bank, and many banks offer up to 80% financing of the property’s purchase price. Alternatively, you may opt for overseas property financing options, such as mortgages from banks in your home country. It is crucial to compare the interest rates, processing fees, and terms between local and overseas options to determine which works best for your situation.
2. Option to Purchase: To secure the property, you will need to pay a 1% down payment, known as the Option Fee, to the seller in exchange for the Option to Purchase (OTP) document. The OTP gives you exclusive rights to purchase the property within a specific timeframe, usually 14 to 21 days. During this time, it’s advisable to have a lawyer review and draft the terms of the Option to Purchase. This document will eventually become the binding agreement for the sale, so it’s essential to ensure all terms are accurate and favorable.
3. Confirm the Purchase: To confirm your intention to buy, you must pay an additional 9% of the property price within the timeframe stipulated in the OTP. This payment, known as the Exercise Fee, is added on top of the initial Option Fee. Once you pay this amount, the Option to Purchase is exercised, and the contract becomes legally binding for both parties.
4. Legal Due Diligence: Your lawyer will then conduct due diligence to confirm the seller’s ownership of the property, check for any outstanding mortgages or legal encumbrances, and ensure that the property can be legally sold. This step is vital to protect your interests and prevent any legal disputes after the purchase.
5. Sign and Register Documents: Your lawyer will prepare the documents required to transfer the property title from the seller to you. Both the buyer and the seller must sign these documents. Once signed, the documents are lodged with the Singapore Land Authority to register the sale officially. The registration process ensures that the title deed is updated, and you become the new legal owner of the property.
6. Completion: The entire process typically takes around six to eight weeks from the date the OTP is exercised. Upon completion, the final payment is made, and you will receive the keys to your new property. From this point, you are free to move in or rent out your new home.

Cost of Buying Property in Singapore

Buying property in Singapore can be an expensive endeavor, influenced significantly by location, type of property, and the overall demand. The closer you are to the city center, the higher the cost, but properties farther away may offer more value for your money, especially if you are willing to commute. Below are average property prices per square foot for different property types:

• Apartments: 1,300 – 25,000 SGD per sqft, depending on location and building type. Luxury apartments in central districts can be significantly more expensive.
• Condos: 1,300 – 4,800 SGD per sqft. Condos in popular areas such as Orchard Road, Sentosa, or Marina Bay tend to be at the higher end of this range.
• Walk-ups: 1,400 – 1,600 SGD per sqft. Walk-up apartments are typically older buildings without elevators but can offer larger living spaces compared to newer high-rise developments.

The price per square foot can vary dramatically depending on the area and luxury level of the property. Neighborhoods like District 9 (Orchard, Cairnhill, River Valley), District 10 (Bukit Timah, Holland Road), and District 11 (Newton, Novena) are among the most sought-after areas, commanding higher prices compared to suburban districts.

If you require financing, banks in Singapore can offer loans covering up to 80% of the property price, depending on your creditworthiness and income level. However, additional considerations such as Total Debt Servicing Ratio (TDSR) may limit the loan amount you can obtain. It’s best to speak to several banks and get quotes to understand the options available to you.

Taxes and Fees

When purchasing property in Singapore, it is crucial to account for various taxes and fees that can add up significantly. These additional costs can represent anywhere from 7% to 20% of the property’s purchase price. Below is a detailed breakdown:

• Buyer Stamp Duty (BSD): BSD is calculated based on the purchase price or market value of the property, whichever is higher. The rates are as follows: 1% for the first 180,000 SGD, 2% for the next 180,000 SGD, and 3% for amounts over 360,000 SGD.
• Additional Buyer Stamp Duty (ABSD): ABSD rates for foreigners are currently set at 16%, which significantly adds to the cost of buying a property. Permanent residents are also subject to ABSD if they are buying multiple properties: 5% for their first property and 10% for subsequent ones.
• Conveyancing Fees: Conveyancing fees cover the legal work needed to transfer property ownership. Typically, these fees are about 0.3% of the property price, with a minimum fee of around 1,800 SGD. Legal fees ensure that all paperwork is completed accurately, and they cover title searches, contract reviews, and registration.
• Real Estate Agent Fee: Real estate agents typically charge 1% of the property price as a commission for their services. This fee is paid by the buyer, while the seller usually pays 2% to their own agent.
• Mortgage-Related Costs: If you are taking a loan, you will also need to budget for bank processing fees, valuation fees, and mortgage insurance. These costs can add up to several thousand SGD depending on the lender and loan package.

Choosing Real Estate in Singapore

Singapore’s property market offers a wide variety of housing options, from high-rise condominiums to suburban villas. For foreigners, condos are the most accessible option due to fewer restrictions. Condominiums often come with a range of facilities such as gyms, swimming pools, playgrounds, and security services, which makes them a popular choice for families and individuals seeking convenience.

For those who prefer landed properties, such as semi-detached houses, terraced houses, or bungalows, government approval is required. Landed properties are much less common for foreigners due to these restrictions and the significantly higher price tags associated with them. However, expatriates who have lived in Singapore for a long period or have made significant economic contributions may apply for special approval to purchase landed properties.

Due to the complexities of the property market, it is strongly recommended to use a trusted local real estate agent who can help negotiate deals and prevent common pitfalls. Agents can also provide invaluable information about the neighborhood, market trends, and upcoming developments that could affect property values. Even if you decide not to hire a buying agent, you will still need to contribute towards the agent fee of the main selling agent, typically 1% of the property price.

Available Property Types for Foreigners

• No Approval Required: Foreigners can buy condos, apartments in buildings up to six stories, and non-residential properties without requiring additional government approval.
• Approval Required: Apartments in buildings over six stories, vacant land, and landed properties require approval from the Singapore Land Authority.

Each property type comes with its own set of considerations. Condominiums are generally the most straightforward option for foreigners due to fewer restrictions and ease of financing. However, if you are interested in landed properties, it is essential to understand the regulatory landscape and consult a legal expert before proceeding.

Tips for Buying Property in Singapore

Before purchasing a property, consider getting a professional survey done. A property survey, although not required by law, can help uncover any structural issues, boundary disputes, or other problems that may not be immediately apparent. Your lawyer can assist you in finding a surveyor who knows the local market well.

It’s also important to be aware of ongoing maintenance costs. For condominiums, you will need to pay monthly maintenance fees for the upkeep of communal facilities. These fees can vary greatly depending on the size and location of the property, as well as the amenities offered.

Finally, consider the long-term potential of the property you intend to buy. Location, upcoming infrastructure projects, and neighborhood development plans can all significantly affect property values. For example, areas undergoing rejuvenation or near upcoming MRT (Mass Rapid Transit) lines may offer better appreciation potential.

Conclusion

Buying property in Singapore is a significant step that requires careful planning and a considerable financial commitment. With the right preparation, understanding of the regulatory landscape, and support from trusted local professionals, the process can be much smoother. Singapore offers a fantastic quality of life, a stable economic environment, and a well-developed infrastructure that makes it an appealing destination for property investment.

Whether you are looking for a permanent residence, a holiday home, or an investment property, Singapore has a wide array of options to suit different needs and budgets. Take your time, seek professional advice, and consider all the associated costs to make an informed decision that aligns with your financial goals.

Disclaimer: This guide provides general information about purchasing property in Singapore and is not intended as financial or legal advice. Consult with a licensed professional for advice specific to your situation.