Buying Property in Singapore - Buyers Guide

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Buying Property in Singapore

Buyers Guide to buying investment property, retirement property and buy to let property in Singapore

Singapore Property Market Performance

The Singapore property market is currently in the middle of a major upswing, with very high occupancy rates (in the region of 95% and set to move higher) magnifying the lack of suitable properties for a market which is crying out for extra capacity. 

The market has been ignited by an economy which is recovering from recent falls of the last few of years.  The upturn in the economy has attracted the interest of property investors from overseas and living in Singapore, with prices rising and activity showing vast improvement on a couple of years ago. While the housing sector rose by over 10% in 2006, it has already shown a rise of some 5% in the first quarter of 2007 and looks set to beat last years annual rise.

Even though the natural population of the country is falling, the steady flow of immigrants is set to continue for some time yet.  The country has also made a name for itself in the world of finance, and is set to over take Japan as one of the major Foreign Exchange markets of the world.  This type of business is attracting wealthy foreign nationals, many of whole are looking to relocate to the country, further increasing the demand for property.

Singapore is an interesting country which now has a number of economic strengths, and a flourishing (if slightly unbalanced) property market.  As more supply comes online, excess demand should be met and price rises should start to slow.  For those looking to relocate for the long term Singapore offers an array of attractions, and the property market still offer good long term value, even if there may be some wild swings along the way!

Please note that non-Singaporean and permanent residence may only acquire properties in buildings with at least six floors, or pre-approved condominium units, without permission from the authorities. They can acquire other properties although permission will be required from the Controller of Residential Property.  This is the countries system of controlling foreign ownership of property, and monitoring possible property speculators.

Buying Property in Singapore: Interest Rates

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 limited 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.

Singapore Property: Purchase Expenses

As with any foreign land, you need to arrange the services of a local solicitor who has expertise in the property market. Check the small print on all contracts!

In general you should budget for the following expenses :

• Solicitor fees
• Mortgage fees
• Stamp Duties

These fees together will add a further 5% to the initial cost of the property

It is also essential that you check the local mortgage laws as not all options are open to foreign nationals.