Buying property in Singapore as a foreigner

Usual caveats!!!!

With an international reputation as a hustling hub of industry, commerce and services, Singapore is a popular market for many expats considering property investments in the Asian region. There are low barriers of entry for foreign buyers, relative to other neighbouring jurisdictions, and the area exhibits a steady record of good long-term capital appreciation.

Singapore also attracts large numbers of expats to its shores. In June 2017 the country’s population was 5.61 million, of which 1.6 million people were non-residents. Nearly 40% of the labour force is made up of foreigners, and this steady flow of non-native feet ensures that the property market is vibrant and growing. Add to this a well-regulated and stable economy (regularly ranked as one of the top business environments in the world) , supported by a prime location in the centre of Asia, and the benefits of Singapore begin to add up.

What’s the property market like in Singapore?

 

Balancing a population of over 5.5 million with a land area of just 716 square kilometres means that housing in Singapore is always in high demand. With high demand, comes high prices.

After experiencing a boom in the years leading up to 2010, where prices for residential homes leapt by over 38% year on year, the government took steps to cool the market by making changes to the stamp duty payable on purchases and implementing some limits on local lending for mortgages.

This has had a stabilising effect on the market, and most recently, prices in central Singapore in 2016 saw a 3% drop in comparison to the year to 2015.

In general, Singaporean property is priced at a premium owing to the strong demand for homes. As with all large metropolitan areas, the price of a preferred home will vary depending on its proximity to the centre of town, the neighbourhood it’s located in, and the amenities available nearby.

As of writing (April 2018) buyers can generally expect to pay around SG$1.64m (~USD$1.25M) for a 120 square metre condo in the city centre, with prices rising to around SG$2.6m (~USD$2.0M) for a larger unit of 200 metres square. As your available loan-to-value ratio is limited to a maximum of 80% if you’re borrowing from a bank based in Singapore, this means being prepared to pay a cash deposit upfront of at least SG$200,000 – $500,000. If you’re borrowing in your home jurisdiction then the rules of your home bank will apply and you may not need to finance the deposit to the same extent.

Moving out from the city centre there are significant variations between neighbourhoods and developments. A flat in China Square of Tanglin Halt will cost you around double per square metre than the same kind of flat in Yunnan or Jelebu.

Can foreigners buy property in Singapore?

The answer here is both yes – and no. There are a range of limitations that apply to property purchases if you’re a foreigner, as the market is intended to cater primarily to Singapore citizens unless there is a clear national (Singaporean) benefit. There are good reasons for this. Singapore is a tiny country where land is in short supply. Since 1973, the government in Singapore has taken a range of steps to ensure that the property market remains comfortably open to its citizens, ensuring that they aren’t priced out of the market by wealthier expats and non-resident investors.

Singapore law sets out all the information relating to foreign property purchases in the Residential Property Act (Chapter 274). The most relevant of these restrictions relates to a form of the housing known as HDB. HDB housing is housing that is made available at a subsidized rate by the Housing & Development Board. New flats are sold under a 99-year lease, but citizens can also buy previously owned flats if the seller has met the criteria known as the minimum occupation period (MOP) of five years. Foreigners however, cannot purchase any type of HDB housing. It’s only available to citizens and permanent residents. The subsidies enable (most!) Singaporeans to afford homes of good quality while also ensuring that home and land ownership is rooted within the national population.

However, expats and foreign investors are still able to buy and invest in a range of other property types in Singapore. This provides access for those people who are sufficiently invested in the country – both figuratively and literally – to make or own a home in the country as well.

Property investments as part of an application for permanent residents

Singapore operates a Global Investor Program (GIP), whereby foreigners can be considered for status as a permanent resident if they invest sufficient funds in one or more enterprises listed under the program. The program is designed to attract foreign talent into the country.

The current GIP requires that this includes at least SG$2 million in business set-ups and/or other investment vehicles such as venture capital funds, foundations or trusts that focus on economic development, and/or private residential properties.

Up to 50% of the investment can be made into private residential properties, subject to the foreign ownership restrictions that exist under the Residential Property Act (RPA), many of which are set out in this article. For more information, you can check this page which also links directly to the Act itself.

What kind of property can foreigners buy in Singapore?

Singapore is highly developed, and you can choose from a range of property types in order to suit your needs and budget. There are three kinds of property available in Singapore, and they are classified with the following headings under Singaporean law:

  1. Non-residential property
  2. Non-restricted residential property
  3. Restricted residential property

Non-residential and non-restricted residential property

If the property you have your eye on is classed under either of these terms, then you can purchase it without restriction and without needing to seek approval from the government.

  • Private apartments or condominium units are individual units located alongside others, either within a building or a group of buildings. They are privately owned, but residents have access to a range of shared facilities such as gym, swimming pool, laundry, common areas and garden or rooftop terrace. Foreigners can buy as many private apartments or condos as they like – there are no restrictions – as long as the height of the building is 6 stories or less.
  • Executive condominiums are sometimes subsidized for the benefit of Singaporean citizens. They are very similar to private apartments or condos. Permanent residents can only buy an executive condo after the building has been completed for five years. Foreigners can only purchase an executive condo once the building has been completed for 10 years.
  • Commercial property – such as shops, hotels, industrial premises, offices, storage and warehouse buildings, factories, shopping malls and so on – is widely available to foreign buyers and there is no restriction on the number of properties you can own.

 Restricted residential property

There are tight regulations surrounding what’s known as ‘landed residential property’ in Singapore, making it very difficult for foreigners to own any kind of property in this category even if they are a permanent resident. Landed residential property is property such as bungalows, villas, individual houses, vacant residential land, places of worship and terrace houses. To purchase anything under this category, as a foreigner you will need to have been a permanent resident for at least five years, and you must seek government approval for your purchase, after proving your economic contribution to Singapore.

Applications are made through the Singapore Land Authority. They cost $1220 and approval can take up to three months.  This handy link helps to explain what is needed, and sets out a full list of what is considered to be landed residential property. Keep in mind that, even if approved, foreigners may only own one of these property types at a time.

Are there any exceptions to these rules?

There is one key exception that might interest you if you’re living in Singapore and you fancy upgrading from a flat to an individual home, or if you’re seeking a new property to add to your portfolio.

Landed residential property at Sentosa Cove is exempt from the usual restrictions of foreign ownership. Sentosa Cove is an attractive, upscale development area aimed specifically at expats, wealthy citizens and investors. Now a leading leisure destination, Sentosa Cove is the jewel in the crown of Singapore’s billion-dollar master plan for Sentosa Island. It’s self-described as ‘one of the world’s most prestigious integrated oceanfront marina residential communities’, and it has been purpose-built as a resort-residential zone.

Purchasers can choose from high-end flats and condominiums, oceanfront villas (there are over 2,000 in the resort), bungalows and large individual homes. Many are oceanfront or waterfront-facing, and all are built to high-end specifications designed to appeal to the expat market.  he entire development of Sentosa Cove is a premium area filled with shops, restaurants, a hotel and many other facilities for recreation and entertainment, so there are plenty of options to keep you and your visitors busy and happy.

Landed residential properties in Sentosa Cove can be bought once a fast-track approval has been obtained from the Singapore Land Dealings Approval Unit (LDAU). Approvals usually take around 48 hours.

 Can you buy-to-rent in Singapore?

Watch out here! There are some limitations on which properties can be rented out.

If you purchase a restricted residential property, be especially careful. These premises should only be used by yourself, or for your occupation, and your family members. If you’re caught breaching this rule, you can be fined $200,000 and imprisoned for three years (NEVER try to flout Singaporean law either in act or in spirit!).

Make sure you check carefully with your agent or lawyer about whether the property you intend to purchase can be rented out. For those properties that can be rented out, the yield is typically lower than that in neighbouring countries like Thailand or Indonesia although many foreign investors consider this to be offset by Singapore’s other advantages. You can expect a yield of around 2.5 – 3% on most residential properties and a yield of approximately 5% on commercial properties. Some higher-end properties will deliver a greater yield of up to 4.5% – check this page for a list of average property yields, but note that the data only covers the period up to 2016.

What is the legal process for buying property in Singapore?

As a foreign purchaser, the process for your acquisition is fairly straight-forward.

  1.  Identify the property you wish to buy. Make sure you have visited it in person, or that you have visited a showroom property if you’re buying “off the plan” from a developer.
  2.  Agree the final price of the property with the seller.
  3.  Sign an “Option to Purchase” and pay 1-5% of the price to exclusively reserve the right, for a period of between 2-3 weeks, to purchase the property.
  4.  Pay your deposit, the deadline for which is stated in the Option to Purchase.
  5.  Finalise the “Sale and Purchase Agreement” and pay the outstanding monies including the remainder of the deposit, all taxes, stamp duty and any other fees. Your lawyer or buyers’ agent will usually complete this step for you by taking care of the documentation and receiving the keys.

Regardless of whether it’s Singapore or anywhere else, when you are considering a property purchase in a foreign country it is always a good idea to engage a skilled and reputable lawyer who can assist you with the buying process and ensure you comply with all the specialized regulations applying to your individual circumstances.

What are the costs of buying property in Singapore?

When buying property in Singapore, you will need to pay a deposit, and range of standard fees and charges. Remember to budget for legal fees (usually around 0.3% of the purchase price), agent’s commission (if it is not included in the purchase price, usually around 1%), registration fee (USD$52), transfer of ownership charges and so on.

After your deposit, the most important (and substantial) cost is the stamp duty you’ll pay on your property. Stamp duty in Singapore is divided into three categories:

 1. Buyer’s stamp duty (BSD)

This is levied at between 1-3% depending on the price of your property:

  • 1% on the first $180,000
  • 2% on the next $180,000
  • 3% on the remaining amount.

 2. Additional buyer’s stamp duty (ABSD)

This stamp duty levy only applies if you are buying a residential property – there is no ABSD on commercial property.

Citizenship ABSD rate on

1st purchase

ABSD rate on

2nd purchase

ABSD rate on

3rd and subsequent purchases

Permanent Residents 5% 10% 10%
Foreigners and non-individuals (corporate entities)  

15%

 

15%

 

15%

However, if you’re a citizen from the USA, Switzerland, Liechtenstein, Norway or Iceland, you will only pay the same ABSD rate as a citizen of Singapore (7-10%), under the terms of the Free Trade Agreement between Singapore and these countries.

There are some nuances involved if you’re buying a property jointly with another party. For example, if a Singaporean purchases a property with a foreigner, the ABSD rate of 15% applies, irrespective of the number of properties either party already owns. Or, if you are purchasing a property with a Singaporean spouse (ie, a married couple with a Singaporean spouse or a permanent resident/foreigner spouse), you will receive ABSD relief and pay no ABSD as long as both spouses do not own any other property at the time of purchase.

The question of ADSB is detailed and specific, and it’s advisable to speak with your lawyer about how exactly ADSB will apply in your individual situation. For more information you can check this update from the Singaporean Inland Revenue Authority (IRA).

3. Seller’s stamp duty (SSD)

This only applied to residential properties and it is paid by the seller. There are a range of different rates that apply depending on individual factors such as selling price and how long you have held the property. Check this factsheet for more information.

Costs for commercial properties

If you buy a commercial property in Singapore, you’ll pay a 7% GST, unlike residential properties where there is no GST. However, you won’t pay any ADSB, which could be a significant sway factor in your investment decision.

Financing your property purchase in Singapore

If you aren’t paying cash for your property, local banks in Singapore are generally happy to lend to foreigners as long as you meet their individual criteria. They will assess your credit-worthiness and eligibility in a similar way to that in which a bank in your home country would.

  • If you do not have an existing mortgage, you can usually borrow up to 80% of the purchase price of your Singaporean property
  • If you already have an existing mortgage, this limit drops to 60% of the purchase price.

Singapore has a well-developed banking sector, where many international banks have chosen the country as the home of their Asian or APAC headquarters. This means you can choose from a range of reputable brands for your mortgage. Locally, the Development Bank of Singapore (DBS Bank) and United Overseas Bank (UOB) both offer mortgages tailored specifically to the foreign market. You should also investigate whether your home bank has a local presence, as this could mean a better deal for you, or consider a bank in your home country. You may be able to access a higher LVR and a lower cash deposit, which can make a difference to your investment decision.

Lastly, bear in mind that unlike the case of Singaporean citizens, there are no incentives for foreign property purchases in Singapore.

 Property taxes in Singapore

In Singapore, you’ll need to pay taxes on your property on a sliding scale of between 0-16%, depending on your individual circumstances. The calculation is based on the annual value of your property multiplied by the tax rate. The annual value equates the amount of rent you’d earn if you let the property, and it is calculated by government authorities. The figure is adjusted every year to reflect current market conditions. It doesn’t matter if you actually rent the property or not, or if the rent you receive is different from the prescribed annual value.

Rental income is also taxed in Singapore and you must declare it in your tax return. Like many other countries, you can deduct a range of costs including:

  • The interest you pay on the mortgage
  • Fire insurance
  • Property taxes
  • Maintenance and repair costs
  • Replacement furniture and fittings
  • Utility bills (if the tenant doesn’t already pay for these services).

You’ll be taxed on a progressive rate of between 0-20% if you are a permanent resident or if you spend at least 183 days of the tax year in Singapore. If you’re a non-resident for tax purposes, your rental income (after deductions) will be taxed at a flat rate of 20%. And if you’re working in Singapore the tax rate will be lower still. Property tax for commercial properties however, is a flat 10% of the annual value of the commercial property.

Check the IRAS website for more details.

Work with a licensed agent or lawyer

As in every foreign country, it’s recommended that you work closely with a licensed real estate agent and/or lawyer to complete your purchase. In Singapore, around 75% of buyers – including locals – use an agent.

Foreign property purchase can be complex, and your best protection to ensure you don’t run foul of the law, is to engage licensed, specialised help. There are many restrictions on foreign purchases and a qualified real estate agent and lawyer should know the intricacies of the law and any recent changes you need to be aware of.

To start your browsing, it’s worth checking out the properties available on some of the key websites serving the expat market:

  • iproperty is a large website with an excellent search function that enables you to narrow your home search based on a range of factors, including proximity to public transport options
  • Property Guru is a comprehensive site listing new developments as well as established dwellings across the full country
  • Savills is a high-end site covering global markets, and their Singapore listings are targeted towards the higher end of the market.

Protecting your assets in Singapore

Inheritance law in Singapore can be highly complex for expatriates, who may have assets and homes in more than one country and could be considered to be domiciled somewhere other than Singapore, for example, depending on their country of origin. It’s important to ensure you receive appropriate instruction from a lawyer who is skilled in Singaporean inheritance law, as well as taking advice from a lawyer in your home country who specializes in international law.

 

 

 

 

 

 

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