Buying An Apartment In Singapore – 7 Proven Strategies

Owning a home in Singapore to live in or investing in property, whether the property is an apartment or a landed house can be a major achievement and a huge decision in one’s life.

As a future buyer or investor, it’s necessary to know and understand the latest rules, regulations, and processes that are required in Buying an apartment in Singapore.

This comprehensive guide on Buying an apartment in Singapore will walk you through the essentials of buying or investing in property in Singapore, by focusing on the new rules and considerations that have emerged in the recent years of Singaporean history. 

Overview of the Singapore Property Market

Before buying an apartment in Singapore, you must know the essentials of the Singapore property market and about both the Singapore property segments which include public and private properties.

Public housing serves as the home for 80% of the population of Singapore. They are constructed and developed by HDB. Private residential contains condominiums, apartments, and landed houses targeting a much smaller number of buyers.

The Singapore government has set up many measures to control the property market and growth in the property sector, including Additional Buyer’s Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) to curb the practice of speculative buying.

Buying an apartment in Singapore #1

It is vital to know there are situations where foreigners, are restricted by law from purchasing certain types of properties in Singapore before venturing into purchasing properties in the country. 

For HDB flats, buyers must meet certain eligibility conditions, such as:

• Singapore citizenship (at least one buyer)
• Minimum age of 21 years old
• Income ceiling (depending on the flat type and scheme)
• Property ownership restrictions (e.g., cannot own private property)

For private properties, the eligibility criteria are more relaxed, but there are still some restrictions to note:

• Foreign buyers, the buyers that are non-Singapore citizens and non-Permanent Residents, are restricted to buying only certain types of private properties, like condominiums and landed homes in Sentosa Cove, without the approval of the government.
• The same rules apply to Singapore Permanent Residents (PRs) when buying HDB flats but PRs may face even higher stamp duties when they buy private properties.

The buyer thus needs to ensure they can purchase a property and if there are any restrictions in the intended property purchase.

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In recent years, new measures and regulations have been launched by the government of Singapore over the years to stabilize the market of properties in the country; here are some of the changes that have been made and you must be aware of:

Higher Additional Buyer’s Stamp Duty (ABSD) Rates

Starting from the 16th of December, 2021, the ABSD rates for Singapore citizens and PRs have been increased for the purchase of the second and subsequent property. The new rates are as follows: The new rates are as follows:

• Singapore citizens: 17% for second property, 25% for third and subsequent properties
• Singapore PRs: 25% for second property, 30% for third and subsequent properties
• Foreigners: 30% for all properties

Tightened Total Debt Servicing Ratio (TDSR) Threshold

The Total Debt Servicing Ratio (TDSR) is the measure of the percentage of a borrower’s income used to service total debts.

The TDSR is a regulation that caps the monthly repayment of a borrower’s loans (including the property loan) to a certain percentage of the borrower’s gross monthly income; as of 16 December 2021, it has been adjusted to 55% from the previous 60%; this means that buyers can borrow less for a property.

Revised Loan-to-Value (LTV) Limits

The LTV limits set the highest standards of the funds that buyers are allowed to get from banks or other financial institutions for the acquisition of properties. It has been adjusted now so loans from HDB can not be as much as before. The set LTV limit is 85%. For bank loans, the LTV limits are as follows:

• 75% for the first housing loan
• 45% for the second housing loan
• 35% for third and subsequent housing loans

These new thresholds will influence the down payment or Central Provident Fund (CPF) savings that are used for the purchase of a property.

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For HDB flats bought from the resale market, there is an MOP of a 5-year holding period for any purchased flat. During this period, the buyer must follow several regulations, the most prominent being that the buyer cannot sell the flat or sublet the entire space.

Seller’s Stamp Duty (SSD) for Private Properties

It is pertinent here to note that any person selling a private property must pay SSD, in the event the property’s sale is less than 3 years after purchase. The SSD rates are as follows:

• 12% for properties sold within the first year of purchase
• 8% for properties sold within the second year of purchase
• 4% for properties sold within the third year of purchase

The SSD is meant to discourage short-term speculative buying and selling of private properties.

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Financing is crucial when Buying an apartment in Singapore. Here are some key considerations:

Central Provident Fund (CPF) Savings

Singapore citizens and PRs are allowed to use their CPF OA to finance the property that they are buying, although there are conditions and restrictions about the amount that can be used. Other factors that influence the CPF OA savings that can be used include; the type and tenure of the property and the remaining years of the lease.

Bank Loans 

Purchasers who do not have enough cash to meet the minimum payment for a property can also use bank loans, but the loan amount is regulated by LTV and TDSR which have been stated above. It is advised that one should always compare different loan packages offered by different banks, one has to look at issues like the interest rate charge, lock-in period, and the repayment structures that are offered for a particular loan.  

HDB Loans 

For HDB flats, eligible buyers can opt for an HDB loan, which offers more lenient eligibility criteria and a higher LTV limit (85%). The interest rate for HDB loans is pegged at 0.1% above the prevailing CPF OA interest rate, which may be higher than some bank loan rates. 

Buying an apartment in Singapore #5

The acquisition of Buying an apartment in Singapore, on average, has several stages and may take several months. Here’s a general overview of the process and timeline:

Property Search and Shortlisting (1-3 months)

• Discover your budget, whom you can borrow from, and property criteria.
• Look for suitable properties through the internet, real estate agents, or property developers.
• Shortlist properties and coordinate for property visits.

Option to Purchase (OTP) and Sale and Purchase Agreement (S&PA) (2-4 weeks)

• For private properties, one has to make the payment of the booking amount which is generally one percent of the total cost price to get the OTP.
• For HDB flats, for instance, the application has to be made through HDB and there is a payment of an option fee that is at most a thousand dollars.
• Schedule a meeting with an attorney to discuss and draw up the S&P agreement.
• Exercise the OTP during the option period, which is normally between two weeks and three weeks, and execute the S&P agreement.  

Loan Application and Approval (4-6 weeks)

• The loan application should be submitted to the bank or Housing Development Board. 
• Provide necessary documents, like income proof and property details.
• Secure an In-Principle Approval (IPA) or Approval-in-Principle (AIP) for your loan.  

Completion and Key Collection (2-3 months)

• The other portion of the down payment and stamp duties should also be settled.
• Complete the legal documentation and mortgage formalities.
• Gather the keys to the new house.

It is pertinent to remember that such a timeline can be adjusted considering the type of the property, certain requirements of the seller, and sometimes even the financing options needed. 

Buying an apartment in Singapore #6

When Buying an apartment in Singapore, there are several stamp duties and costs to consider, in addition to the property price: 

Buyer’s Stamp Duty (BSD) 

BSD is the taxes charged on the acquisition of property and computed based on either the value of the property or the price at which the property was bought whichever is higher. The BSD rates are as follows:

First $180,000: 1% 

Next $180,000: 2% 

Next $640,000: 3% 

Remaining amount: 4% 

Additional Buyer’s Stamp Duty (ABSD)

ABSD is another form of tax that has been layered on top of BSD and is dependent on the buyer’s profile and the number of properties that they own. The ABSD rates are as follows:

Singapore citizens: 0% for first property, 17% for second property, 25% for third and subsequent properties

Singapore PRs: 5% for first property, 25% for second property, 30% for third and subsequent properties

Foreigners: 30% for all properties 

Legal Fees

Legal fees are payable to the lawyer who handles the conveyancing and legal documentation for the property purchase. The lawyer fee is calculated based on the property value and can range from 0.2% to 0.4% of the property price.

Valuation Fees 

The fees for valuations are paid to a professional valuer who then determines the value of the property for lending and stamp duty. Possible costs can average from 300 to 3,000 dollars only, depending on the type of real estate as well as its cost.

Agent Commission 

If you decide to search for and purchase a property with the help of professional property agents, you may have to pay a commission which may be a percentage of the price of the property commonly, between 1 to 2%.

Conclusion 

Buying an apartment in Singapore requires following many rules and regulations while not forgetting the processes involved, it is crucial to be up to date with the changes and consult various professionals like property agents, lawyers, and financial advisors.

By understanding the eligibility criteria, financing options, property types, and buying process, you can embark on Buying an apartment in Singapore with greater confidence and clarity.

When selecting your property, do not forget about your financial objectives, current life requirements, and tolerance to risk. Be sure to include all other related costs in the purchase.