So you’ve decided to head to the little red dot that is Singapore to work, settle down and stay for the foreseeable future.
If you’re looking to buy a house, that might be a good choice if you’re staying for more than a few years.
With the money put into an appreciating asset, you would save more than, as they say in Singapore, coffee money over a period of a few years.
But where do you get started since you’re not a Singaporean? What rules, regulations and laws do you need to observe?
Here’s a quick guide on what to look out for if you’re a foreigner (non-Singaporean) deciding to buy a property in Singapore.
Who or what is a foreigner?
According to the Singapore Land Authority, a foreigner is any person who is not the following:
- Singapore citizen;
- Singapore company;
- Singapore limited liability partnership; or
- Singapore society.
You can’t buy landed properties
Properties in Singapore are generally categorized into landed and non-landed properties.
Landed properties include terraced, semi-detached, detached houses and bungalows.
Non-landed are generally multi-story apartments, walk up flats and condominiums.
If you very much want to stay in a landed property on the main island (not Sentosa), you can try writing in to the Land Dealings Approval Unit to appeal.
The Residential Property Act goes further to list the following that cannot be bought by a foreigner.
- Vacant residential land;
- Terrace house;
- Semi-detached house;
- Bungalow/detached house;
- Strata landed house which is not within an approved condominium development under the Planning Act (eg. townhouse or cluster house);
- Shophouse (for non-commercial use);
- Association premises;
- Place of worship; and
- Worker’s dormitory/serviced apartments/boarding house (not registered under the provisions of the Hotels Act).
If you want to own a piece of Singapore as a foreigner, the following do not require approval for purchase under the Residential Property Act.if
- Condominium unit;
- Flat unit;
- Strata landed house in an approved condominium development;
- A leasehold estate in a landed residential property for a term not exceeding 7 years, including any further term which may be granted by way of an option for renewal;
- Shophouse (for commercial use);
- Industrial and commercial properties;
- Hotel (registered under the provisions of the Hotels Act); and
- Executive condominium unit, HDB flat and HDB shophouse
Purchase taxes and stamp duties
As a foreigner, you will have to pay additional stamp duties on your residential property purchase.
All purchasers, regardless of nationality, must pay BSD in the following manner of calculation. This is updated to reflect the 20 Feb 2018 policy change.
- 1% on the first S$180,000
- 2% on the next S$180,000
- 3% on the next S$640,000
- 4% on remaining amount
A quicker way to calculate BSD is to use the following formula.
- For houses below S$1m, use “higher of purchase price or market value” multiplied by 3% – S$5,400.
- For houses above S$1m, use “higher of purchase price or market value” multiplied by 4% – S$15,400
For example, I buy a house at S$1m. The market value (valuation) is S$950,000. The higher of both is the price of S$1m.
The BSD is calculated as S$1m x 3% – S$5,400 = S$30,000 – S$5,400 = S$24,600.
I buy a house at S$2m. The market value (valuation) is S$1.9m. The higher of both is the price of S$2m.
The BSD is calculated as S$2m x 4% – S$15,400 = S$80,000 – S$15,400 = S$64,600.
In addition to the BSD, Permanent Residents (PRs) have to pay stepped up rates of 5 to 10% of the higher of purchase price or market value while foreigners have to pay a flat 20% of the higher of purchase price or market value.
Figures in the table refer to higher of the purchase price or market value.
|Profile of Buyer||BSD Rates||ABSD Rates on/after 6 Jul 2018|
|Singapore Citizens (SC)1 buying first residential property||1% on first $180,000
2% on next $180,000
3% on next S$640,000
4% on remaining amount
|SC1 buying second residential property||12%|
|SC1 buying third and subsequent residential property||15%|
|Singapore Permanent Residents (SPR)1 buying first residential property||5%|
|SPR1 buying second and subsequent residential property||15%|
|Foreigners (FR) and entities buying any residential property||20%|
|Entities2 buying any residential property||25%3 plus Additional 5% for Housing Developers4 (non-remittable5)|
1 Whether owned wholly, partially or jointly with others.
2 An Entity means a person who is not an individual. It includes the following:
- An unincorporated association,
- A trustee for a collective investment scheme when acting in that capacity,
- A trustee-manager for a business trust when acting in that capacity
- The partners of the partnership whether or not any of them is an individual, where the property conveyed, transferred or assigned is to be held as partnership property.
3 As entities, developers will also be subject to the ABSD rate of 25% for entities. Developers may apply for remission of this 25% ABSD, subject to conditions.
4 Housing Developers refer to entities in the business of housing development (i.e. construction and sale of housing units) with respect to the subject property acquired.
5 This 5% ABSD for Housing Developers is in addition to the 25% ABSD for all entities. This 5% will not be remitted, and is to be paid upfront upon purchase of residential property.
5 ABSD is to be rounded down to the nearest dollar.
Sale taxes and stamp duties
For all sellers, regardless of whether you’re a Singapore Citizen, Permanent Resident or Foreigner, the following Seller Stamp Duties (SSD) apply.
The idea of the SSD is to prevent speculators from buying and flipping the house in a short timeframe.
To get over this hurdle and make a profit with a purchase, you need the value of the property to rise more than 4% p.a.
- If you sell within one year, you pay 12% of the actual price or market value, whichever is higher.
- If you sell within two years but more than one year, you pay 8% of the actual price or market value, whichever is higher.
- If you sell within three years but more than two years, you pay 4% of the actual price or market value, whichever is higher.
|Date of Purchase or Date of Change of Zoning / Use||Holding Period||SSD Rate (on the actual price or market value, whichever is higher)|
|On and after 11 Mar 2017||Up to 1 year||12%|
|More than 1 year and up to 2 years||8%|
|More than 2 years and up to 3 years||4%|
|More than 3 years||No SSD payable|
Singapore is a country that allows capital to flow relatively freely, so you should not have a problem securing a Singapore dollar denominated loan here.
The three big local banks – DBS, UOB and OCBC command a big proportion of the market.
Loans usually come in the form of a fixed or floating format.
The floating rate home loans are usually pegged to SIBOR rates, with different banks stacking on a spread on top of the SIBOR rates together with various lock in periods.
Some other loan providers include Maybank, HSBC, Bank of China, CIMB, RHB, Hong Leong Finance, Alliance, Singapura Finance, SBI, ICBC, Citibank, ANZ and Standard Chartered.
Loan to value limits for property purchases
The following flowchart will help you determine how much loan you can take for your property purchase, and how much cash downpayment you need to make.
Start from the top – how many home loans will you currently service after you take the coming one
On the second level, decide how long you want the tenure of the loan to be. Generally, buyers do not take loans >30 years, as the LTV drastically drops. Try to remain within 30 years.
On the third level, add the tenure of the loan to your current age. If you are buying jointly with someone, use your income-weighted-average-age. (Quick example: If you’re 40 and earn S$10,000 a month, and your partner is 30 and earns S$5,000 a month, the income-weighted-average-age is 40 x 10,000 / 15,000 + 30 x 5,000 / 15,000 = 36.7 years (always round up, in this case to 37 years old). If the sum of loan tenure and your age (or income-weighted-average-age). Try to stay below 65 for this number.
On the next two levels, you will see how much LTV you will be able to take for your property purchase and the cash downpayment required.
With regards to bank loans, all buyers (Singapore citizens, Permanent Residents and Foreigners) need to note that the loan proportions of valuation they are taking will progressively be smaller the more outstanding loans one has.
So there you have it, a few things a foreigner should look out for if they are interested to buy a property in Singapore.
The biggest item would be the ABSD as that usually runs up into the hundreds of thousands.
The amount usually needs to be paid in cash as most foreigners will not have any CPF monies.
If you’re interested to know about buying property in Singapore, do contact us using the following form.