How to Buy Property in Singapore

A simple 7-step guide to owning your very own property in Singapore! Inclusive of info on real estate agents, detailed transaction procedures, property taxation and rental!

Steps

1. Appoint a property agentThe first step to any property transaction is appointing a property agent. As your representative throughout the process of buying and selling, it is crucial for him or her to be competent and experienced in the market. Stay with one agent per transaction because appointing more than a representative will lead to confusion and embarrassment since most agents in Singapore share the same portfolio. Be frank with your agent as to the kind of property you are looking for, such as dimensions, location and price. Clear instructions will help your agent direct you to the ideal residence quickly and accurately. A good agent can also act as a consultant should you require any legal and financial advice upon purchase.
2. Decide on a propertyBased on your needs, the housing agent will search for suitable living spaces. Once narrowed down to the select few, you will be cordially invited to view the units. During the rounds of inspection, pay attention to the furnishings, fixtures and other special arrangements, if any. Do not feel hesitant in negotiating for renovation and price. Property investments are long term big ticket items; so make sure you are perfectly satisfied with the unit before agreeing to the purchase.
3. Option to Purchase / Offer to PurchaseOnce you have your eyes on a property, you should prepare 1% of the purchase price as consideration in exchange for the Option to Purchase from the seller. Upon which, you will be given 14 days to decide whether you want to purchase it. If you choose to do so, you should exercise the option by signing it and forwarding it to the seller’s solicitor together with another 4% to 9% of the purchase price. Alternatively, you can request your agent or solicitor to draft the Offer to Purchase stating clearly the price and terms and conditions. Most agents can refer you to a reputable solicitor if your wish to consult any.
4. Complete the transactionLeave things in the hands of your solicitor. He or she will complete the sale in 8 to 10 weeks by lodging a caveat on the property and coordinating with the financial institutions if necessary. You can inspect the property one last time before the completion of sale if you seek permission to do so in the Option to Purchase. You should check the furnishings of the property and the items that the seller has agreed to sell together with the unit. Within 14 days of signing the Option to Purchase or the Sales and Purchase Agreement, a stamp duty of 3% of purchase price has to be paid to Inland Revenue Authority of Singapore if the property exceeds S$300,000. While the agency commission is borne by the seller, which varies from 1% to 2% of the purchase price, you need to bear the legal cost. A one-off fee of S$3,000 is payable to your solicitor for every transaction.
5. Apply for bank loanAs a foreigner earning an income in foreign currency, you can secure a loan from a Singaporean bank for up to a maximum of 80% of the purchase price. It is important to note that the amount of loan is subject to property valuation by the lenders. From our experience in Singapore Prime Districts, the majority of foreign borrowers can secure a loan of 70% of the purchase price. Banks in Singapore are well known for their competitive lending interest rates which currently stand at an average of 3.5% to 4%. This is significantly lower than the rate being offered by other regional cities such as Hong Kong whose prime lending rate is 6.5%.
6. File for property taxYou should file for property tax on an annual basis after gaining ownership of the property. The amount payable is calculated by multiplying the annual value of the property with the tax rate. Annual value or AV is taken to be the estimated annual rent of your property. As for the tax rate, it is 10% annually but for those who occupy the property themselves, they can apply for a concessionary rate of 4%.
7. Let out the propertyIf you are purchasing the property as an investment, do take note of the rental yield of the unit. Your agent should give you a close estimation of the monthly rental of your purchase. Prime locations like Districts 9, 10 and 11 easily weld the highest rental yields due to desirability and great demand. However, the Inland Revenue Authority of Singapore treats rental as part of income and charges income tax accordingly. For a non-residential foreigner without employment or pass for long stay, the tax payable is 20% of rental. For a foreigner with valid employment in Singapore, the tax is much lower.