Owning a Property in Singapore

Living in Singapore
Land is a scarce commodity in Singapore. Due to this, residential properties are mainly in the form of highrise apartments or condominiums. Landed properties are a luxury as they are very expensive. On average, 80% of Singaporeans live in flats which are built and managed by the Housing and Development Board (HDB) while the rest live in private apartments, condominiums and landed properties.

The population continues to grow as the influx of foreigners increases with the opportunities in Singapore’s bustling economy. The three main property types here are HDB flats, private apartments and landed properties. Foreigners must clearly understand the differences among these properties, especially because of the ownership restrictions for HDB flats and landed properties. It is absolutely important to know about the property you intend to buy. Before deciding on which property type of property you are purchasing, you need to know the general classification of properties as set by the government.

Private apartments
Private apartments fall under the classification of apartments or condominiums, with the distinction between the two being the development size and also built up sizes. Condominiums are usually packaged with more facilities such as swimming pool, tennis court, gymnasium, squash courts, children’s playground, BBQ areas, enclosed car park and security services. These developments are commonly freehold but there are instances where they are 99-year leasehold or 999-year leasehold.

Landed properties
As for landed properties, they are classified as terraced houses, semi-detached houses, detached houses, exclusive bungalows and shop houses. These properties can be very expensive depending on the plot size as well as location and are usually tied to the land title. Most are freehold yet some are 99-year leasehold and 999-year leasehold.

HDB flats
HDB flats are the most sought after properties in Singapore as it is comparatively the most affordable. These properties are built and maintained by the Housing and Development Board which is government financed and subsidised and are 99-year leasehold. One of the advantages of HDB estates is that these developments are designed to be self-sufficient communities with basic amenities such as coffee shops, supermarkets, food centres, schools, clinics, shopping malls, playground and parks. Getting around is also convenient as these developments are well served by a host of public transportation systems like the MRT, buses and taxis. 

Executive condominiums
These are slightly bigger than HDB flats but smaller than private condominiums and were created to fulfill the needs of young professionals wanting something better than a HDB flat but cannot afford the costly private condos. For the first 5 years these condominiums cannot be sold at all but is automatically converted into ‘no restrictions’ after 10 years. Between 5 to 10 years they cannot be sold to foreigners.

There are certain restrictions on foreign ownership of properties in Singapore so it would be wise to do some research and consult a solicitor before buying. As a foreigner, you may rent a private apartment and landed property by producing documents such as a valid work permit or student pass. Recently, the government had relaxed the foreign ownership restrictions to attract foreign investment and talent in a bid to increase the population and strengthen the economy. Those with Permanent Resident status or Citizenship are allowed to purchase HDB flats either through re-sale or directly from the government.

There are certain criteria you need to fulfill before qualifying for the HDB scheme. In a nutshell the criteria are:

  • You must be a Singapore citizen or PR with at least one other sibling who is a PR.
  • You must be at least 21 years old.
  • You must form a family nucleus – either married or intending to get married; or with parents, siblings and/or children.
  • The combined income of all persons in the application must not exceed S$8,000 a month in order to qualify for CPF Housing Grant (Optional).
  • There are other HDB schemes for special cases (visit http://www.hdb.gov.sg/ for details)

Appointing a solicitor
The best and safest way to go about purchasing a property is to first appoint a solicitor. This will help to overcome the web of legalities and help expedite the process without any unnecessary hiccups. Furthermore, the solicitor will look into the overall phases of the purchase process that includes mortgage if a bank mortgage is sought or withdrawal of funds from the CPF Board if this is your option.

Ensure that you have the money before signing any contract because if you are unable to come up with the money to go through with the purchase after the reservation deposits are paid, it may be forfeited unless the cancellation is due to reasons stated in the contract.

Getting financing for the intended property
Getting a bank mortgage to finance the property isn’t difficult as long as you can provide the proper documentation and have a clean financial record. The approval and mortgage amount you get will depend on your income and capacity to service the monthly repayments, your age, employment history, credit history as well as the valuation of the said property by the bank. Under normal circumstances, Singaporeans may get up to 90% while foreigners up to 80% financing on the amount of the property value. If you are a Singaporean, you may withdraw from your CPF savings for the deposit. If your CPF has a substantial amount you may not need much cash to pay for the property but for foreigners, be prepared to fork out at least 20% in cash which would include certain fees. If purchasing a HDB flat, you may want to check your eligibility for a concession loan from HDB before considering a commercial bank for a mortgage. 

Necessary documentation processes you need to know

Option to Purchase
The ‘Option to Purchase’ gives you a 14-day exclusivity period to decide on purchasing the intended property. Upon signing the ‘Option to Purchase’ agreement, 1% of the purchase price is placed as a good faith deposit. If you decide to purchase it within the stipulated deadline, you must return the agreement to the seller together with another 4% or 9% depending on what is agreed on in the agreement. If you fail to honor the agreement within 14 days, your 1% deposit is forfeited and the property may be offered to another buyer.

Offer to Purchase
The ‘Offer to Purchase’ is an agreement where you may not want any time to consider or contemplate on the property but instead prefer to make a binding direct offer to purchase. This agreement is to be prepared by your solicitor or agent, stating the price, completion date and other conditions you want to specify. If the seller accepts the offer, the ‘Offer to Purchase’ agreement must be signed and you can move into the next phase of the process which is the Sales & Purchase Agreement (S&P). At this stage, 5% or 10% of the agreed price is paid to the seller as a deposit.

Sales and Purchase Agreement
During this phase, your solicitor will lodge a caveat on the said property, coordinate with the bank/CPF board for the mortgage up to the preparation of the contracts which will in total take approximately 10 weeks.

Fees and Commissions
You will also need to consider the fees and commissions that will be incurred from the transaction such as:

  • Agent’s Commission

The agent’s commission is usually paid by the seller which could be between 1-2% of the selling price. For a HDB flat the commission is 1%.

  • Solicitor’s Fee

Solicitor’s fee paid by the buyer is between 0.3-0.6% of the selling price. Extra legal fee is applicable if CPF is used to pay for the apartment. The seller pays 0.15% of the transaction value to his/her solicitor.

  • Mortgage Fee

Banks charge administration fee and valuation fee for the mortgage which is usually around S$200-300. You are also required to purchase an insurance policy on the property.  

  • Stamp Fee

The stamp fee is payable to Inland Revenue Authority of Singapore within 14 days upon exercising the Option to Purchase or signing the Sales and Purchase Agreement when buying from a property developer. For properties above S$360,000, the stamp fee is 3% of the purchase price. The mortgage stamp fee is around S$500, which is quite the standard amount for most mortgages.