Singapore is one of Asia’s most advanced and cosmopolitan cities. It is an island state with a limited amount of undeveloped land. Because land is scarce, it is a precious resource and property is constantly in demand.
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Majority of the population live in high-rise HDB (Housing & Development Board flats (public housing) and condominiums. The rest of the people here own and live in private apartments/condominiums or live in a landed property.
Investing in real estate is very common among wealthier Singaporeans. More than 90% of households own their homes and are equipped with modern amenities.
Residential properties in Singapore can be divided into three main categories: Private apartments, landed properties and HDB apartments.
Private apartments are classified either as apartments or condominiums by the government. The distinction is somewhat artificial, but typically apartments are smaller developments and condominiums generally have more facilities and are larger. Most condominiums come with swimming pool, tennis court, gym, squash court, children playground and a BBQ area. They also typically have their own enclosed car park and security guards looking after the security at the entrances and the whole area around the condominiums. Tenure of private apartments is commonly freehold, 99-year leasehold or 999-year leasehold. A freehold title enables the owner to hold the property in perpetuity, whilst a leasehold title confers possession upon the purchaser for the duration of the lease (for example, 99 or 999 years). On expiry of the lease, the title and interest in the property revert to the State.
Interest rates in Singapore are currently relatively low which is helping to attract more buyers to the property market. Home financing can be quite affordable and if an investor decides they want a mortgage to buy their investment property in Singapore they should have this agreed in principal before making any offer to buy otherwise the sale could fall through and the potential buyer could lose up to a 10% deposit.
On deciding to purchase a property the first step is to get an Option to Purchase. This is done by making a payment of one percent of the purchase price. This will effectively take the property off the market and allow the investor’s solicitor to have time to check out whether all is in order with the property and whether the investor will require permission to buy it.
Option to Purchase is usually prepared by the seller's (vendor) solicitor or property agent is valid for a 14 day period after which time a buyer either forfeits his 1% and the property goes back on the market or the buyer pays a further 9% of the purchase price to make up a 10% deposit. At this stage the property buying process moves forward and a preliminary contract is signed by the vendor and buyer.
Any further surveys, searches and permission seeking will take place before the final contract is signed and the property is exchanged. There is usually a 1% fee payable by the buyer to the estate agent in Singapore.
Besides this, stamp fee will be payable to Inland Revenue Authority of Singapore within 14 days upon exercising the Option to Purchase or signing the Sales and Purchase Agreement when you buy from a property developer. For properties above S$300,000, stamp fee payable will be 3% of the purchase price minus S$5,400.
Lawyer’s fees and any charges attributed to acquiring permission to buy property in Singapore or securing a mortgage are extra.
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