If you are planning to purchase your first property in Singapore. Please refer to the frequently asked Q&A.
Q-Should I buy the property jointly with my spouse or children?
There is no restriction to buy it solely or together with your spouse or children. However, only the buyers can secure a mortgage loan. Singapore banking regulation do not allow non-buyers to secure loan.
If buyers plan to buy jointly, they can have the option to buy under “Joint Ownership” so that both of them own the property equally. This is also commonly known as “The right of survivorship”. This clause is used by couples or parents and children buying together. In the event of one passing away, the property automatically goes to the other 100%.
Another type is called “Tenancy in Common”. This allows multiple ownership whereby each person has a fixed share of the property. In the event that one party passes away, that person’s share in the property will be distributed according to his/her will. This is frequently used for unrelated parties buying a property together for investment.
What is the difference between freehold, 999 years leasehold and 99 years leasehold?
There are basically 2 main categories of tenure in Singapore.
Freehold and 999 years leasehold are usually grouped together. Freehold properties are termed as “Estate in Fee Simple” or “Estate in Perpetuity”. They are almost the same meaning. 999 years leasehold means the tenure start from a specific year. Since 999 years are a long time, the market value is approximately the same as any freehold property. Such properties are found across Singapore and mainly in more established towns. This is the best category.
Leasehold ’99 years’ or ‘107 years’ properties are available in many parts of Singapore. They are usually available in newer towns or near MRT stations. These land parcels are traditionally sold by the state and thus their tenure is usually 99 years. Most of the properties fall into this category. The value of such properties is less, especially if they are old with fewer years remaining on the lease. If the lease gets shorter than 60 years, the value can be affected as mortgages can be more difficult to obtain. However, such properties have the option of being redeveloped by private developers and get the lease top up, subject to government approval. Rental yield for such properties tends to be higher compared to a freehold or 999 years properties.
Q – What are the taxes that I need to pay?
The Buyer Stamp Duty (BSD) and Addition Buyer Stamp Duty (ABSD) are the 2 main taxes that buyers need to pay, whether you are a citizen or a permanent resident. The tax rate varies according to the different ownership. Please refer to the Tax Section of this page.
Q- Is there tax on property rental income?
Yes. Rental income refers to the full amount of rental income you receive and related payments you make when you rent out your property. This includes rent of the premises, maintenance, furniture and fittings. Rental income is subject to income tax. This means that any profit or net amount left once you have added together your rental income and deducted any allowable expenses is taxable.
There are 2 types of tax rates for residential properties. They are owner-occupied tax rates which enjoy lower tax rates than residential properties that are not occupied by the owner(s). Non-owner occupied residential properties that are rented out for investment gains such as condominiums or other residential properties are taxed at the residential tax rates.
Non-residential properties such as commercial and industrial buildings and land are taxed at 10% of the Annual Value.
Please refer to www.iras.gov.sg for more information.
Q- Are there capital gains tax for property?
Yes and No. Generally, the gains derived from the sale of a property in Singapore are not taxable as it is a capital gain. The gains may be taxable if the individual buys and sells property with a profit-seeking motive. When a person is deemed to be trading in properties, the gains from the sale of property in Singapore is considered taxable income. Whether a person is deemed to be carrying on a trade will depend on individual circumstances.
Some criteria used by IRAS to assess if you are trading in properties are as follows:
- Frequency of transactions (buying and selling of properties);
- Reasons for acquiring and selling of property;
- Financial means to hold the property for long term; and
- Holding period
Q – What are the other tax related costs of buying a property in Singapore?
Property management fees (maintenance fees) – it varies depending on the type and size of your property and it should range from S$300 to S$600 per month. For luxury property, it could range up to S$1,000 per month or more.
Property tax – Property tax is a wealth tax levied on property ownership. It is not a tax on rental income. All property owners have to pay property tax based on the annual value of their property, irrespective of whether the property is occupied or vacant. Property tax range from S$500 to S$5,000 per year depending on the annual value of your property.
GST (Goods and Services Tax or VAT) – Not applicable if you are buying a residential property.
Other minor costs – Utilities bills and telecommunication charges.
Seller Stamp Duty – Singapore does not have a capital gains tax if you dispose your property and make a profit on it. However, there is a Seller Stamp Duty (SSD) introduced to curb property owners from flipping their properties to make a quick windfall. SSD applies if you have purchased any residential property on or after 11 Mar 2017.
- If holding period is up to 1 year: 12% on the actual price or market value, whichever is higher
- If holding period is more than 1 year and up to 2 years: 8% on the actual price or market value, whichever is higher
- If holding period is more than 2 years and up to 3 years: 4% on the actual price or market value, whichever is higher
- If holding period is more than 3 years: No SSD is payable.
Q- How much can I borrow?
If this is your first housing loan in Singapore, the financing is up to 75% of the purchase price or property market value, whichever is lower. If you are currently serving another mortgage, your loan amount may vary.
Q- What are the documents required for the loan application?
The following documents are required for a Home Loan application:
- Duly completed loan application form
- Copy of your passport
- Copy of Identity Card
- Latest certified true copy of your income documents:
- Pay slip or employment letter AND bank statement (latest 3 months) showing salary credit.
- For self-employed, latest 3 months’ bank statements and latest two years’ notice of tax assessment
- Copy of property’s option to purchase or copy of Sales & Purchase Agreement.
Q- Is fire and mortgage insurance necessary?
Yes. fire insurance is required by the bank to insure your property against the risk of fire. You may at your own discretion purchase mortgage insurance for your mortgage.
Property Market & Information
Q- How is the property market in Singapore?
The property market in Singapore is fairly stable over the years. Singapore is a financial centre in Asia with a stable government. It has attracted many MNCs to set up their regional headquarters. Singapore is a cosmopolitan city. It is also an attractive place to live, work and play. Property prices in Singapore has always been increasing after the last trough in 2015-2016 when prices has fallen after much government intervention to cool the market. Going forward, prices have been increasing so far from the beginning of 2017 till present. This is due to the pent-up demand from buyers and a strong economy.
Q – How do I search for my ideal property?
You can either search for a property by yourself or engage a qualified property agent. It will be tiring and stressful to search for a property if you do not have much prior experiences. Alternatively, you can engage a qualified property agent who is familiar with the rules and regulations. You can benefit tremendously from their expertise and ground knowledge. Moreover, you do not need to pay them for their services as most of them will be securing their commission from the sellers/developers directly.
Q– Can I get a discount from the prices shown?
No. Most of the prices stated are generally fixed. There could be times when developers may offer some discounts / rebate off the published prices for certain units. It is always good to check with your real estate agent on this.
Q- Will you help us to lease and manage the property?
Yes. We will continue to manage and secure a tenant on your behalf. The usual fees we charge is a month commission for a rental contract of 2 years. Or half a month commission for a one year rental contract. Our job scope includes finding potential tenants, doing up the contract and handing over the premise to the tenants.
Q- What are the on-going expenses of investment properties?
You will need to set aside expenses for the monthly maintenance fees to upkeep the property. Such fees vary according to the property. They could range from SG$200 to as much as SG1,000 for bigger property. You will also need to pay yearly property tax imposed by the tax department. In addition, you will need to pay for the usual repair works that are carried out on your investment property.
Q- Can I buy an investment property and immediately rent it out?
Yes and No. If you are buying a new launch which the property has yet to receive its Temporary Occupation Permit (TOP) or yet to collect key. You will need to wait till it obtains TOP before you can rent it out. Alternatively, if you are buying a resale property or a new launch which the property has received its TOP, you can rent it out almost immediately.
Q-What is the Rental Rates like?
Residential properties has an average rental yield of 2% to 3% or more.