A Short Expat Guide To Buying A House In Singapore

Since the year 1973, the Singaporean Government has restricted the ownership of residential property in the country by foreigners. Ownership of houses is governed by the Residential Property Act. This Act is mainly aimed at giving the locals a stake in their country by being able to buy and possess their own houses. At the same time, it also encourages foreigners who make an economic contribution to the country to purchase property for their own occupation.

Investing in the Singaporean real estate industry can be quite complex, especially for a foreigner. Given below are the steps that need to be followed to purchase a house in Singapore:1. Contact the seller or the broker and state your interest to buy the house.
2. Visit the property, inspect it, and agree upon the price. This may require a few rounds of negotiation, which could take a while.
3. Have your lawyer draw up an “Option To Purchase”. This is an essential step as it gives you the exclusive right to buy the house for two weeks by paying just 1% of the property price. This amount is adjusted with the balance payment if you proceed with the purchase. It is non-refundable if you decide not to buy the house.
4. Within the next 14 days, you must pay off 10% of the property price to let the seller know that you are genuinely interested in buying it.
5. Ask your lawyer to prepare the documents for transferring the property title. You will need to pay off the remaining balance amount to complete the sale.

Of course, there are several other factors that you need to consider before buying a property in a foreign country. Below are a few pointers to keep in mind before you buy a house in Singapore.

Budget

As in most other countries, the purchase of a house not only includes the cost but also several other expenses. These include:

● VAT for new properties (18%)
● Stamp duty on the purchase of your first property (up to 3%, depending upon the value of the house)
● Registration fees for the transfer of ownership

Since buying properties is quite a complicated procedure, most expats end up consulting a lawyer for the paperwork. The legal fees could have an impact on your budget, as most lawyers charge around 0.30% of the property price for basic consultation. This may increase if any additional work is required. For properties purchased through a broker or an estate agent, an additional 1% fee should also be set aside beforehand.

All expats are advised to put down around 30% of the purchase price to safeguard themselves against market downturns.

Eligibility

There are no restrictions on the ownership of condominiums (apartments) for expats. However, only those who hold Permanent Residency and have special approval from the Land Development Authority can purchase landed properties, a phrase that refers to a house that has an attached piece of land or a yard. Expats therefore have to seek special approvals before they can purchase a bungalow, or a semi-detached, detached or terraced house.

Market trends

The real estate market in Singapore is quite volatile. At times, private residential properties are high in demand and fetch desirable prices that are highly attractive to the owners. However, it often takes a while to find a suitable buyer who is willing to match the asking price. Expats who have to sell their properties at short notice (due to the end of a contract or employment) are at a risk of incurring losses. You should only think about purchasing a house in Singapore if you know you have sufficient time to do so, as it may take several months to close the sale.

Property Taxes & Maintenance Costs

All home owners are required to pay monthly, quarterly or annual maintenance costs for upkeep of the property. The amount may vary, depending upon the size, price and location of the house.

In addition to this, owners are also supposed to pay property taxes to the Singapore government. The amount is calculated by multiplying the tax rate (progressive 10% to 20%) by the annual property value (potential annual rent). Expats who do not rent their properties out also have to pay this tax. The tax rate for owner-occupied houses is much lower (4% to 6%)

Rental Income Tax

Any expat who earns an income through rent in Singapore needs to declare the amount in their income tax return, under the heading “Other Income: Rent From Property”.

The income that is taxable is the annual rent amount minus the deductible costs (interest paid on home loan, property tax, fire insurance, maintenance and utilities)

Expats who have a Permanent Residency in Singapore and spend at least 183 days a year in the country are required to pay a progressive tax rate of 0-20%, depending upon their taxable income bracket. Non-resident foreigners who earn rent in Singapore are charged a flat tax rate of 20%.