As keen observers of the Singaporean property market, we can all attest to the fact that the property market in Singapore has been segmented in favor of Singaporean citizens. This is quite discouraging right? Well, this came to be as a result of government thresholds and restrictions on foreigners that were imposed overtime since the early 70s. Fortunately, there is a loophole and thus foreigners can also invest in Singapore property. If you are a foreigner then you do not have to worry since there lie plenty of opportunities for those who want to buy a home within Singapore.
Who exactly is a Foreigner in Singapore?
You are considered a foreigner under Singaporean law if you are not a Singaporean citizen, Singaporean Limited liability partnership, Singapore Company, or Singaporean society. If you do not fall under any of these then you are regarded as a foreigner in Singapore.
What to Buy or Rent
Before you even consider buying or renting property in Singapore, you have to understand the options available for you. There are basically a few property classes to choose from for foreigners;
- HDB flats or public housing-an option that is out of reach for foreigners. Majority of citizens reside in this type of property.
- Private residential property-more costly and has limited restrictions with respect to foreign ownership.
- ECs or Executive Condominiums-a hybrid or public and private property. Foreigners are allowed to purchase these condos strictly 10 years from the time they are completed.
If you are a foreigner and desire to purchase property within Singapore, your primary option would be private property like the new launch condo Clement Canopy. Condo projects and apartment buildings are not restricted for foreigners thus they are an ideal option for foreigners and expatriates. As for landed property or bungalows, foreigners need to seek an approval from the Land Dealings Authority Unit. However, there is an exception; unless it is part of a larger condo project or it lies within Sentosa Cove.
If you want to rent property within Singapore then you are free to rent all property types including public housing. Nonetheless, Singaporean nationals are allowed to rent out their entire flat after they have fulfilled a five-year minimum occupancy period. Thus as an expatriate or foreigner you have to verify if this is fulfilled before you rent it.
Property Ownership Duration
- It is wise to consider how long one want to hold on to property before making a purchase. Expats and foreigners who intend to buy property in Singapore have to evaluate the duration of their property ownership. This is a crucial consideration since the Singaporean government imposes a Sellers Stamp Duty on all individuals who sell a home or property within 4 years after its purchase. If you intend to stay in Singapore for less than 4 years then sell your property then it makes economic sense to simply rent a place.
- If you desire to hold on to property for a long time then you will reap tremendous dividends based on past trends. If you also consider moving out of Singapore early then you can earn substantial amount of passive income by renting it out. Currently expatriates favor resale private condominiums like Costa Del Sol and The Waterside which has sea view of Singapore’s East Coastal line. If you desire to own a brand new under construction sea facing unit, you can look at Seaside Residences which is available in 1st quarter 2017. According to the latest metrics, Singaporean property gross rental yield stands between 2.5 to 5 percent with respect to the market conditions and the property itself.
Consider how Much you can Afford
- Private property is quite expensive in Singapore and hence one has to evaluate their financial standing before buying property. Furthermore, the government regulations only permit banks to lend up to 80 percent of the property value. You should expect to pay as from S$200,000 down payment in the most popular areas such as city fringe. You will definitely get higher prices the closer you move to the core. Proximity to MRT station is also a price factor. In Singapore context, price can be a huge difference between developments that is three minutes and five minutes’ walk to the same MRT Station. Therefore, there is definitely a price difference between Grandeur Park Residences and Summer Gardens as the former is closer to Tanah Merah MRT station.
- Also important to note is the Additional Buyers Stamp Duty (ABSD) that is normally imposed by the government on foreigners and expatriates. This is meant to curb foreign speculation. This levy is imposed in addition to the Buyers Stamp Duty (BSD) normally subjected to every purchase. Nonetheless, there is an ABSD exemption for citizens or permanent residents of countries that are under some specific free trade agreements. For instance, countries such as Iceland, USA (citizens only), Lichtenstein, Switzerland, and Norway.
Cons of Owning Property as a Foreigner
There are trade offs for those who commit themselves to owning property and a mortgage within Singapore.
- First off, if you rent property in Singapore you get the freedom to move around the area and enjoy the different set of characteristics each part has to offer.
- As for those who choose to buy rather than rent, they are locked to one specific part of Singapore and may end up regretting their decision in the future.
- Secondly, private property is quite costly in Singapore and thus the huge down payment you use for buying property could have been channeled to other profitable investments.
- Instead of committing all this money why not invest in stocks, mutual funds, term deposits, or any other viable investment.
Finally, you may get into a huge debt if you have another mortgage within your home country. You will end up being overstretched when servicing both mortgages. Thus it is prudent to seek competent advice from professionals who understand the Singaporean property market.
Despite the downside of being a foreign property owner in Singapore, in the long run it is definitely worth every penny to buy rather than rent property in Singapore. Many foreigners and expatriates who have come to Singapore ended up falling in love with the country and eventually bought property. However, if you will stay for a short time in Singapore then it will be wise to rent so that you can get the chance to experience all that Singapore has to offer. If you want to make things much easier then it is good to hire a licensed real estate agency that will walk with you through all the facets of foreign property ownership in Singapore. With that said and done, you are halfway towards owning your own property in this beautiful country called Singapore.