In most cases the purchase of property in Singapore is challenging and is one of those decisions that must be evaluated well prior to making a purchase. There are lots of factors that need to be considered since home ownership comes with some associated costs and extra responsibilities. Even though the search for your dream home may seem stressful, at the end you will receive priceless rewards. Government tips and grants to home buyers can help reduce the costs of owning a property in Singapore. It is prudent to keep a keen eye on what is happening in the Singaporean real estate market if at all you want to benefit from the schemes and grants provided by the government.
When considering a house to buy in Singapore, you need to know the various types of properties available;
- HDB or Public Housing
These types of apartments refer to government housing in Singapore. HDB stands for Housing Development Board. Foreigners are not allowed to own this type of property in Singapore.
- Public-Private Hybrid
ECs or Executive Condominiums refer to property which the government allows foreigners to purchase 10 years from the time construction was completed. They usually share the design and facilities of a private condominium. The ECs in Singapore are subject to a minimum occupation period of 5 years after which you are allowed to sell it on the open market to Singaporeans and PRs. A Foreigner will only be allowed to buy an HDB flat if they are marrying a Singaporean.
- Private Residential Housing
This type of property comes in two types; landed property and condominiums/apartments. Private property owners prefer condominiums and apartments since they are not subject to government restrictions with respect to foreigners. As a matter of fact, expats tend to buy this type of property. For those who would love to buy a condo in Singapore this is a perfect choice.
Landed properties on the other hand include; houses, shophouses, cluster houses, bungalows, and terrace houses. They are bigger, private, and provide spacious living. Singaporean citizens are allowed to buy landed properties without restrictions. However, foreigners require an approval from the Land Dealings Authority Unit if they want to purchase landed property. Nonetheless, there are some exceptions; if the house is linked to a larger condominium project or it is situated at Sentosa Cove. To get a quick approval, buyers should seek it from the Singapore Land Dealing Unit.
Differences between Public and Private Housing
Some of the major differences between these two include;
- Eligibility for Grants
As we all know, grants are not available for those who buy private houses. However, there is an exception when it comes to ECs. These are normally financed by bank loans and on the 11th year they become private. You can get grants for ECs and they are available as from $5000 to $30000 with respect to your level of income. This may explain why ECs are so popular. They are the only form of private housing that qualifies for government subsidy. Buyers should therefore take advantage of this.
- Resale Restrictions
Public housing is subject to a Minimum Occupancy Period of 5 years. The owner has to live in the property for at least 5 years before they can rent out the whole flat. Such a owner should also be based in Singapore during this 5 year period. Furthermore, a resale levy is applicable which will reduce your subsidies in case you buy another HDB.
Private housing is not subject to Minimum Occupancy Period. However, the owner has to pay the Seller Stamp Duty if he or she sells the property within the first 4 years (1st one year 16%, 1 to 2nd year 12%, 2nd to 3rd year 8%, 3rd and 4th year 4%, and more than 4 years 0 SSD). You can sell the private property whenever you want for as long as you are ready to pay the SSD.
- Possibility of Freehold
99 years leasehold applies to all property whereas for private property, freehold land might be available. New launch condos sitting on land banks from government land sales are all 99 years. It is not in the government’s dictionary to sell freehold land to developers which explains why both government land sales developments in 2017 such as Clement Canopy and Seaside Residences are all 99 years. With some properties that date back to the colonial era you may get a 999 years lease. In terms of value evaluation, leasehold property tends to be lower in value when compared to freehold property.
- Home Loan Financing
You can only get a bank loan financing for all forms of private housing, with ECs included. As for private housing the banks provide financing to up to 80% of the purchase price. You should however be prepared to pay the 5% absolute minimum in cash. Furthermore, minimum cash requirements may cost up to 25% when other factors such as CPF balance and Debt Servicing Ratio are considered.
For public housing the buyer can borrow up to 90% and pay no down payment when paid via CPF. Also important to note is the $2000 fixed amount that applies as option fees for HDB BTOs irrespective of the unit you are buying. As for private properties, you pay 1% for the option fee which is refunded when you exercise your option.
As for home loan interest rate structures, financial providers do not provide perpetual fixed rates since they are subject to complex financial uncertainties. The interest rates provided by home loans tend to fluctuate after 3 to 5 years. Therefore, you need to understand how the rates work and refinancing options for you to keep them low. An expert comes in handy when it comes to such issues.
The public housing on the flipside offers a perpetual fixed rate through HDB loan. Nonetheless, going by the market trends, the HBD loan has been quite costly when compared to bank loans for the last 5 years.
The rules and regulations that apply to private and public housing in Singapore may seem overwhelming to comprehend. However, with an expert you can easily understand how they work and make the best of the government grants and schemes. Foreigners and residents alike should take advantage of the benefits offered by the government to those buying property. It is a bonus as government is also very transparent about neighborhood rejuvenation, upgrading of MRT lines & stations etc as this information is all readily available from media and government websites. Such Masterplan information will affect property prices with the most recent one being the upgrading of Tanah Merah MRT station to cater for the increasing traffic towards Changi Expo and Changi Airport. This upgrading news coincides with the launching of upcoming Grandeur Park Residences which is only minutes’ walk to Tanah Merah MRT and will definitely boost up its prices.