Buying a Property in Singapore
Singapore Land is a scarce commodity in Singapore. Due to this, residential properties are mainly in the form of highrise apartments or condominiums. Landed properties are a luxury as they are very expensive. On average, 80% of Singaporeans live in flats which are built and managed by the Housing and Development Board (HDB) while the rest live in private apartments, condominiums and landed properties.
The population continues to grow as the influx of foreigners increases with the opportunities in Singapore’s bustling economy. The three main property types here are HDB flats, private apartments and landed properties. Foreigners must clearly understand the differences among these properties, especially because of the ownership restrictions for HDB flats and landed properties. It is absolutely important to know about the property you intend to buy. Before deciding on which property type of property you are purchasing, you need to know the general classification of properties as set by the government.
Singapore Housing Type
A) Housing and Development Board (HDB)
The Housing and Development Board (HDB) is a common feature of Singapore real estate listings in Singapore with more than 80% of Singaporeans living in public housing. Purchases of HDB flats are restricted to Singaporeans and Permanent Residents. For the HDB flat classification system, the living room is counted as 1 room. You may refer to the HDB website for more information.
- 2 Rm (2 room HDB Flat). 1 bedroom with a built-in area of about 45 sq m or 485 sq ft.
- 3 Rm (3 room HDB Flat). 2 bedrooms with a built-in area of about 70 sq m or 754 sq ft.
- 4 Rm (4 room HDB Flat). 3 bedrooms with a built-in area of about 90 sq m or 969 sq ft.
- 5 Rm (5 room HDB Flat). 3 bedrooms with a built-in area of about 110 sq m or 1,184 sq ft.
- EA (Executive Apartment). 3/4 bedrooms with built-in area of about 150 sqm or 1,615 sqft.
- EM (Executive Mansionette). Same as Executive apartment, except it has two levels.
- 6 Rm (6 room HDB Flat). Jumbo flat joint by two 3 room flats
B) Condominium / Private Apartment
Private apartments and condominiums come in various sizes from as small as 500 sq ft to 8,000 sq ft. The units in private residential projects range from studio, 1, 2, 3 and 4-bedroom units to penthouses. Residents, both Singaporeans and foreigners, share a common compound and facilities such as clubhouses, playgrounds, gymnasiums, swimming pools, tennis courts and BBQ pits. Most condominiums also come with 24-hour security surveillance and intercom systems. These developments are commonly freehold but there are instances where they are 99-year leasehold or 999-year leasehold.
- Condo (Condominiums). Apartment with facilities.
- Duplex. Apartment divided into two living residences, having separate entrances.
- HiRise (High rise Apartment). Usually with no facilities.
- LoRise (Low rise Apartment). Usually with no facilities.
- Mansionette. Apartment with two levels, double storey.
- Penthse. Biggest unit in a condo or apartment block. Usually on top floor and two levels.
- TownHse. Landed house that shares the same compound or facilities (if any).
- WalkUp. Low rise apartment without a lift, have to walk up using the stairs.
C) Landed Property
Conventional landed property on Singapore real estate listings refer to houses which come with private garden compounds and/or garages. These properties can be very expensive depending on the plot size as well as location and are usually tied to the land title. Most are freehold yet some are 99-year leasehold and 999-year leasehold. Singapore Government has imposed restrictions on foreign ownership of private residential property in Singapore. You may refer to the Singapore Land Authority website for more information.
- Bungalow. Free standing house with no shared wall with others except the fence.
- Semi Detached. A pair of houses, two houses joint side by side.
- Inter Terrace (Intermediate Terrace House). A row of houses joint side by side.
- Corner Terrace (Corner Terrace House). The last house of the row of houses.
D) Others
- Colonial House, Bungalow: Houses built in the pre-war British colonial times.
- Conservation House, Shop House: Houses or Shop Houses that are marked for conservation.
- Black and White House: Houses built in the pre-war British colonial times, usually with white external walls with wood support painted in black.
- Heritage House: House constructed with a touch of Asian heritage and culture, Balinese concept and loved by expatriates.
Appointing a solicitor
The best and safest way to go about purchasing a property is to first appoint a solicitor. This will help to overcome the web of legalities and help expedite the process without any unnecessary hiccups. Furthermore, the solicitor will look into the overall phases of the purchase process that includes mortgage if a bank mortgage is sought or withdrawal of funds from the CPF Board if this is your option.
Ensure that you have the money before signing any contract because if you are unable to come up with the money to go through with the purchase after the reservation deposits are paid, it may be forfeited unless the cancellation is due to reasons stated in the contract.
Getting financing for the intended property
Getting a bank mortgage to finance the property isn’t difficult as long as you can provide the proper documentation and have a clean financial record. The approval and mortgage amount you get will depend on your income and capacity to service the monthly repayments, your age, employment history, credit history as well as the valuation of the said property by the bank. Under normal circumstances, Singaporeans may get up to 90% while foreigners up to 80% financing on the amount of the property value. If you are a Singaporean, you may withdraw from your CPF savings for the deposit. If your CPF has a substantial amount you may not need much cash to pay for the property but for foreigners, be prepared to fork out at least 20% in cash which would include certain fees. If purchasing a HDB flat, you may want to check your eligibility for a concession loan from HDB before considering a commercial bank for a mortgage.
Necessary documentation
Option to Purchase
The ‘Option to Purchase’ gives you a 14-day exclusivity period to decide on purchasing the intended property. Upon signing the ‘Option to Purchase’ agreement, 1% of the purchase price is placed as a good faith deposit. If you decide to purchase it within the stipulated deadline, you must return the agreement to the seller together with another 4% or 9% depending on what is agreed on in the agreement. If you fail to honor the agreement within 14 days, your 1% deposit is forfeited and the property may be offered to another buyer.
Offer to Purchase
The ‘Offer to Purchase’ is an agreement where you may not want any time to consider or contemplate on the property but instead prefer to make a binding direct offer to purchase. This agreement is to be prepared by your solicitor or agent, stating the price, completion date and other conditions you want to specify. If the seller accepts the offer, the ‘Offer to Purchase’ agreement must be signed and you can move into the next phase of the process which is the Sales & Purchase Agreement (S&P). At this stage, 5% or 10% of the agreed price is paid to the seller as a deposit.
Sales and Purchase Agreement
During this phase, your solicitor will lodge a caveat on the said property, coordinate with the bank/CPF board for the mortgage up to the preparation of the contracts which will in total take approximately 10 weeks.
Fees and Commissions
You will also need to consider the fees and commissions that will be incurred from the transaction such as:
Agent's Commission
The agent’s commission is usually paid by the seller which could be between 1-2% of the selling price. For a HDB flat the commission is 1%.
Solicitor's Fee
Solicitor’s fee paid by the buyer is between 0.3-0.6% of the selling price. Extra legal fee is applicable if CPF is used to pay for the apartment. The seller pays 0.15% of the transaction value to his/her solicitor.
Mortgage Fee
Banks charge administration fee and valuation fee for the mortgage which is usually around S$200-300. You are also required to purchase an insurance policy on the property.
Stamp Fee
The stamp fee is payable to Inland Revenue Authority of Singapore within 14 days upon exercising the Option to Purchase or signing the Sales and Purchase Agreement when buying from a property developer. For properties above S$360,000, the stamp fee is 3% of the purchase price. The mortgage stamp fee is around S$500, which is quite the standard amount for most mortgages.
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