A Simple Guide to Property Buying in Singapore

As the year comes to a close, now is a good time to make an informed decision in Singapore’s property market. However, making a good investment entails more than just locating a beautiful home; it also entails recognising the key factors that will set yourself up for long-term success.

Types of Property Ownership

A clear understanding of property ownership types is essential for a successful property purchase. The main ownership models include:

• Self-Ownership: Owning a property independently allows you full control but also assumes all responsibilities and financial obligations.
• Joint Tenancy: Here, all tenants own the property collectively and equally. Should one owner pass away, their share transfers directly to the other owner(s).
• Tenancy in Common: Under this model, each co-owner holds a separate and distinct share in the flat. The right of survivorship does not apply.
• Legal and Beneficial Ownership: Legal ownership means holding the property title, while beneficial ownership refers to the individual entitled to the property’s benefits, like income or occupancy. It’s essential to clarify these distinctions before finalising a property purchase.

Property Tax

Property tax is a wealth tax levied annually on all properties, irrespective of occupancy status. Understanding how property taxes impact your overall budget is critical, as these levies apply to both residential and investment properties. The tax rates are established based on the property’s annual worth; thus, taking this into account helps manage ongoing spending and budget expectations.

Property Stamp Duties

Stamp duties are a significant factor in Singapore’s real estate market because they boost the initial cost of property purchases. The three primary types of stamp duty are:

• Buyer’s Stamp Duty (BSD): A mandatory tax on all property purchases.
• Additional Buyer’s Stamp Duty (ABSD): Applies to second and subsequent property purchases, often at higher rates.
• Seller’s Stamp Duty (SSD): This applies to properties sold within a specific period after purchase. Understanding SSD is essential, especially if you plan on reselling within a short time.

These duties impact your budget considerably, so make sure to factor them into your financial calculations from the beginning.

Location of the Property

The location of a property is a powerful driver of its potential for appreciation and rental yield. In Singapore, evolving infrastructure and government-led development plans can make certain areas especially attractive. When choosing a location, look beyond the immediate neighbourhood to consider upcoming projects that could elevate the area’s appeal and value. A well-chosen location not only enhances liveability but can also lead to strong capital appreciation over time.

Home Loans and Financing Options

Financing is often the backbone of property purchases, and understanding Singapore’s loan options can save you from potential pitfalls.

• HDB Flats: If buying an HDB flat, you may choose between an HDB loan or a bank loan. HDB loans often have more flexible criteria, while bank loans may offer lower interest rates.
• Private Property: For private property purchases, bank loans are the only option. Each bank offers different terms, so comparing interest rates, repayment structures, and lock-in periods is essential.

Sources:

1. https://www.hdb.gov.sg/residential/living-in-an-hdb-flat/changing-owners-occupiers/change-in-ownership/change-in-flat-ownership/manner-of-holding
2. https://www.iras.gov.sg/taxes/property-tax/property-owners/property-tax-rates
3. https://sghomeinvestment.com/buying-a-property-in-singapore-factors-to-consider/

Disclaimer:

The information provided is for general information only and does not constitute financial advice. While we have taken care to check the source of the information, we cannot guarantee that the information is accurate, complete, or will suit your individual financial needs. You are advised to seek professional assistance.