The process for buying property in Singapore for expatriates, foreign residents living in Singapore and overseas investors is slightly convoluted and confusing as many exceptions, exemptions and requirements exist.
Overseas buyers are generally freely permitted to purchase an apartment in a building which has at least six stories, a housing unit in an ‘approved condominium development’ or alternatively a leasehold property a building which has at least six stories. All other properties may be available for sale to an investor but they have to seek the permission of the Singapore Land Authority before proceeding to purchase.
You need to be aware that many properties are ‘restricted’ and are unavailable for foreign investors.
Buying Process
- As soon as real estate has been located that an investor believes will meet his requirements he can secure an ‘Option to Purchase’ the property by paying a non-refundable 1% of the purchase price to effectively take the property off the market and allow the investor’s solicitor to have time to check out whether all is in order with the property and whether the investor will require permission to buy it
- The ‘Option to Purchase’ is valid for a 14 day period after which time a buyer either forfeits his 1% and the property goes back on the market or the buyer pays a further 9% of the purchase price to make up a 10% deposit. At this stage the property buying process moves forward and a preliminary contract is signed by the vendor and buyer
- Any further surveys, searches and permission seeking will take place before the final contract is signed and the property is exchanged. There is usually a 1% fee payable by the buyer to the estate agent in Singapore and the property investor also has to pay stamp duty which amounts to a further 3%. Lawyer’s fees and any charges attributed to acquiring permission to buy property in Singapore or securing a mortgage are extra
Taxation Issues
It’s worth pointing out that short-term property speculation is not really an option for a property investor in Singapore because if they resell their real estate within one year of purchase they will become liable for 100% capital gains tax. This drops by 33% a year for the next two years therefore anyone who wishes to profit from equity accrual needs to wait at least three years before reselling their property assets.
Investment Potential
Singapore is already a hugely popular destination with tourists, those seeking a regional base and of course the expatriate and local professional population employed in Singapore. All demand quality accommodation for sale and to let and because this market interest is not abating an investor has a strong core and strong foundation on which he can build any residential based property investment.
There is also immediate appeal in the Singapore retail real estate market because the Singaporean government recently announced that the Orchard Road shopping belt is to receive SGD 40 million over the next three years for rejuvenation and infrastructure improvement and that this will help boost tourism numbers in Singapore by 7%. Furthermore the increase in attraction of this part of Singapore will create more visitor walk-through activity and push up profits for the retailers operating in the area.
Singapore also has a sophisticated and highly successful free market economy heavily reliant on exports, one of the world’s busiest ports in terms of throughput and the Republic saw GDP rise in excess of eight percent in 2004 creating vast new opportunities for international companies seeking a base in the region. But the city-state suffered greatly following the global recession in 2001, the outbreak of SARS in the region and a slowdown in the tech sectors and this highlighted Singapore’s vulnerability through its exposure to and reliance upon external economies for ongoing success. This realization has led to a planned period of prolonged economic readjustment which the government of Singapore believes will shore up the economy and protect it in the future from external negative influences. As part of the adjustments, the promotion of Singapore as a tourist destination of note has already proved successful with international visitor numbers up. The city-state has a great deal to offer tourists as well - from retail excellence to entertainment extravagance, from stunning natural beauty to architectural splendor.
From a property buyer’s perspective the changes to promote sustainable economic stimulus also affect policies governing the foreign ownership of real estate in Singapore which was once very restricted but which has now been eased. This has led to an increase in demand from overseas investors keen to purchase apartments in the most desirable locations to let out long term to professional residents or short term as corporate lets. The easing of ownership restrictions has also invited property prospectors onto the scene who are developing new residential complexes and targeting the international local community. And while interest rates in Singapore remain attractively low, more local demand for property to buy is breaking through.
The Singaporean government’s plans for fiscal stimulus are certainly working well in the entire real estate sector therefore - and real estate investors buying in Singapore now are purchasing at a time of great economic positivity which is only predicted to improve over the short to medium term.
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