What You Need to Know About Property Investment in Singapore  (2018 Update)

What You Need to Know About Property Investment in Singapore (2018 Update)

KEYWORD PHRASE: Property investment in Singapore 

There is never a bad time to talk about property investments in Singapore. Despite the sky-high prices of property in Singapore, an overwhelming 90% of Singapore residents have their own homes, as per Dollars and Sense. Before we start with specific details that you must know before you consider investing in property, it is important to make a distinction here. 

What is your purpose of investing in a property in Singapore? If this property investment is for the purpose of your own residential use, you have to consider the standard factors such as the location, the size of the property (based on the size of your family unit), and the requisite property taxes that are applicable at the time of the purchase. However, if you’re considering buying a property for the purpose of additional investment, you must consider other factors. 

Investment for Investment’s Sake? 

Very few investment experts disagree with the basic merits of an investment in tangible property. Property investment is safer, largely less volatile when compared to other equity investments. You have the assurance of solid backing in the form of a sizeable capital investment while you continue to milk the rent in the meantime. On the other hand, the commonplace argument against property investment is that it is hardly the fastest means to generate returns. In light of such concerns, the seasoned investment expert generally recommends a more balanced portfolio. Preferably with an equal distribution of capital assets alongside other lucrative investment avenues such as investments in equity, mutual funds, and maybe even Bitcoins for that matter! 

Investment in Property – The Essentials 

However, the central focus of this piece is about the essentials of property investment in Singapore. Without further detours, let’s continue. 

The Location 

Don’t decide to go ahead with the property investment without doing comprehensive research. The location should be the first thing you should consider because, without the right location, all bets of getting decent returns on investments are off. It is essential that you choose a location with high potential for future development (and growth). Alongside timely visits to property agents, also consider visiting the Housing and Development Board and Urban Development Authority websites for further insights. 

The Funding 

You’re most likely going to have to apply for a housing loan to successfully acquire property in Singapore unless you have adequate savings in the bank. Furthermore, only citizens of Singapore can look to borrow 80% the value of the property they intend to purchase provided they have paid the sum they have borrowed for previous property purchases, that is applicable only if they have previously purchased a property. Those with existing mortgages only avail a loan of 50% the value of the property. Furthermore, the financial institutions are requiring to ensure the citizens don’t carry a monthly debt in excess of 60% of their overall monthly income. 

The Property Tax 

Regardless of how the homeowner intends to utilize their property, they are required to pay property taxes. Hence it is important to account for these expenses when you’re making the calculations. The amount of the tax you’ll be required to pay naturally depends on the value of the property. And the prevailing rate of property tax. It is also important to note that the property tax rate differs when we’re comparing those properties occupied by the owner themselves and those that aren’t.  

Owner-occupied properties are taxed progressively anywhere between 0% and 16% while non-owner occupied properties are taxed progressively between 10%-20%.  

The HDB Grant 

Most Singaporeans know the immense value of owning an HDB flat. And naturally, you’ll need a housing loan to get underway with the process. The allure of buying an HDB is that you can also be eligible for HDB grants, which have the potential to save you a large sum of money while you’re at it. Here’s the complete guide to HDB housing for the various available types of flats you can choose between. 

Other Applicable Costs 

Housing in Singapore is expensive. And it doesn’t help when potential investors don’t foresee the applicable costs associated with buying a property. When we account for renovation costs, interest costs, and opportunity costs. Thus, the overall costs associated with investing in property are consequently scaling up. Dollars and Sense made an excellent elaboration of the fact that your home is perhaps a lot more expensive than you think it is. 

Investment in Property – for Non-Residents 

It is hardly fair to miss out on the non-residents when we’re talking about property investment in Singapore. Especially when there is the prevalence of genuine misinformation out there. 

  • Those who are not citizens of Singapore, a registered Singaporean company, a limited liability partnership, or a Singaporean society is defined as a foreign individual or entity 
  • The properties in Singapore are divided into two major categories – ‘restricted property’ and ‘non-restricted’ property; needless to say, the ‘restricted’ properties are out of bounds for non-residents of Singapore unless with the necessary approval from the government in advance 
  • Here’s the governmental page on restrictions on foreign ownership of restricted property for your reference 
  • You’ll also be required to pay stamp duty irrespective of the property you choose to buy 
  • Here’s the complete guide to buying property in Singapore as a foreigner 

Investing in a property in any part of the world is a complicated process. That involves a solid understanding of the laws of the land. Regardless of the type of property you finally decide on, it’s important to conduct adequate research all the same. Lastly, is always better to consult several property agents to ensure you are not being cheated on. Here’s hoping you make a rewarding investment after considering the points we’ve elaborated on. 

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