Guide
How to invest property in Singapore for non-Singaporeans (Foreigners)?
Singapore’s vibrant property market continues to attract global attention, defying international trends with its resilience and growth. While many countries grapple with declining property values and rental rates, Singapore’s real estate sector has experienced remarkable booms. This unique landscape presents an enticing opportunity for foreign investors and non-Singaporeans looking to diversify their portfolios. However, navigating the intricacies of property investment in this city-state can be challenging for outsiders. This guide will walk you through the essential steps, regulations, and considerations for foreigners interested in tapping into Singapore’s thriving property market.
Can foreigner buy property in Singapore?
Yes.
When it comes to investing properties in Singapore by non-Singaporeans, the authorities generally classified them into 2 groups; Permanent Resident and Non-permanent resident.
Who are Permanent Resident?
Generally the following group of foreigners are eligible to apply for permanent residency with Singapore authority
- Spouse of a Singapore citizen or Singapore permanent resident (PR)
- Unmarried child aged below 21 years old, born within the context of a legal marriage to, or have been legally adopted by, a Singapore citizen or PR
- Aged parent of a Singapore citizen
- Holder of an Employment Pass or S Pass
- Student studying in Singapore
- Foreign investor in Singapore
Is there any difference in property purchase treatment?
Permanent residents are eligible to buy resale Singapore public housing HDB with significant government grants. Non-permanent residents are not allowed to buy resale HDB.
Both groups are not allowed to own landed property, subject to approval from Singapore authority – Land Dealing Approval Unit.
Other than HDB, both groups could buy all other property types.
Even though, both groups could buy all property types, there is a difference in property tax treatment for residential property.
Permanent resident could buy private non-landed condominium by paying additional buyer stamp duty of 5% (first property count), 30% (second property count) and 35% (third property and thereafter).
Non-permanent foreigner pays a flat 60% for all residential property count.
Understanding the Residential Property Act for foreign buyers
The Residential Property Act (RPA) in Singapore governs the types of properties that foreigners are allowed to buy. Under this act, foreigners are generally restricted from purchasing landed properties in Singapore without specific approval from the Singapore Land Authority. However, they are permitted to buy non-landed properties such as condominiums and apartments. This legislation aims to balance the interests of Singapore citizens and permanent residents with those of foreign investors, ensuring that the local property market remains stable and accessible to all.
Foreigners interested in buying property in Singapore must familiarize themselves with the RPA to understand what is permissible. The act also outlines the conditions under which exceptions can be made, such as through significant economic contributions to the country. Understanding these regulations is essential for any foreigner buying property in Singapore, as it helps avoid legal complications and ensures a smooth transaction process.
How does the Additional Buyer’s Stamp Duty (ABSD) affect foreign property investors?
Breaking down ABSD rates for foreigners
The Additional Buyer’s Stamp Duty (ABSD) is a significant consideration for foreign property investors in Singapore. As of the latest regulations, foreigners buying property in Singapore are subject to an ABSD rate of 20% on the purchase price or market value, whichever is higher. This is in addition to the standard Buyer’s Stamp Duty (BSD) that all property buyers must pay. The ABSD was introduced to moderate the property market and curb speculative investments.
Understanding the ABSD rates and their impact on the overall cost of property purchase is crucial for foreign investors. The ABSD can significantly increase the initial investment required, affecting the feasibility and profitability of the investment. By being aware of these costs, foreign investors can better plan their finances and make informed decisions regarding property investments in Singapore.
Strategies to manage ABSD costs when buying property in Singapore
Managing ABSD costs is a critical aspect of property investment for foreigners in Singapore. One common strategy is to purchase property under a Singapore Permanent Resident (PR) status, which may result in lower ABSD rates compared to those for non-residents. Another approach is to invest in properties that are exempt from ABSD, such as commercial properties or certain types of industrial properties.
Additionally, some investors explore joint purchase arrangements with Singapore citizens or PRs to reduce the ABSD burden. It is also advisable to consult with financial advisors and real estate experts who can provide tailored strategies to manage ABSD costs effectively. By implementing these strategies, foreign investors can optimize their investment returns while complying with Singapore’s property regulations.
Are foreigners allowed to take property loan for Singapore property purchase?
Yes. Singapore does not restrict the banks from extending property loans to foreigners.
Navigating home loan requirements for non-Singaporeans
Securing a home loan as a foreigner buying property in Singapore involves navigating various requirements and conditions. Most banks and financial institutions in Singapore offer home loans to foreigners, but the terms and conditions may differ from those available to Singapore citizens and PRs. Foreigners may be subject to higher interest rates, lower loan-to-value ratios, and stricter eligibility criteria.
To successfully obtain a home loan, foreigners must provide comprehensive documentation, including proof of income, employment history, and creditworthiness. It is advisable to work with mortgage brokers or financial advisors who specialize in assisting non-Singaporeans with home loan applications. By understanding the requirements and preparing the necessary documents, foreigners can increase their chances of securing favorable loan terms for their property investment.
Understanding loan-to-value limits for foreign property buyers
Loan-to-value (LTV) limits are an essential factor for foreign property buyers to consider when financing their investment. In Singapore, the LTV ratio determines the maximum amount a bank can lend relative to the property’s value. For foreign buyers, the LTV limit is typically lower compared to that for Singapore citizens and PRs. As of the latest regulations, the LTV limit for foreigners is generally set at 60% of the property’s value.
This means that foreign buyers must be prepared to make a higher down payment, covering at least 40% of the property’s purchase price. Understanding the LTV limits and their implications on financing is crucial for foreign investors. By planning their finances accordingly, they can ensure that they have sufficient funds to cover the down payment and other associated costs.
Are foreigners allowed to set up company to invest in Singapore property?
Yes. Singapore does not restrict foreigners from setting up company to purchase Singapore property. All entities need to pay an additional buyer stamp duty of 65% for each property it purchases.
Are there any restrictions on the duration that foreigners need to own the property before it could be sold?
No. Singapore does not impose any ownership duration of property purchase. However, seller stamp duty of 12% (sold within 1 year), 8% (sold within 2 years) and 4% (sold within 3 years) applies.
Can foreigners sell their purchased property to other foreigners?
Yes. The Singapore property market operates on the principles of buyers and sellers being free to make their own decisions.
Can foreigner rent out their purchased property in Singapore?
Yes. Singapore does not impose any restriction. All rental collected are subject to paying personal property tax if owned by individuals and business tax if owned through a company entity.
What is the process for foreigners to purchase property in Singapore?
Step-by-step guide to buying property as a foreigner
The process of buying property in Singapore as a foreigner involves several key steps. First, it is essential to determine the type of property you are eligible to buy and understand the regulations governing foreign ownership. Next, engage a reliable real estate agent who can assist with property searches and negotiations. Once you have identified a suitable property, conduct thorough due diligence, including property inspections and legal checks.
After finalizing the property selection, make an offer and negotiate the terms of the sale. Upon reaching an agreement, sign the Option to Purchase (OTP) and pay the option fee. Secure financing through a home loan or alternative methods, and prepare the necessary documents for the transaction. Finally, complete the sale by signing the Sale and Purchase Agreement (SPA) and paying the remaining purchase price. By following this step-by-step guide, foreigners can navigate the property purchase process smoothly and efficiently.
Required documents and approvals for foreign property buyers
Foreign property buyers in Singapore must prepare several key documents and obtain necessary approvals to complete their purchase. Essential documents include a valid passport, proof of income, employment history, and a credit report. Additionally, foreigners must obtain approval from the Singapore Land Authority (SLA) if they wish to purchase restricted properties such as landed residential property.
For financing purposes, banks may require additional documentation such as tax returns, bank statements, and employment contracts. It is advisable to consult with legal and financial advisors to ensure all required documents are in order. By preparing the necessary documents and obtaining the required approvals, foreign property buyers can facilitate a smooth and successful property transaction in Singapore.
Working with real estate agents and lawyers in Singapore
Engaging the services of experienced real estate agents and lawyers is crucial for foreign property buyers in Singapore. Real estate agents can provide valuable insights into the property market, assist with property searches, and negotiate favorable terms on behalf of the buyer. They can also guide buyers through the legal and regulatory aspects of the transaction, ensuring compliance with local laws.
Lawyers play a vital role in reviewing and drafting legal documents, conducting due diligence, and ensuring that the transaction is legally sound. They can also assist with the transfer of ownership and registration of the property. By working with reputable real estate agents and lawyers, foreign property buyers can navigate the complexities of the Singapore property market with confidence and ease.
Don’t hesitate to arrange a meeting if you choose to look into property investment.
Jack Tan
An agent you do not need to change