|
Getting your Trinity Audio player ready...
|
Charming bungalows along Bukit Timah lure with views of lush palms and bring the outdoors in. Beachfront condos in Sentosa Cove call coastal horizons inside like modern sirens. Who hasn’t been captivated by the idea of indulging in a luxurious home while on a vacation abroad?
However, international real estate is more than an impulse buy — or it should be – if you’re a smart investor.
The Singapore luxury property market is showing signs of recovery in foreign buyer activity, particularly in the second quarter of 2024. Foreigners purchased 47 non-landed homes in the Core Central Region (CCR) during Q2 2024, marking a 24% increase from the previous quarter. This uptick comes after steep hikes in stamp duties had previously dampened the market. Transaction volume grew 36.1% to 89 units in the first half of 2024 compared to the latter half of 2023, indicating a gradual thawing of the market.
Owning a second or third, or more, homes abroad isn’t just about luxury. There are pragmatic benefits to purchasing property in another country. It can be a way to diversify an investment portfolio or provide rental income. Buy in Singapore, and you automatically gain access to one of the world’s hottest — and safest — property markets. International purchases made a decade ago are considered very wise today.
The resurgence is further evidenced by the variety of price ranges in CCR apartments bought by foreigners, with the $2M to $3M range seeing the highest number of transactions. Additionally, bungalow transactions in Good Class Bungalow (GCB) areas have shown increasing total value and area in 2024.
Notably, Singapore has solidified its position as a key centre for foreign wealth, particularly for Indian investors, with around 25% of all Indian cross-border wealth held in Singapore. Despite the lingering effects of previous cooling measures, these trends suggest a cautious but steady return of foreign interest in Singapore’s luxury real estate market.
Singapore’s real estate market is known for its substantial investment value and regulatory environment that balances international investment with local market stability. Additionally, specific investments might make foreigners eligible for residency statuses like the Long-Term Visit Pass or Permanent Resident status.
Can Foreigners Buy Property in Singapore
With its long-term economic prosperity and stability, Singapore is naturally a place for foreign investors to buy properties outside their home country. It’s a market ripe for investment, especially considering the diverse range of options available in Singapore for properties. However, knowing what properties are available and off-limits in Singapore’s legalistic society may be difficult for investors abroad.
To put it simply, foreigners can buy property in Singapore. There is no ruling that says they cannot, but they must meet certain eligibility criteria and comply with specific regulations that Singaporean citizens are not subject to. Additionally, there are types of properties that foreigners cannot purchase, which we’ll go into later. On top of that, there are special taxes that foreign investors must pay to purchase property in Singapore, and they may face restrictions on their mortgage options.
Condominiums and apartments are fair game for foreign investors. These private residential properties are available for purchase and are a great choice for foreign investors looking to get into Singapore’s luxury residential developments, more of which pop up yearly. However, certain private residential properties, such as landed properties, require more work to purchase. These require special approval from the Land Dealings Approval Unit (LDAU). Other types of properties that require approval from the LDAU.
“It turns out buying property in Singapore as a foreigner has been a good idea and offers several benefits, such as a stable property market with strong growth potential, the opportunity to generate rental income, and the possibility of capital appreciation,” says Sunita Gill, co-founder and COO of Singapore Luxury Homes.
Rules for Foreigners Buying Property in Singapore
Of course, there are risks as well. Currencies can slide, taking with them the value of overseas investments; political changes can affect ownership laws; and the buying process can be complex and confusing, especially when foreign funds are in play. So, while it may seem like a lark, foreign buyers should put even more care and thought into purchasing internationally than at home.
“You shouldn’t assume that the real estate system mirrors your home country’s,” Gills continues. “The marketing approach to property and the tax system can vary significantly based on your nationality.”
Understanding the local real estate market trends and economic factors can guide a more informed purchase decision. Some principles should be followed when buying real estate anywhere. It is common sense to ensure that the person selling you your dream home has a title to the property. Beyond that, providing the property’s legal status and any encumbrances is also an essential step. Investigating the neighbourhood’s future development plans is wise, as these can impact property values.
Every country has different rules and conventions, which means prospective buyers need to consider diverse issues, including ownership restrictions, tax ramifications, development regulations, currency issues and political climate. Here are some common ones that you should be aware of if you’re a foreigner buying property in Singapore:
Buyer's Stamp Duty (BSD)
The Additional Buyer’s Stamp Duty is an extra tax imposed on certain property purchases in Singapore to cool the residential market and discourage speculative buying. It applies to locals and foreigners, with foreigners facing a higher rate. The ABSD rate for foreigners is significantly higher than for Singapore citizens or Permanent Residents, underlining the government’s approach to prioritising housing affordability for its citizens.
Additional Buyer's Stamp Duty (ABSD)
The Additional Buyer’s Stamp Duty is an extra tax imposed on certain property purchases in Singapore to cool the residential market and discourage speculative buying. It applies to both locals and foreigners. The ABSD rate for foreigners is significantly higher than for Singapore citizens or Permanent Residents, underlining the government’s approach to prioritising housing affordability for its citizens.
ABSD Remissions
ABSD remissions can apply under specific conditions, such as for Singapore Citizens buying their first residential property, for foreigners and Permanent Residents (PRs) under certain Free Trade Agreements (United States, Switzerland, Iceland, Norway and Liechtenstein), and family transfers under specific conditions. Married couples with mixed residency status may qualify for rebates, and housing developers may receive remission for ABSD rates, although an additional 5% is non-remittable. Read our article, “Additional Buyer’s Stamp Duty (ABSD) Remissions & Exemptions for Foreign Investors”.
Land Dealings Approval
For foreigners to buy landed property in Singapore, approval from the Land Dealings Approval Unit (LDAU) is required. The process includes restrictions under the Residential Property Act, requiring applicants to have PR status for at least 5 years and to have made significant economic contributions to Singapore. Conditions post-approval include using the property solely for living purposes by the applicant and family, with a no-sale period of 5 years. The criteria for Sentosa properties are less strict and do not require PR status. Applications take about a month to process LDAU.
Mortgage Home Loan Eligibility
Foreign buyers in Singapore do face different considerations regarding home loan eligibility compared to locals. Banks offer varied loan packages, and a buyer’s income, employment status, and creditworthiness significantly influence loan eligibility. The Loan-to-Value (LTV) ratio, which indicates the maximum amount a bank can lend based on the property’s value, typically ranges between 50-70% for foreigners, varying by bank.
Resale Restrictions
Foreign buyers with LDAU approval for purchasing landed property in Singapore face no specific resale restrictions. However, the higher ABSD rates for foreigners compared to locals and PRs might influence the willingness of sellers to accept offers from foreign buyers. This discrepancy in ABSD rates could impact the ease with which foreign buyers can transact in the resale market.
Residential Property Act
The Residential Property Act has restrictions on what foreigners can buy, and acquiring a property requires meeting certain legal and economic contributions to Singapore. Approval from the government is needed for restricted properties, but non-restricted properties like apartments, strata landed houses in approved condominium developments, and commercial properties can be purchased more freely. Economic contribution and specific qualifications might influence your eligibility for owning property and potentially impact your visa status.
Note these government regulations are based on the current information as of February 2024. For the latest information, visit the respective government websites for clarification, or contact the real estate experts at Singapore Luxury Homes to learn more about buying a property as a foreigner.
Globalised World, Local Knowledge to Help Foreigners Buy Property in Singapore
Overseas ownership accounts for 13–17% of condominium sales in Singapore, with the top group of foreign buyers throughout the past 5 years being Chinese, American, Malaysian, Indonesian and Indian citizens, representing almost two-thirds of this. Buyers have been encouraged by increasing affluence and by a travel industry that has made the world more accessible to explore, as well as Singapore’s ongoing recruitment of top talent within specific industries.
“The world is exclusively small. There are more job opportunities overseas and digital,” says Gill.
Before you hop into a deal, get to know a place more than just as a passing fashion. Gill advises that prospective buyers take several trips if it’s their first time in Singapore instead of staying in a resort. Real estate is local, and you require enormous information about the investment — it’s not like buying into a fund of overseas companies. Working with the right real estate agency is key, as not all agents have the breadth of knowledge to ensure your home is the right investment for your future financial goals.
Once you ascertain that you are willing — and able — to buy, you may discover differences in how properties are listed.
The multiple listing system used in the United States, for example, is different from that in Singapore. Property developments may have exclusive listing agents, and some of the best properties are off-market, offered privately and require the right broker with a vast network. (Read our article, “Live Your Dream by Buying a Second Property in Singapore.”)
Read related our article
Live Your Dream by Buying a Second Property in Singapore
Offers may also be made differently. In the US, property buying involves making an earnest deposit upon offer acceptance, demonstrating buyer commitment, which is held in escrow until closing and varies by state. In the UK, when a buyer’s offer is accepted, no deposit is required — but there is also no contract. Buying a property in Singapore works a little differently and is more structured.
The process starts with a verbal or formal offer and progresses to an Option to Purchase (OTP) issuance, costing 1% of the purchase price for exclusivity. Exercising the OTP requires an additional 4% fee. Next, both parties sign a Sale and Purchase Agreement, followed by conveyancing for legal and title transfer processes. The final step involves the buyer paying the remaining 20% of the purchase price and any mortgage contributions, officially transferring ownership, typically 8-10 weeks after the OTP is exercised.
Taxation Policies, Estate Laws and Renovation Restrictions
When buying internationally, it’s important to consider currency risks and government controls.
“If I invest my US dollars in Singapore, does the seller take US dollars, or do I need to convert them to Singapore dollars to pay for the property?” highlights Gill. “Once I sell my property, can I freely take out my money without additional taxation?”
In Singapore, gains from selling property, shares and financial instruments are generally not taxable as they are considered capital gains. However, if the transactions are frequent or conducted with a profit-seeking motive, they may be deemed trading, making the gains taxable. Factors such as the frequency of transactions, the reasons for buying and selling, financial means to hold the property long-term, and the holding period are considered to determine if activities constitute trading.
There are other legal instruments for buying and selling property, but consulting with a professional real estate consultant, legal professional or accountant is beneficial to ensure your investment is financially sound.
In Singapore, tax and estate laws for property owners, including foreigners, are specific and structured. While there is no capital gains tax, other taxes like the BSD and ABSD apply to locals and foreigners, with foreigners typically paying higher rates.
Estate distribution follows the legal will of the deceased or the Intestate Succession Act if there’s no will. This differs from the scenario where a government might automatically divide an estate among survivors, indicating the importance of understanding local laws and regulations.
Then, there are building and renovation restrictions. Conservation restrictions work to preserve charming shophouses in Singapore. Specific guidelines must be followed, especially regarding repairs and renovations, mandating that the work preserves the building’s historical and architectural heritage value.
Renovations and additions to Good Class Bungalows in Singapore must follow strict Urban Redevelopment Authority guidelines to preserve their exclusive status, including limits on height, coverage ratio and architectural preservation.
Wading through the challenges and rewards of owning property internationally can be endless for foreigners buying a property in Singapore. Choose the right real estate team at Singapore Luxury Homes to guide you through the buying process effortlessly, leveraging our deep market knowledge and personalised service to unlock the potential of your investment and secure the most favourable outcome.
