Since 1973, the Singapore government has been strict about foreign land ownership in the state. With the birth of “Residential Property Act“, there has been a series of restrictions and limitations on foreigners planning to acquire a property in Singapore. And up to date, the real estate market is still in favor towards its citizen which is clearly understandable given the very limited physical land area of the country.
If you’re an expatriate in search for a foreigners property buying guide, understanding first the Residential Property Act is deemed to be essential. Knowing the RPA of 1973 will give you a clear knowledge about the various properties you are allowed to buy, land restrictions, and legal requirements you need to pass before you become eligible to purchase a property in Singapore.
What Is the Residential Property Act?
The Residential Property Act aims to give Singaporeans a stake of its own country by being able to buy and acquire their own residential property with an affordable price tag. Yet, this doesn’t eliminate expats wishing to buy a home in Singapore. The Residential Property Act still encourage foreign talents by allowing permanent residents and foreign companies who make an economic contribution to Singapore to purchase properties for their own occupation.
With its strict and somewhat stringent rules, the RPA of 1973 was amended in July 2005. The amendment now allows foreigners to purchase apartments in non-condominium developments given that they are less than 6 levels. With the new rule, expatriates can acquire such properties without the need to obtain prior approval from the government.
Definition of Foreigner
So when are you classified a foreigner under the Singapore law? For expats buying property in Singapore, you are considered a foreigner if you are NOT a:
1. Singapore citizen
2. Singapore company
3. Singapore limited liability partnership; or
4. Singapore society
In addition to the above, fiscal residents or those who are living for tax purposes are likewise classified as foreigners. Bear in mind that not all foreigners can acquire property in Singapore, you need to make an adequate economic contribution to the country to prove your worthy of the property.
Restricted Properties for Foreigners
An expatriate CANNOT purchase restricted residential properties unless he or she obtains an approval from the Minister for Law. These restricted properties that foreigners can’t purchase without authorization are as follows:
> HDB flat and HDB shop house
> Vacant residential land
> Terrace house
> Semi-detached house
> Bungalow or detached house
> Strata landed house (NOT within an approved condo development like townhouse or cluster home)
> Shophouse for non-commercial use
> Associated premises
> Place of worship
> Worker’s dormitory, service apartments and boarding house
Non-Restricted Properties for Foreigners
Continuing on this foreigners guide buying property in Singapore, you as an expatriate is allowed to purchase non-restricted properties without approval from the government. These unrestricted properties that expats can buy without consent are:
> Condominium unit
> Flat unit
> Strata landed house (in an approved condominium development)
> Leasehold estate in a landed residential property (with term not exceeding 7 years)
> Shophouse for commercial use
> Industrial and commercial properties
> Executive condominium of at least 10-year old
> Apartment within a building
> A foreign person is not allowed to purchase all apartments or units within a building without approval from the Minister of Law.
> If the property is classified as “non-residential” or in layman’s term “commercial/industrial”, foreigners can purchase it without seeking approval from the government.
> There are NO incentives given to foreigners planning to buy a property in Singapore.
How to Acquire Restricted Residential Properties?
What if the property you wish to purchase is unfortunately restricted? How can you get approval from the Singapore Land Authority (SLA)? This Singapore foreigners property buying guide wouldn’t be complete without you knowing the answer on how to get hold of these restricted properties.
The restriction of property is specifically designed to keep foreigners at bay from this segment of the market, but the government leaves an open window of possibility. You can still acquire restricted residential properties if you are a foreigner with:
1. permanent residency
2. adequate economic contribution to the country
Other factors that you need to consider are as follows but not limited to:
> academic background
> technical or professional qualifications
> career scope
> history of investments in Singapore
> Approved foreigners can only acquire one restricted residential property at any time.
> Foreigners are allowed to own restricted residential property but only in Sentosa Cove. Though, you must first obtain approval from the controller of the property.
> A fast track approval of approximately 48 hours is available from the Singapore Land Dealing Unit.
Foreigners Property Buying Guide in Singapore – Steps on How to Acquire a Property
First and foremost, consider your finances if you’re an expat planning to purchase a property in Singapore. Keep in mind that unlike Singapore citizens, you are not entitled to any housing grant from the government and this can bring a huge impact on your finances. On the other hand, the process of buying a property in Singapore is fairly easy, even if you are a foreigner.
1. Search for a property you wish to acquire. Keep in mind the restricted and non-restricted list of properties.
2. Visit the show flat if available or schedule an ocular inspection of the place.
3. Discuss the final price of the property.
4. Secure the property by signing the “Option to Purchase” and pay 1-5% cash to the seller to reserve the unit for up to two weeks.
5. Proceed with the “Sale and Purchase Agreement” and pay necessary dues such as agreed deposit, taxes, stamp duties, etc.
6. The last step is usually performed by your agent or solicitor and this involves the completion stages like finalizing documents as well as handling over the keys.
Expats Buying Property in Singapore – The Costs Involved
As stated above, you need to keep in mind the availability of your finances. If you don’t have enough cash to complete the purchase of the property, as a foreigner you can borrow funds from the local bank. Bank financing for expatriates are available and the requirements needed typically depends on your credit evaluation.
Bank Limit for Foreigners
> For individuals without outstanding housing loans, you can borrow up to 80% of the purchase price.
> For individuals with one or more outstanding housing loans, the limit is up to 60% of the price.
Property Taxes for Foreigners
Next on this foreigners property buying guide in Singapore are the property taxes. Regardless of the type of property you purchase, its location and measurement, you need to pay certain taxes for the said asset. They are called “Stamp Duty” and it is further divided into three types; Buyer’s Stamp Duty (BSD), Additional Buyer’s Stamp Duty (ABSD) and the Seller’s Stamp Duty (SSD).
Buyer’s Stamp Duty – it is the 1-3% ad valorem tax to be paid by the buyer. Irrespective of your nationality, Singapore citizen or foreigner, you need to settle this taxation charge.
> 1% on the first $180,000
> 2% on the next $180,000
> 3% everything thereafter
Additional Buyer’s Stamp Duty – this tax is only applicable to residential properties. Foreigners should pay a flat tax duty of 15% upon acquisition of any residential property. Whereas if you’re a Singapore citizen, the tax percentage is pro-rated.
> If you’re a national from USA, Switzerland, Liechtenstein, Norway and Iceland; you will pay the same ABSD rate as a Singapore citizen. This is due to the FTA agreement of these countries.
Seller’s Stamp Duty – is only applied to residential properties and this should be covered by the seller.
Do not forget the “other” fees associated with your purchase like legal fees, agent’s commission, registration charges, transfer of ownership and all others.
Final words, not every property in Singapore sold to foreigners can be rented out. Bear in mind that the purchase of restricted residential property should be used only by you; for your occupation and with your family members. If breached, there is a fine of $200,000 together with 3 years of imprisonment. So better check with your agent or seller if renting the property out is allowed, that is if you have plans investing on such.
Take this foreigners property buying guide with you to avoid confusions, costly mistakes, and common errors encountered by most expats. Even if you’re a foreigner planning to purchase a property in Singapore, its relatively easy to build a home sweet home to this country.