Why Purchasing Real Estate in Singapore is a Bad Idea
Updated: May 28, 2020
You have just received a huge amount of funds from a wealthy relative. Recently, you heard from a friend that Singapore Real estate properties are a fantastic store of value and it will be a good idea to invest in some of them. After pondering on it for a while, you have decided to pull the trigger and approached a Singaporean Realtor to process this deal.
A few years later, you realized that the condo apartment that you have bought has lost its value by 5% and was left unrented for the past few months. Shortly after, you are unable to afford the mortgage and have to sell the unit at a loss.
What exactly had happened?
Navigating the landscape of purchasing your first real estate in Singapore is a tricky affair. Here are some important terms which you need to know before starting
Buyers Stamp Duty
This is a tax payable which a proportion of the price payable of the property. It is applicable to all properties.
Additional Buyers Stamp Duty (ABSD)
This is a tax payable that was introduced on 8 December 2011. Its main purpose is to put control of demand for residential property. (I.e. commercial and industrial properties are not affected!) This will ensure that every Singaporean is able to own their own homes and that prices will move in correlation to economic fundamentals.
There are certain cases in which ABSD can be exempted, such as in cases for married couples or if you are
· A National or Permanent Resident of Iceland, Liechtenstein, Norway or Switzerland.
· A National of the United States of America
If you are not purchasing a brand-new property, there is a high chance that the existing property that you have in mind to purchase will require some renovation works. As an estimation, renovation costs should be around 10% of the transacted price of the project. If renovation works are not needed, do consider minor works.
Although the capital appreciation of your investment is the main consideration when picking your real estate, cash flow from the rental is equally important to contribute towards your mortgage payment. As of Q3 2019, vacancy rates to 6.1% as at the end of 3rd Quarter 2019, from 6.4% in the previous quarter
Seller Stamp Duty
You are finally ready to cash out to realize your gains. However, are you aware that there is a tax in place when you are selling your Residential property? For rates based on earlier purchase dates/change of use, do refer to this article.
In conclusion, one should bear the following points in mind before diving into real estate investment in Singapore as there are many transparent fees outside of the property price. Your agent should be equipped with this fundamental knowledge when advising you.
Are you intending to get started on your property purchase within Singapore? I handle both Commercial and Residential. Do drop me an email at Joshua.firstname.lastname@example.org to get started.
The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual. The author does not accept any responsibility whatsoever for any harm or loss arising from accessing or relying on information contained in this blog post.