Singapore’s transformation from a malarial swamp to one of the richest nations in the world has been nothing short of astonishing. Its strategic location along the Strait of Malacca, a pro-business government, openness to foreign investment, along with a bit of ingenuity have all helped the country leap forward over the past few decades.
Having the most developed economy in the region and hosting Southeast Asia’s financial center, Singapore is unique among its neighbors. It’s a stark contrast to nearby emerging markets such as Indonesia and The Philippines.
For investors, this leads to both strengths and weaknesses for Singapore’s property market. A strong rule of law, high efficiency, and English as the official language means that real estate buyers are not likely to encounter problems – at least not any which can’t be fixed easily.
Whereas you might need to deal with translations and bureaucracy in a country such as Vietnam, buying real estate is far easier in Singapore. Developers usually maintain high standards and the transfer process couldn’t be much easier.
But with Singapore’s lower risk and ease of investment, there’s also less money to be made. Rental yields are low at around 4% on average. Property values have also been on a downward trend for the past few years, as of 2017.
Remember that Singapore is also one of the most expensive cities in the world. The minimum price of entry is far higher than in most other places. Hong Kong is the only city in Asia which is pricier than Singapore, in fact.
A small-island nation of just over 6 million people, space is at a premium in Singapore.
Optimists might say that Singapore’s lack of space and strategic location will drive property prices higher in the future, betting on a lack of supply. Indeed, a good argument can be made that there’s still room for growth. Comparable city states such as Hong Kong, Lichtenstein, and Monaco all have more expensive real estate markets than Singapore.
Yet after years of remarkable growth, Singapore’s GDP is now rising at a tepid pace. Is it worth buying property in Singapore when there are nearby countries growing at over 7% per year with equally impressive rental yields?
For some people, the answer is yes. High net worth investors looking to buy property in a country with a strong rule of law, almost no political unrest, and a relatively stable currency may still want to consider investing in Singapore real estate.
Can Foreigners Invest in Singapore Real Estate?
Yes. Foreign buyers may own condominium units in their own name and with a freehold title. As such, foreigners enjoy the same rights as Singapore citizens when buying non-landed property.
Houses, bungalows, and other landed properties under six stories tall can be bought by foreigners too. But you need government approval first. This process is rather bureaucratic and you must prove that your ownership will benefit Singapore – usually by bringing a substantial sum of money to buy the land with.
Things get a bit more difficult when it comes to the matter of taxation. Foreigners are taxed at higher rates than locals and permanent residents. But as for the mere ability to buy property in Singapore, foreign investors are treated very similarly to locals.
How Much are Property Taxes in Singapore?
Taxes in Singapore are payable when buying a property. In addition, an annual property tax is also due. Both of these taxes are significantly higher for foreigners than for Singaporeans and permanent residents.
The tax when buying real estate is called the Additional Buyer’s Stamp Duty (ABSD) and is payable on the property’s purchase price. Singapore citizens buying their first property are not required to pay ABSD. Singaporeans buying a second home need to pay 7%. This increases to 10% for any subsequent purchase.
ABSD is a bit stricter for permanent residents. PRs need to pay 5% on their first property and 10% on any subsequent one. However, foreigners must pay an even higher 15% on any purchase of real estate in Singapore.
Singapore’s annual property tax is payable at a progressive rate based on its annual rental value. A chart is shown below, but foreigners must pay an additional 10% on each rate. Furthermore, an extra 4% on each rate is payable for owner-occupied properties while an 10% is due on rental units.
Singapore’s Annual Property Tax Rates for Non-Owner Occupied Properties.
Rental income in Singapore is taxed at a flat 20% for non-residents. For residents, this tax is around 15%. Insurance, repairs, renovations, and property taxes can all be used as deductions which can help lower this rate significantly.
Places to Invest in Singapore
Singapore might not be a large country. It’s one of the world’s smallest, in fact. But the city-state still has several unique neighborhoods with different price points, vibes, centrality, and ease of access to the MRT. The latter is one of the most important factors to keep in mind when buying property in Singapore.
The MRT is the most widely-used form of transportation in the city. It’s also considered to be one of the world’s best public transportation systems. The MRT is extensive and has 5 different lines with a 6th currently under construction.
Many places on the island have easy access to the MRT, but considering how expensive it is to own a car and drive in Singapore, the importance of being located near a station should not be understated.
As the name quite obviously implies, Central is home to Singapore’s downtown and has some of the most expensive real estate in not just the city, but in all of Asia. Singapore’s central business district, Marina Bay, Little India, and Chinatown are all included in Central.
The area also includes the nearby residential district of Orchard for the purposes of this guide. Developers don’t often wish to permanently give up the right to such prime real estate. Therefore, most properties in this part of town are sold on a leasehold-basis, typically for either 99 years or 999 years.
Freehold property is much easier to find closer to Orchard Road than in Singapore’s CBD. There’s a few condominiums near the CBD, but practically all of them are leasehold. Regardless of whether a project is freehold or leasehold, the lofty prices which define Central aren’t likely to change much.
Woodlands / Sembawang
Located on the northern part of the island, Woodlands and its surrounding areas are becoming increasingly popular for expats and middle class locals alike.
They border the Singapore Strait which separates the country from Malaysia. These neighborhoods are perhaps best defined by their parks. Singapore does have many parks in general, but the central and northern parts of the city are less taken up by highrise buildings and have more greenery.
Real estate prices around the Woodlands area are also lower than most others in Singapore. You’re never going to find cheap property in Singapore, nor will you find any ghettos. But it might be worth looking into the city fringe areas if value is more of a concern than convenience.
Serangoon / Ang Mo Kio
Serangoon and Ang Mo Kio are two districts in the northeastern part of the city. A convenient location putting them right between downtown and Changi Airport, along with an abundance of malls and other activities, has led to them being among Singapore’s most popular areas.
Properties in this part of town are more expensive than in most of Singapore. While the price tags in Serangoon or Ang Mo Kio don’t quite reach the level of Central, the fact that they’re as close as you can get to Orchard without actually being in Orchard makes them upper-class neighborhoods.
It’s very easy to get downtown from these two districts. Ang Mo Kio MRT is only six stations away from Orchard – and getting to Singapore’s central business district isn’t much harder.
Investors might want to look at student housing in Jurong because of Nanyang Technological University.
Jurong is a vaguely defined area which comprises most of Singapore’s West Region. There’s plenty of housing here and it’s one of the city’s densest areas. But industry also plays a large role.
Jurong Port is Singapore’s only multipurpose port which has led to a lot of factories being built in the area. For those new to Singapore who might have mental images of smog and pollution brought up when the word “factory” is mentioned – don’t worry. Being in Singapore rather than China, there’s plenty of parks and lakes to compensate.
It’s also worth noting that Nanyang Technological University (NTU), which is Singapore’s largest, is located in Jurong. The National University of Singapore (NUS) is also very near. As such, landlords might want to consider that this neighborhood is popular among students.
Consisting of most areas between downtown and Changi Airport, Singapore’s East Region includes the districts of Bedok and Tampines. Like Jurong and West Singapore, manufacturing makes up a large part of the region’s economy.
Expats are increasingly choosing to live in East Singapore because of its lower costs, easy access to Changi Airport, a more suburban environment, and a location which is relatively close to the city’s downtown area.
Houses and other landed properties are easier to find in East Singapore than in many other parts of the city. As such, those with families and a bit of spending power may want to consider living out here.
Real Estate Agents in Singapore
One benefit of investing in Singapore is the ease of buying, selling, and renting properties. It’s not absolutely required to use a realtor and the commission, which is payable by the seller, can be saved by not doing so.
With that said, even locals are choosing to use property agents more because of generally high service standards and a low commission rate of 1%. This is in contrast to most other countries in Southeast Asia’s where realtors are almost exclusively a service for foreigners.
In places like Thailand and Vietnam, locals prefer to sell properties through friends, family and online forums because of high commission rates in the 3% to 5% range.
There’s a wide array of websites to list and see properties for sale on the market. PropertyGuru and iProperty are the two most popular.
Is Singapore Property a Good Investment?
You might want to consider buying real estate in Singapore if you have plenty of cash in the bank and are looking for a safe country with good governance and a strong currency. Many aspects of the city-state make it ideal for preserving wealth.
However, it’s probably best to look elsewhere if your main goal is rental income and capital appreciation. Low-yields and high prices mean that other countries in Asia have better prospects for the purpose of investment.
Different markets are suited for different people. Investing in Singapore might not be ideal for some. But for others, it offers a type of stability which few other places have.
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