Last updated October 13th, 2018.

 

Singapore’s transformation from a malarial swamp to one of the richest nations in the world was nothing short of astonishing.

 

A strategic location along the Strait of Malacca, pro-business government, openness to foreign investment, along with a bit of ingenuity have all helped Singapore 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 anyone investing in Singapore property, that equates to both strengths and dangers in the local 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 won’t go away 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 property investment, there’s less money to be made. Rental yields are low at around 4% on average.

 

Real estate values have also suffered downward pressure for the past several years. That negative trend will probably continue during the short-term.

 

Singapore HBD

Space is at a premium in Singapore, a small-island nation of just over 6 million people.

 

Remember that Singapore is one of the most expensive cities in the world too. The minimum price of entry is far higher than in most other places. In fact, Hong Kong is the only city in Asia which is pricier than 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.

 

Foreigners can own houses, bungalows, and other landed properties under six stories tall too. But you need government approval first.

 

It’s a bureaucratic process and you must prove that your ownership will benefit Singapore. Usually that’s done by bringing in a substantial sum of money to buy the land with. Think in the eight figure dollar range.

 

Things get a bit more difficult when it comes to the matter of taxation. Foreigners pay tax 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 don’t 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 Property Tax

Singapore’s Annual Property Tax Rates for Non-Owner Occupied Properties.

 

Taxes on rental income in Singapore is 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, along with ease of access to the MRT.

 

Proximity to Singapore’s MRT 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 owning a car in Singapore is, checking to make sure you’re near a station is crucial.

 

Central

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.

 

Central 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. You’ll likely pay above S$20,000 per square meter either way.

 

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 Singapore property, 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. Even property in Singapore’s far-flung areas should appreciate over time.

 

Serangoon / Ang Mo Kio

Serangoon and Ang Mo Kio are two districts on the northeastern edge of Singapore’s suburbs.

 

A convenient location right between downtown and Changi Airport, along with an abundance of malls and other activities, has helped them become two of Singapore’s most popular areas.

 

Despite being far away from Central, real estate in this part of town is expensive when compared with most other top neighborhoods in Singapore though.

 

Prices in Serangoon or Ang Mo Kio don’t quite reach the level of Central. Yet 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.

 

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NTU

Investors might want to look at student housing in Jurong because of Nanyang Technological University.

 

Jurong

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 plays a large role too.

 

Furthermore, Jurong is home to Singapore’s only multipurpose port. That helps bring many factories to the area, especially those in the tech and medical sectors.

 

For those new to Singapore who have mental images of smog and pollution brought up when someone mentions the word “factory” – don’t worry. Being in Singapore rather than China, there’s plenty of parks and lakes to compensate.

 

It’s also worth noting that Jurong is a top educational hub. Nanyang Technological University (NTU), which is Singapore’s largest, is based here.

 

The National University of Singapore (NUS) is very near too. As such, landlords might want to consider that this neighborhood is popular among students.

 

East Singapore

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 buy real estate in East Singapore because of its lower costs, easy access to Changi Airport, a more suburban environment, and a location 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.

 

Rows of luxury houses and condos in Serangoon. The neighborhood’s great location is supporting a property construction boom.

 

Real Estate Agents in Singapore

One benefit of investing in Singapore property is the ease of buying, selling, and renting them. 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%.

 

That’s in stark contrast to most other countries in Southeast Asia’s where realtors are almost exclusively a service for foreign investors.

 

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.

 

Singapore real estate should continue appreciating in value over time. A severe lack of space combined with population growth and rising income bodes well for long-term investors.

 

Wealthy foreigners will also keep investing in Singapore property. Despite the government’s attempt to push non-resident buyers away through tax increases, the city state’s reputation as a safe haven is unrivaled.

 

Mainland Chinese especially consider Singapore a safe place to park their money. It’s increasingly preferred over Hong Kong as Beijing starts cracking down on the Sinosphere’s own international gateway.

 

However, it’s probably best to look elsewhere if your main goal is rental income and capital appreciation. Singapore’s weak yields and high prices mean that other countries in Asia have better prospects for the purpose of investment.

 

Different markets suit different people. Investing in Singapore property might not be ideal for some. But for others, it offers a type of stability that few other nations can.

Skip the Next Western Recession

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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