There goes my plans as an average Singaporean wishing to purchase a second residential property as small time investment (not speculation). Most of my peers are skeptical about even the last wave of drastic cooling measures which will dash hopes of the non-Singaporeans among us of owning their homes here and hopes of the Singaporeans among us of being a small time landlord. We feel that the rich businessmen in the region will continue to come in with their cash (so LTV ratio is not a problem for them) and the additional stamp duty may not deter them since Singapore remains a relatively safe, easy and cheap place to invest in property (~13% didn’t deter them so why should ~18%). On the bright side, at least the government gets more income that it can use towards making lives of Singaporeans better, even if the measures don’t have as much effect as hoped.
For the benefit of those who didn’t have time to catch up on the news or do the calculation, here’s a summary of the costs involved in property purchase:
1. Option money
Amount: Usually 1%, but nothing in law to say its got to be 1%. I have seen a different amount once in a very specific circumstance.
Time: Whenever you decide you want to buy the property.
2. Exercise option
Amount: Usually 4% of purchase price, or whatever amount it takes to make up 5% when added to option money.
Time: Within the option period, usually 14 days from signing option to purchase.
3. Stamp duty
Amount: Normal stamp duty (1% on first $180,000, 2% on next $180,000 and 3% on subsequent amounts), plus Additional Buyer’s Stamp Duty are as follows:
- Singapore Citizens: none on first property, 7% on second property, 10% on third and subsequent properties
- Singapore Permanent Residents: 5% on first property. 10% on second and subsequent properties
- Foreigners and non individuals (such as companies): 15% on all properties
Time: Within 14 days of exercising option
Mode: Combination of cash, CPF and loan
- First loan: 80% of valuation, or 60% of valuation if loan tenure is more than 30 years or extends past age of 65
- Second loan: 50% of valuation, or 30% of valuation if loan tenure is more than 30 years or extends past age of 65
- Third and subsequent loans: 40% of valuation, or 20% of valuation if loan tenure is more than 30 years or extends past age of 65
- First loan: at least 5%, or 10% if loan tenure is more than 30 years or extends past age of 65
- Second loan: at least 25%
- Third and subsequent loans: at least 25%
- Legal fee: approximately $3000 for properties below $2m and $4000 for properties above $2m; usually banks will give a subsidy of at least $2,500 for this.
- Agent commission: 1% or 2%
CPF: Whatever amount towards property purchase that is not accounted for under loan and cash above.