Rikvin Capital Bridging Loan Highlights
- 24 Hours In Principal Approval
- 3-18 month loan term
- $1M to $50M
- Bungalow, Semi-D, Condo, Shop House & Commercial can be used as Collateral
- up to 70% Loan to Value
- Borrowers must qualify as Acccredited Investor in Singapore
In a report published in 2018, the investment bank UBS noted Singapore as a lucrative option for real estate investment. The country’s pro-business and low-tax environment has put it on the radar for property investment among foreigners. Even after introducing property price cooling measures such as the Additional Buyer’s Stamp Duty, non-existence of capital gains and inheritance taxes, offset any potential costs for foreigners in the city-state.
Moreover, Singapore’s stable political environment and sound economic policies, and close monitoring of the property scene by the Government, give confidence to foreigners of the near-certainty of rising property assets value in the future.
Even in terms of taxes applicable while selling a property, the only chargeable tax is the Seller’s Stamp Duty (SSD), which is only applicable within the first three years and is relatively low.
Thus, buying a property in Singapore, especially in today’s volatile economic environment around the world, makes perfect sense.
Who is considered a foreigner in Singapore?
In Singapore, anyone who is not a Singaporean citizen or Singapore Permanent Resident (PR) is considered a foreigner.
And these three broad categories — citizens, PRs, and foreigners — are restricted with the kind of properties they can or cannot purchase, depending on whether it is residential or non-residential/commercial.
In general, foreigners in Singapore buying properties commonly face more taxes and far greater restrictions when owning residential properties.
Whereas non-residential property, which includes most commercial property types, can be owned by foreigners as easily as PRs and citizens. Note that the Additional Buyers Stamp Duty (ABSD) is not levied on foreigners when buying a warehouse or office building.
What type of residential properties can PRs buy in Singapore?
There are three main types of residential properties in Singapore:
- Housing Development Board (HDB) flats
- Private properties; this include landed residential properties and private condominiums
- Executive Condominiums (ECs)
Please note that to buy an HDB flat, you must be a citizen or a PR, as foreigners can’t buy HDB flats in Singapore. Also, Singapore citizens are free to purchase any type of private property, including apartments and landed bungalows, and ECs.
Meanwhile, PRs have access to only HDB resale flats three years after obtaining the PR status and only if they are jointly buying as two Singapore PRs. They also do not have access to either the Central Provident Fund’s Housing Grant or HDB’s mortgage loans at concessionary interest rates.
Though PRs can buy a subsidized executive condominium, also known as a semi-privatized executive condominium, five years after the building is completed. Moreover, PRs can also apply to the Singapore Land Authority (SLA) to buy a landed house, but only if they can prove an economic contribution to the country.
What type of residential properties can foreigners buy in Singapore?
Coming to the purpose of this article, property options for foreigners in Singapore:
- can purchase private properties such as private apartments and condominiums.
- PRs can buy landed properties, including bungalows, semi-detached houses, etc. but will need government approval.
- can only buy Executive Condominiums (ECs) that are a minimum of 10 years old.
- cannot purchase HDB flats in Singapore.
Also, note that there isn’t any limit on the number of private apartments and condominiums that a foreigner can buy.
Which properties require approval for foreigners to purchase in Singapore?
Every application for foreign ownership of property in Singapore is assessed on a case-by-case basis, including the applicant’s Permanent Residency status and duration (at least five years) and/or whether the applicant has made an exceptional economic contribution to Singapore.
But in general, the following properties require approval to purchase:
- Vacant residential land;
- Terrace house, semi-detached house, or a bungalow/detached house;
- Townhouse or cluster house, not within an approved condominium development under the Planning Act
- Shophouse for non-commercial use;
- Association premises or places of worship;
- Worker’s dormitories, serviced apartments, or boarding houses that aren’t registered under the Hotels Act).
Can foreigners buy landed property in Sentosa Cove?
Yes, foreigners can buy landed property in Sentosa Cove. However, it must be noted that Sentosa Cove is an exception where foreigners are allowed to purchase landed properties with approvals granted in just two days. But importantly, such properties must be owner-occupied and cannot be rented out. This condition is imposed on all foreigners buying restricted residential properties in Sentosa Cove by the Residential Property Controller.
Which properties can foreigners purchase in Singapore without seeking approval?
In contrast to the above, certain kind of properties do not require approval to be purchase by foreigners, which are as follows:
- or a flat unit;
- Strata landed house within an approved condominium development;
- Commercial-use shophouse;
- Industrial and commercial properties including hotels registered under the provisions of the Hotels Act); and
- And if you are a PR, executive condominium unit, HDB flat and HDB shophouse
As is clear from the above, there are no restrictions on foreigners buying commercial properties in Singapore. These commercial properties include shops, offices, hotels, warehouses, factories, and shopping malls.
What are the best loan options for foreigners in Singapore?
Once you have zeroed in a property you want to buy, the next question is arranging the finances and securing a loan. Here too, like the restrictions on the kind of properties, there are some differences between the property loan options for foreigners in Singapore and citizens/PRs.
Can a foreigner get a home loan in Singapore?
Yes, foreigners can apply for a home loan in Singapore. However, there are limits on the loan to value (LTV) ratio of your mortgage, as well as mandated minimum cash down payments. Also, do remember if you are applying for a bank loan. Regardless of which you approach, a foreigner must possess an excellent credit standing to be awarded a loan. A private lender may take a lenient view on your property loan, as they base their lending mostly on the collateral of properties.
So if you’re an onshore foreigner, you must have a good credit score to avoid roadblocks during your application. And if you’re an offshore foreigner, banks will be verifying your eligibility based on your proof of income and net worth statement.
Although private lenders, which can lend to only restricted applicants (details below), may have other criteria.
Which documents are required for a foreigner to apply for a home loan in Singapore?
A foreigner must provide a foreign identification number (FIN) while applying for a loan, which you will have once the visa application is complete. Additionally, the following documents are required for a home loan as a foreigner in Singapore:
- A valid work visa, or the Employment Pass
- Copy of your passport or Identity Card (for Permanent Residents)
- Your latest CPF statement showing account balance and any contributions (if applicable)
- Latest copy of your income proofs including:
- Six months payslips with bank statements if you are staying and working overseas
- Three months’ payslip if you are working on an employment pass
Suppose the property is already confirmed for purchase. In that case, the bank will also require either the signed Option to Purchase (OTP) or a Sales and Purchase Agreement (S&P).
If you are self-employed, you must submit their proof of earnings and net worth statement.
What are the essential considerations as a foreigner applying for a property loan in Singapore?
What is In-Principal Approval (IPA) in Singapore?
You’ll need to obtain an In-Principal Approval (IPA) from the bank. An IPA indicates the maximum amount of loan you can borrow and the tenure.
In Singapore, the Monetary Authority of Singapore has capped the maximum loan tenure for housing loans of non-HDB properties at 35 years, or 75 years of age, by the end of the loan tenure. This applies to both freehold and leasehold properties.
How much can I borrow as a foreigner buying a property in Singapore?
By definition, Loan-to-Value is the mortgage loan you can take up from a bank or any other financial institution with your property’s market value.
- Here, it is essential to note that if there’s an outstanding mortgage loan, borrowing 75% of the purchase price is possible.
- If you already have an outstanding loan, only 45% of the purchase price will be granted.
- If you have two outstanding loans, you can only borrow 35%.
If you’re a foreigner, the maximum amount you can borrow depends on the number of housing loans you’ll be taking or already have. If it’s your first time, your LTV entitlement is 75%.
Everything about the Total Debt Servicing Ratio (TDSR) in Singapore
Going hand in hand with LTV is TDSR, or total debt servicing ratio, which is another way the Singapore government limits the amount individuals can borrow for mortgage purposes.
The Singapore government introduced the TDSR in 2013 to make sure individuals borrow responsibly and not end up drowning in debt.
In a nutshell, the TDSR limits the amount you can spend on your monthly debt repayments (student loans, car loans, personal loans, etc.) to 60% of your gross monthly income. This means that if your income is $5,000, your home loan repayments, plus any other loan repayments, cannot exceed $3,000.
There are a few obvious ways of improving your TDSR, which won’t surprise any savvy investor:
- First is to reduce one’s monthly loan commitments. Try paying off as much debt as feasible, and as soon as possible, be it car loans, credit card debt, or student loans.
- See if you can have assets such as gold, stocks, or shares, which may produce some extra income streams, and as seen by your financial institutions. This will increase your monthly income. And will this, in turn, bring down your TDSR.
Mortgage Servicing Ratio (MSR) in Singapore
Suppose you’re buying an HDB flat (both brand new and resale) or an EC. In that case, you have additional criteria to look out for other than the TDSR – the Mortgage Servicing Ratio (MSR).
Under the MSR framework, the monthly mortgage payments for your HDB flat or EC cannot exceed 30% of your household income.
So let’s say your other loan obligations amount to only 10% of your monthly household income. Although the TDSR limit is 60%, you can’t merely commit 50% of your household income to pay off your HDB flat or EC monthly, hoping to pay off your home much faster.
With the MSR, you can only use up to 30% of your household income.
Is a Singapore accredited investor exempted from TDSR?
The short answer is yes. If you are a Singapore accredited investor, you can be exempted from TDSR if you borrow from a registered, private funder in Singapore.
This so because a registered, private funder is not hindered by the Money Lending Acts, even though they are licensed by the Monetary Authority of Singapore (MAS).
MAS allows such private funders in Singapore to loan money to accredited investors that would otherwise exceed their TDSR by using some form of collateral. While MAS allows these private funders to bypass TDSR without collateral, they are unlikely to for risk management reasons.
Thus if one has enough assets to offset one’s TDSR as collateral, one can bypass TDSR restrictions altogether.
This gives an investor a lot more flexibility and scope to accurately assess whether the investment is a prudent one, rather than being limited by a structure that assumes you can’t afford it.
You can check if you qualify as an accredited investor here.
Also, Rikvin Capital can advise you on how to avoid TDSR in your investments.
What is the maximum tenure a foreigner can get on property loans in Singapore?
The maximum tenure for freehold and leasehold property for foreigners in Singapore is 35 years or 75 years of age by the end of the loan tenure. Freehold property is usually more expensive than leasehold properties because it has no time limit on ownership. Typically, leasehold property in Singapore has a 99-year or 999-year tenure.
What are the fees and duties to consider while buying a property in Singapore?
You will be required to pay various fees to finish purchasing your property in Singapore, such as the OTP fee to buy property, a down payment, conveyance fees for legal services, Buyer’s Stamp duty, Additional Buyer’s Stamp Duty (ABSD), as well as the valuation fee.
We explain some of these in detail below.
Stamp duty for foreigners looking to buy property in Singapore
Buyer Stamp Duty (BSD) for all property buyers in Singapore
By definition, Buyer Stamp Duty (BSD) is a tax levied in Singapore on all property buyers regardless of their nationality. It is just dependent on the market value of the property. In general, the more expensive the property’s purchase price or market value, the higher the BSD Rate.
Right now, residential properties are:
- taxed at 1% for the first $180,000
- 2% for the next $180,000
- 3% for the next $640,000;
- and 4% for the remaining amount.
Additional Buyer Stamp Duty (ABSD) is a requirement for foreigners buying a property in Singapore.
The Additional Buyer Stamp Duty (ABSD) in Singapore is a tax levied on residential property purchase. In addition to the BSD, it is only applicable to the following buyers. It is different for citizens, PRs, and foreigners.
- Singapore Citizens: ABSD will be levied on the second (12%) and subsequent property purchases
- Singapore Permanent Residents (PRs): ABSD will be levied on all purchases. The first purchase will be 5% while the second and subsequent purchases will be 15%
- Foreigners: 20% ABSD for any property purchase
- Entities (companies or associations): 25% for each property
Virtually, ABSD affects everyone except Singapore Citizens buying their first property and some other exemptions as below.
If i) you are a foreigner or a PR married to a Singaporean Citizen and ii) you don’t own any residential property, you won’t be charged the ABSD. In case you are switching residential properties as a married couple, it can also be refunded to you. Note that the first ABSD-paid property must be sold within six months, either after purchasing the second property if the sale is completed or after obtaining a Temporary Occupation Permit, whichever falls earlier.
Foreigners eligible for ABSD remission under Singapore’s Free Trade Agreements (FTAs)
Citizens of the United States of America, Iceland, Liechtenstein, Norway, and Switzerland will be granted the same tax treatment as Singapore Citizens due to the Free Trade Agreements signed with the United States of America and the European Free Trade Association.
Therefore, the ABSD will not be chargeable for listed nationalities on their first residential purchase. Their second, third & subsequent residential purchases will be taxable at 12% and 15%, respectively.
Is there any capital gains and inheritance tax in Singapore?
It is important to note that there is no capital gains tax in Singapore. There is also no inheritance tax in Singapore, whether you are foreign or local.
However, note that there is a Seller’s Stamp Duty (SSD), which was introduced to prevent house-flipping in Singapore. But it only applies for three years after the sale and affects both the foreigners and citizens/PRs alike:
- The SSD is 12% of the property price if the property is sold again within the first year of buying,
- eight percent in the second year, and
- four percent in the third year.
- Notably, there is no SSD from the fourth year onward.
It is important to note that the Seller’s Stamp Duty does not apply to commercial properties – except for industrial properties. Thus if you own a commercial property that is not an industrial property, you can choose to sell it anytime without any SSD implications.
For industrial properties, though, the corresponding SSD rates are:
- 15 % up to the first year of buying,
- 10% for the next year,
- 5% in the third year,
- No SSD for more than three years
Is an agent required to buy a property in Singapore?
No, it’s not essential, but advisable. An agent can assess and negotiate pricing and help navigate the paperwork, taxes, and fees. Do note that buyer’s agents typically charge a fee of around 1% in Singapore.
Do I need legal advice while buying a property in Singapore?
It is crucial to have a qualified local lawyer to help you while buying a property in Singapore. The bank or private lender will usually refer a lawyer to their panelist, work directly with the CPF Board and the seller’s bank to get everything sorted.
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