Property investment in Singapore is seen as a secure, long-term option compared to the more volatile stock market. Despite government restrictions and cooling measures, it remains a favored investment. Before diving into your next property, consider these five crucial questions:
Do I qualify to purchase a second property?
For HDB flat buyers, check if you've fulfilled the five-year Minimum Occupancy Period (MOP) before considering a second property. The MOP requires you to reside in your current HDB, resale HDB, or Executive Condominium for five years before purchasing another property.
What kind of property am I searching for?
Define the type of property you're interested in, as it influences the subsequent steps. Options range from HDB flats, DBSS flats, Executive Condominiums (ECs), condos, apartments, semi-detached or terrace houses, to Good Class Bungalows (GCBs).
What are the most important things to think about while selecting a property? Whether it's for investment or residence, consider these four factors:
The location influences the type of tenants you attract. CBD locations appeal to expats, while heartland areas suit families. Consider your lifestyle and community preferences.
Assess nearby amenities and transportation networks, influencing the tenant profile. For owner-occupiers, ensure amenities like supermarkets, hospitals, and schools meet domestic needs.
Check URA plans for the area. Example: URA's plan to transform Jurong East into a second CBD, impacting property values positively.
Assess potential rental yield, capital appreciation, and return on investment. Check historical rental rates to gauge performance. Aim for rental rates that cover or exceed monthly loan repayments
If it's an investment, is this the ideal time to make the purchase?
Consider the timing of your investment. Note the risks, such as the declining expat population affecting rents. Be aware of the Total Debt Servicing Ratio (TDSR) when seeking a home loan, ensuring responsible borrowing
When considering a second property purchase in Singapore, it's crucial to be aware of various financial considerations and government regulations. The following are crucial things to take into account:
Loan-to-value (LTV) Ratio:
The LTV for bank loans is 75%, but for the purchase of a second property, it is 45% or 25% for loans with tenures exceeding 30 years.
Additional Buyers’ Stamp Duty (ABSD):
ABSD rates vary based on buyer status. For Singapore Citizens purchasing a second property, ABSD is 17%. For Permanent Residents, it's 25%, and for foreigners, it's 30%.
From May 9, 2022, a new ABSD (Trust) of 35% applies to the transfer of residential properties into a living trust.
Property tax rates for both owner-occupied and non-owner-occupied residential properties will be revised starting in 2023. Rates for owner-occupied homes with an annual value over $30,000 will increase, while non-owner-occupied homes will see higher taxes across the board.
Given the capital-intensive nature of buying a second home, financial prudence is crucial. Miscalculations can lead to financial challenges. Working with a financial planner to establish a clear plan is recommended.
It's essential to stay informed about these regulations and factors to make well-informed decisions when considering a second property purchase in Singapore.