Buying For Foreigners

Properties in Singapore are sold either on a freehold or leasehold tenure. A freehold title enables the owner to hold the property in perpetuity, whilst a leasehold title confers possession upon the purchaser for the duration of the lease (for example, 99 or 999 years). On expiry of the lease, the title and interest in the property revert to the State.

Eligibility

Since mid-2005 foreigners can buy apartments (known as strata-titled properties) in all buildings without needing approval from the Singapore Authorities. Previous rules about the apartment block needing to be higher than six storeys and classified as a condominium no longer apply.

A foreign person (any person who is not a Singapore citizen, Singapore Company, Singapore limited liability partnership or a Singapore society) will still need approval from the Singapore Land Authority (SLA) to buy land-titled property such as houses, bungalows and vacant plots of land.

Financing the Purchase

Mortgages can be obtained for purchase of all freehold properties and some leasehold properties depending upon the usage and the unexpired lease term. New leasehold residential properties which generally come with 99 years leasehold shouldn't be a problem. Banks may be unwilling to give loans for residential properties with less than 60 years unexpired lease.

The current Monetary Authority of Singapore (MAS) (August 2006) ruling allows buyers to borrow up to 80 percent of the valuation (Market Value) or purchase price, whichever is lower. (The percentage is lower for commercial properties.) Ten percent must be paid in cash, the other ten percent can be paid using the buyer's Central Provident Fund or cash.

Some banks offer a lower interest rate for mortgages where the residential property is the first property purchased and is for owner occupation.

The purchaser should check the market valuation for the property they want to buy. Valuation directly affects the amount of financing that can be granted for the property. Banks generally do not require a condition survey on the state of repair of a property. However, if there are serious known risk issues, banks may be reluctant to grant a mortgage. The condition of the property also affects market value and hence the actual loan amount that can be obtained under a mortgage.

The purchaser will also need to check if their credit status and income proof will enable them to borrow the amount required.

Note: For foreigners, too, major banks or financial institutions in Singapore can lend only up to 80 percent of the valuation or sale price (whichever is lower), and will require proof of earnings.

Stages Involved in Buying a Property

Finding a Property

There are many ways to go about finding the right property. Some local newspapers (including the Straits Times) have classified property sections and many local property agents have websites.

Professional property agents in Singapore will assist the buyer and protect their interests throughout the purchase, and should help secure the offer at the best possible price. The agents will also ensure that all documents are in order and that the seller is the rightful owner of the property. Most of the property agents share their databases with each other.

The Institute of Estate Agent (IEA) has published recommended commissions/fees for real estate transactions.

Checking the property and the seller's credentials

Check with the seller that any renovations and/or alterations to the property were approved and are legal. Agree with the vendor that if the authorities should require any illegal renovations and/or alterations to be rectified, the vendor will be responsible for rectification works, at his expense.

Engage a solicitor

It is advisable to engage a solicitor to conduct a title search on the property to confirm ownership and title and carry out a bankruptcy search on the vendor.

The solicitor will lodge a caveat at the Singapore Land Registry to notify the public of the buyer's interest in the property, send out legal requisitions to the relevant government departments in order to ensure that the property is not subject to any adverse notices, and liaise with the relevant bank or financial institution and the CPF (Central Provident Fund) Board to ensure that the loan and monies are released on time. The solicitor will also prepare the transfer document and arrange for execution of the mortgage and/or CPF documents.

Option to Purchase

On deciding to purchase a property the first step is to get an Option to Purchase. This is done by making a payment of one percent of the purchase price. Usually 14 days are allowed for the buyer to decide whether to proceed with the purchase and to finalise the finance. There will not be a caveat on it at this stage but the seller cannot sell to anyone else.

If the purchase proceeds, the buyer must then exercise the option by signing and sending the purchasing documents to the seller's solicitor together with a cheque for a further nine percent of the purchase price.

Alternatively the agent managing the purchase can prepare the Option to Purchase and present it to the seller. It must clearly state the price, sales completion date and other conditions. Terms and conditions can be drafted by a solicitor.

Once the Option to Purchase has been exercised it is unconditional on both sides. The buyer will lose the ten percent deposit if they decide to pull out, and a seller who wants to opt out of the agreement will have to refund the ten percent including the accrued interest.

The vendor has the right to seek recourse through the courts if the buyer pulls out, in the same way that the vendor cannot pull out or they may also risk being sued, so a seller cannot decide to pull out and sell to someone else.

Sales and Purchase Agreement

A solicitor will be needed to prepare a Sales and Purchase Agreement. The sale should be completed within about 10 weeks, and stamp fees are payable before completion. Visit the Inland Revenue Authority of Singapore (IRAS) for more information on Stamp Duty.

Buyer and vendor should arrange a date for inspection of the property before completion of the sale. Check the fixtures and fittings, and also confirm which items the vendor is including in the sale price.

Completion

At completion the Certificate of Title will be issued on payment of the final balance of the purchase price. While the mortgage exists, the bank will retain the Certificate of Title and will release it to the purchaser when the loan is fully repaid.

For new properties, payment is made progressively or upon completion of construction and issuance of the Certificate of Fitness for occupation.

On completion the seller must hand over the property as agreed.

Property Investments with a view to Permanent Resident (PR) Applications

Private residential property investment will be considered in any application for Permanent Residency. A foreigner can be considered for PR status if they invest in business set-ups or other investment vehicles.

Up to 50 percent of the investment can be in private residential properties, subject to foreign ownership restrictions under the Residential Property Act (RPA). This is to attract and anchor foreign talent in Singapore.