Authored by the expert who managed and guided the team behind the Singapore Property Pack
Everything you need to know before buying real estate is included in our Singapore Property Pack
Are you considering investing in Singapore’s real estate market? What are the legal steps, tax implications, and cultural nuances you need to understand before diving in? What challenges do foreign investors typically face, and how can you overcome them?
These are the questions we hear most often from foreign investors because we’re actively connected to this market. We’ve spent time working with local agents, developers, and investors, so we know what works—and what doesn’t. That’s why we’ve written this article: to provide a clear guide that answers the questions we get asked daily.
Our goal is to help you, as a foreigner, to navigate the property buying process with confidence. If you think there’s something we missed or want more details, let us know (please do!). Your input helps us refine and improve our advice for everyone.
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1) Be aware of Singapore’s 60% ABSD on foreign residential property purchases, as it can greatly affect investment returns
In Singapore, foreigners face a hefty 60% Additional Buyer's Stamp Duty (ABSD) when buying residential property.
This change, implemented in April 2023, doubled the previous ABSD rate from 30% to 60%, causing a stir in the property market. The impact was immediate; in the second quarter of 2023, condominium transactions by foreign buyers plummeted by 59.2% compared to the first quarter. This drop highlights how the increased ABSD has made foreign investors think twice about purchasing homes in Singapore.
For foreign buyers, the financial hit is substantial. Imagine buying a $1 million property; you'd have to shell out $600,000 just for the ABSD, leaving only $400,000 for the actual property. This steep cost can seriously dent the potential returns on your investment.
Real estate experts see this ABSD hike as a strong signal from the government to curb foreign investment in residential properties. The message is clear: Singapore is prioritizing local buyers. Media reports have pointed out that foreigners eyeing luxury homes in central Singapore are particularly affected by these changes.
For those considering a property purchase in Singapore, it's crucial to factor in these costs. The ABSD is not just a fee; it's a strategic move by the government to manage the property market dynamics. Understanding this can help you make a more informed decision.
Sources: InsightPlus, Baker McKenzie, The Straits Times
2) Foreigners can only buy private properties in Singapore, not HDB flats, which are the most common housing type
In Singapore, foreigners can only buy private properties like condos and landed homes.
HDB flats, the most common housing type, are reserved for Singaporeans and permanent residents. This policy ensures that affordable housing remains available to locals, reflecting the government's priority to support its citizens first. So, if you're eyeing a property here, private options are your go-to.
Interestingly, in 2023, foreigners made up 13–17% of condominium sales. This indicates a healthy interest and market for private properties among international buyers. Condos are particularly popular due to their amenities and strategic locations, offering a taste of urban living.
However, if you're considering a landed property, be prepared for some paperwork. Foreigners need approval from the Land Dealings Approval Unit to purchase these types of homes. This regulation is part of the Singapore Land Authority's efforts to manage foreign ownership and maintain a balance in the housing market.
Singapore's real estate market is known for its stability and potential for appreciation, making it an attractive option for investors. The city-state's strategic location and robust economy add to its appeal, drawing interest from around the globe.
For those looking to invest, understanding these rules is crucial. It ensures a smooth buying process and helps in making informed decisions. So, while the options might seem limited at first, there's still plenty of opportunity for foreigners in Singapore's property market.
Sources: Smart Wealth, SG Luxury Homes, HMLF
We have made this infographic to give you a quick and clear snapshot of the property market in Singapore. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
3) Understand Feng Shui principles, as locals often prefer properties with good Feng Shui, giving you an edge in the Singapore market
In Singapore, the demand for properties with good Feng Shui has been rising, especially in 2023 and 2024.
Locals are increasingly drawn to homes that incorporate Feng Shui principles, like avoiding front doors that face elevators. This trend is so prevalent that real estate listings often highlight Feng Shui features to attract buyers. It's not just a marketing gimmick; it's a real factor that influences buying decisions.
According to a study by ScholarBank@NUS Repository, 85% of Singaporeans are aware of Feng Shui, and 65% actually believe in it. This means that when people are house hunting, they often consider these principles, which can significantly sway their choices.
Properties with favorable Feng Shui don't just sell faster; they often fetch higher prices. The same study found that there's a 0.9% premium on 'Lucky' numbers and a 1.6% discount on 'Unlucky' numbers. This shows that good Feng Shui can actually boost property values.
Real estate agents are savvy to this trend and frequently emphasize Feng Shui elements in their marketing. Anecdotal evidence from industry professionals suggests that homes with good Feng Shui tend to sell quicker or at better prices, making them a hot commodity.
Understanding these Feng Shui principles can give you an edge in the market, as locals often prefer properties with good Feng Shui. This insider knowledge can be a game-changer when you're looking to buy property in Singapore.
Sources: ScholarBank@NUS Repository, Stacked Homes
4) Time your property transactions in Singapore carefully, as the market is highly cyclical and affects returns
The property market in Singapore is highly cyclical, so timing your purchase and sale can significantly impact your returns.
From 2016 to 2023, residential property prices jumped by 47%, but this wasn't a smooth ride. Some years saw big gains, while others were more modest. For instance, in 2023, prices rose by 4.88% year-over-year, a noticeable dip from the previous year's 11.44% surge. By early 2024, after adjusting for inflation, the increase was just 1.85% year-over-year. These ups and downs highlight how crucial timing is for your investment.
Government policies, like the Additional Buyer’s Stamp Duty (ABSD), have a big impact too. These rules can make buying property pricier, which affects demand and prices. Depending on when you buy or sell, your gains or losses can vary significantly. It's all about catching the right wave in this market.
Sources: Fortune, Global Property Guide, Jayson Ang
5) Invest in freehold properties in Singapore, as they generally retain value better than leasehold options
Investing in freehold properties is often a smart move because they tend to appreciate more over time than leasehold properties.
Take Singapore, for example, where freehold properties have appreciated by 5-10% more over a decade compared to leasehold ones. This means if you buy a freehold property, you're likely to see a more significant increase in its value over the years. A specific case is Leedon Residence, a freehold property that saw a 12.86% appreciation from 2009 to 2020, while a similar leasehold property only gained 7.2% in the same period.
Another example is Forett at Bukit Timah, where the average price per square foot reached $1,996 in 2023. This kind of appreciation highlights the potential for better returns on investment with freehold properties. Experts often point out that freehold properties can fetch a premium of 8-12% compared to similar-sized leasehold units in the same area.
This premium is a reflection of the higher demand and perceived value of freehold properties. In 2023, statistical reports from property agencies showed that freehold condos averaged $2,130 per square foot, while leasehold condos averaged $1,766 per square foot. This data clearly indicates that freehold properties generally hold their value better over time.
So, if you're considering buying property, freehold options might be worth the investment. They not only offer better appreciation but also tend to maintain a higher value, making them a more secure choice in the long run.
Sources: SG Luxury Condo, Ohmyhome, Seedly
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6) Stay informed about policy changes in Singapore, as the government closely regulates the property market to prevent bubbles
The Singapore government actively regulates the property market to prevent bubbles and ensure stability.
In 2023, they made a bold move by significantly increasing the Additional Buyer's Stamp Duty (ABSD) rates. Singapore Citizens buying a second home now face a 20% ABSD, while foreigners are hit with a hefty 60% rate on any residential property purchase. These changes are part of a broader strategy that began in December 2021, aimed at cooling the market and keeping housing affordable for those who actually plan to live in their homes.
One of the key tools in this strategy is the Total Debt Servicing Ratio (TDSR), which has been around since 2013. This rule ensures that borrowers' monthly debt repayments don't exceed 60% of their gross monthly income. It's a safeguard to prevent over-borrowing, which could otherwise lead to a market crash.
These measures are not just about numbers; they're about maintaining a balance in the property market. By keeping demand in check, the government aims to avoid speculative bubbles that could destabilize the economy. Such bubbles can lead to economic instability, which is why these regulations are crucial.
For potential buyers, understanding these policies is essential. They not only affect how much you might pay in taxes but also influence the overall market dynamics. Staying informed about policy changes is crucial if you're considering a property purchase in Singapore.
Sources: MAS, Channel News Asia, Corporate Space
7) Know that in Singapore, a "buyer’s agent" represents you, and their fees are usually covered by the seller
In Singapore, property transactions often involve a "buyer’s agent" who represents your interests, and their fees are typically paid by the seller.
This might seem odd, but it's a common practice here. In co-broking transactions, the commission is usually split between the seller's agent and the buyer's agent, with the seller footing the bill. So, even though the buyer's agent is on your side, their payment comes from the seller.
The Council for Estate Agencies (CEA) in Singapore backs this setup. They encourage co-broking, where both buyer's and seller's agents work together. It's so standard that not co-broking can lead to disciplinary action, showing how important buyer's agents are in the market.
For you, this means having someone in your corner without the extra cost. Buyer's agents can offer valuable insights into the local market, helping you make informed decisions. They know the ins and outs, from the best neighborhoods to the latest market trends.
Plus, having a buyer's agent can streamline the buying process. They handle negotiations, paperwork, and any potential hiccups along the way. This support can be a game-changer, especially if you're new to the Singapore property scene.
Sources: The Straits Times, The Straits Times, Channel News Asia
8) Invest in uniquely featured or prime location properties in Singapore to stand out in the competitive rental market
In Singapore, the rental market is fiercely competitive.
In 2023, there was a strong demand for high-end properties in prime locations, which pushed rental prices up. Even though 2024 saw a slight cooling in price growth, the desire for properties in prime areas stayed strong.
To attract tenants, consider investing in properties with unique features. Homes with amenities like pools, gyms, and luxury facilities tend to have higher occupancy rates because tenants now prefer more than just basic living spaces.
Location is key. Properties near MRT stations or business districts are in high demand due to their convenience. Areas like Paya Lebar and Serangoon, known for their multiple train lines, have seen increased demand, making them prime spots for rentals.
Singapore's status as a global financial hub continues to draw expatriates and high-net-worth individuals, which further drives demand for rental properties. This influx has led to a scarcity of rental units in popular neighborhoods, pushing prices even higher.
Sources: Expat MetroResidences, PLB Insights, SG Luxury Homes
We made this infographic to show you how property prices in Singapore compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
9) Consider mixed-use developments for diverse income streams, as they combine residential, commercial, and retail spaces and are gaining popularity
Mixed-use developments are on the rise, especially in bustling urban centers like Singapore.
These projects are gaining traction because they cleverly combine residential, commercial, and retail spaces, offering a unique blend of convenience and lifestyle. By 2023, about 60% of new developments were mixed-use, a significant jump from the previous decade. This trend is not just a passing phase; it's reshaping how cities grow and function.
One big draw for investors is the boost in property values that mixed-use developments bring. They attract a diverse range of tenants, leading to higher rental yields. Take Marina Bay Sands and Paya Lebar Quarter in Singapore, for instance. These places have become vibrant hubs, enhancing the quality of life for those who live and work there.
Government incentives are also a game-changer. Programs like the CBD Incentive Scheme encourage the transformation of old office spaces into lively mixed-use areas. This has breathed new life into places like the Central Business District, increasing economic activity and foot traffic, which is great news for local businesses.
People today crave a lifestyle that cuts down on commute times and boosts social interaction. Surveys show that folks love living in areas that mix residential, commercial, and recreational spaces. This shift in consumer preference is a big reason why mixed-use developments are in such high demand. They offer the convenience and vibrant lifestyle that city dwellers are after.
Sources: Tolj Commercial, Cvent, URA
10) Consider properties easily convertible to co-living spaces, as they are popular among young professionals and expatriates
Co-living spaces are booming, especially among young professionals and expatriates.
These shared living arrangements are gaining traction because they offer affordable and flexible housing options. In Singapore, for instance, the demand for co-living spaces has surged by 30% in just the past year. This trend is largely driven by individuals under 35, who make up about 60% of the tenants. They are drawn to the idea of living in a community that provides both convenience and a sense of belonging.
Singapore's co-living market is thriving, with over 20 active players and more than 9,000 rooms available. This rapid growth reflects a significant shift in housing preferences, making it a hot spot for potential investors. The market's expansion by 30% in a single year underscores the increasing popularity of these spaces.
For those considering property investment, co-living spaces offer a unique opportunity. The trend is not just about shared living; it's about creating environments where people can connect and collaborate. This is particularly appealing to young professionals who value community and flexibility.
Investing in properties that can be converted into co-living spaces could be a smart move. The demand is there, and the market is ripe for growth. By tapping into this trend, investors can cater to a demographic that prioritizes community and convenience over traditional housing.
As the co-living trend continues to rise, it presents a promising avenue for those looking to invest in the property market. The combination of affordability, flexibility, and community makes co-living an attractive option for many.
Sources: Proptisfy PropertyGuru SG The Rise of Co-Living, Insights into Investing in Co-Living Sector in Singapore, Benefits of Co-living You Need to Know
11) Consider properties near reputable schools, as they are in high demand by families and can yield higher rental rates
Investing in properties near reputable schools is a smart move because these areas are in high demand among families.
Families prioritize living close to good schools to ensure their children receive a quality education, which naturally drives up property values and rental rates. For instance, in Singapore, condos within 1km of Princess Elizabeth Primary School saw their median resale prices increase by 51% in 2023. This shows that properties in these areas not only hold their value but also appreciate significantly over time.
Rental yields in school districts tend to be higher. Take AMO Residence in District 20, for example. Despite high prices, it experienced strong demand due to its proximity to CHIJ and Ai Tong Primary School. This suggests families are willing to pay a premium for the convenience and benefits of living near reputable schools.
Expatriate families also contribute to this demand, as they often seek out areas with good schools for their children. This further boosts the desirability and rental potential of properties in these neighborhoods. Expats prioritize educational quality, making these areas even more attractive.
In Singapore, the trend is clear: properties near top schools have historically shown higher appreciation rates. This is a key factor for investors looking to maximize their returns. The demand from both local and expatriate families ensures a steady stream of potential tenants.
Investing in such areas not only promises potential appreciation but also offers a reliable rental income. Families are consistently drawn to these neighborhoods, ensuring a stable market for property owners.
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12) Avoid properties with high maintenance fees, as they can reduce rental yields and profitability
When buying property in Singapore, consider all costs, not just the purchase price.
One sneaky expense is the maintenance fee, which can range from SGD 300 to SGD 1,000 monthly. This is quite high compared to other places and can significantly impact your rental income. Even if you follow the "1% rule"—where your monthly rent is at least 1% of the purchase price—these fees can still eat into your profits, making it tough to maintain a positive cash flow.
Maintenance fees don't just stay the same; they often increase. Imagine buying a condo in 2015 and seeing its fees rise by over 42% in just five years. What seems manageable now could become a financial burden later, further squeezing your rental yields and profitability.
High maintenance fees can also make your property less appealing to renters. If the fees are too steep, you might find it challenging to attract tenants, leading to more time with the property sitting empty and not generating income.
In Singapore, where the property market is competitive, keeping an eye on these fees is crucial. They can be a hidden cost that affects your investment's success. Always factor them into your calculations to ensure you're making a sound financial decision.
Be cautious of properties with high maintenance fees, as they can eat into your rental yields and overall profitability.
Sources: Rental Income Advisors, Buildium
13) Avoid areas with high vacancy rates, as they can make finding tenants difficult and impact rental income
When you're thinking about buying a property, keep an eye on the vacancy rate in the area.
In places like Newton/Novena, the average gross rental yield is 4.25%, which is noticeably lower than in areas with fewer vacancies, such as Hougang/Punggol/Sengkang, where the yield is 5.03%. This difference means that properties in areas with high vacancy rates might not generate as much rental income.
Landlords in high vacancy areas often face challenges in finding tenants, leading to longer periods where their properties sit empty. This can significantly impact rental income. For instance, property owners in Newton/Novena have reported difficulties in renting out their units.
In contrast, areas with lower vacancy rates tend to have a more stable rental market. This stability can make it easier to find tenants and maintain a steady income stream. Choosing a property in such areas might be a safer bet for potential investors.
Understanding the local market dynamics is crucial. Areas with high vacancy rates can be risky, as they often indicate a lack of demand. This can lead to prolonged vacancies and reduced rental income, making it harder to achieve a good return on investment.
Before making a purchase, consider the vacancy rate as a key factor. It can be a strong indicator of the area's rental market health and your potential to earn consistent rental income.
Sources: Global Property Guide, CEIC Data
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility.