2022 Guide To Buying A Condo In Singapore
Can You Afford To Buy A Condo In Singapore?
Many Singaporeans feel the pinch and often shake their heads when buying a condominium in Singapore.
Buying is not that hard at all.
A lot of property investment Ads tell us it’s so easy.
The latest private housing available in the market touts attractive headlines and fancy photos and lifestyle videos.
Kids are playing happily in the swimming pool.
Gym in the condo for you and a sauna for your wife to relax.
Large cool rooms, beautiful and stylish magazine interiors.
A typical Condominium For Sale Ad looks like this;
” Freehold condo near MRT. Choice of 1–3 Bedrooms; Attractive low entry price (deposit) from $200,000 ONLY”.
It is the qualification process and affords to pay the monthly mortgages for the next 20 or 30 years to cringe.
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Buying a Condo in Singapore For Investment Doesn’t Mean It’s Affordable.
Can most Singaporeans afford to buy a new condo development?
The brief answer is sad, “YES.”
Because leveraging on mortgages and loans and remaining in debt for almost the rest of your life–doesn’t seem to be an option.
I, too, wished it was otherwise for affordability and the strong Singapore Dollar.
But the facts remain true.
The result of the survey conducted by urban planning policy consultancy Dermographia in Q3 2018, the 15th Annual Edition of the Dermographia International Housing Affordability Survey (2019), is alarming.
The middle-income housing affordability for Singapore is considered “unaffordable.”
In a comparison against the 309 urban housing markets in eight countries
- Hong Kong-China
- New Zealand
- United Kingdom
- United States
Just as the world’s 91 major metropolitan markets (housing markets) and the three megacities (10,000,000 residents) in New York, London, and Los Angeles, the Singapore survey showed that the median house price is 4.6 times higher than the rest of the major cities.
According to the survey, Hong Kong ranked as the world’s least affordable home price with a median multiple of 20.9, followed by Vancouver, which came in second place.
Sydney, Melbourne, and San Jose came in third, fourth, and fifth.
The sixth, seventh, and eighth least affordable housing markets lie in Los Angeles, Auckland, and San Francisco.
London (Greater London Authority) and Toronto were tied in 10th place with a median of 8.3.
Why is buying property a good investment?
Real estate investors build their portfolios and profit from flipping, rental income, Airbnb, capital appreciation, and income generated by business activities on the investment property.
Some of the benefits of investing in properties are
- passive income
- stable cash flow
- tax advantages
- and leverage
While the property is a good investment because of capital gains, is it a cash-flowing asset?
If you look at the statistics of condo owners in Singapore:
82% wait for capital appreciation
44% have annualized gains above 2.5% (properties purchased before 2008)
In 2020, the average annualized returns fell to 2.2% vs. money in CPF generates a guaranteed 2.5%
Is Investing in a Condo in Singapore the best idea?
Let’s look at the return on investment (ROI) from buying a condo.
Before the 1970s, the local property scene was about landed properties and HDBs.
The condominium was a foreign concept to Singapore as a whole.
In less than a decade, the number of condo units 90,000 units condo was built, bringing the total to 210,000 units in 2018.
The Singapore property market went through a few boom cycles.
Investors experienced a 100% price increase between 1990 and 1996 to a 20.9% increase in 2007.
Before the boom, investors who purchased condos enjoyed high capital appreciation from their properties.
After the 2008 Global Financial Crisis, the Singapore government had many cooling measures to check the overzealous market.
What Is The Average Salary Of A Singaporean?
According to tradingeconomics.com, the Singapore Average Monthly Wages (updated in January 2019) shows the highest wages at $5808.00 and the lowest at $1302.00
It is almost impossible to save for a condo in terms of affordability for the average Singaporean, earning at the lower end of the spectrum.
House prices in Singapore have a median multiple of 4.6, so the median house price is 4.6 times the city-state’s median household income, according to the survey.
What Is The Cheapest Price Of A New Condo in Singapore?
There are fewer listings for Singapore Condo prices below $500,000 than the higher-priced condo with an upper range of $5,000,000 and beyond.
And that is for a SINGLE Bedder!
With the current salary scale and limitations, you’d have to afford the repayments before you can even plan to buy your condominium.
A condo is one of the prominent 5 C’s many Singaporeans chase after for many young Singaporeans.
Ticking off the “C”–the biggest big-ticket purchase can be quite a feat to pull off for your dream condo.
Let’s tackle the list before you go the whole nine yards.
1. Make sure you can pay the 25% down payment
While you can offset up to 20% of it using your CPF Ordinary Account (OA), which means you only need to fork out the remaining 5% from your cash reserves.
Next, before you secure your 75% loan from a bank, you will require to take an Approval-In-Principle from a bank – some sellers or property agents might ask to see before agreeing to sell the condo to you.
2. Check if it’s a freehold or leasehold unit
Leasehold tenures in Singapore are 99 years or 999 years.
Essentially, this means you own your property for the rest of the 99 years or 999 years.
If you buy a second-hand property, you need to check this out.
You get to hold your freehold properties for life; however, these are about 10-15% more expensive than their leasehold properties and are not in prime locations.
3. Check nearby MRT and transport lines
Staying near an MRT or transport line should always be a top consideration.
4. Are you paying for amenities you don’t use?
Fancy amenities like a tennis court or an infinity pool mean higher maintenance fees.
The size of your unit computes these.
If you splurge on that high-end unit, you may pay up to $1,000 a month for maintenance fees.
It’d be nice to live right next to tennis courts, gyms, or swimming pools, but they also beg the question: will you be using them, or will you admire them from afar?
5. Set aside an extra budget for taxes and stamp duty
On top of your down payment monthly maintenance fees, virtually there is property tax, which goes up to $2,100 a year.
If you purchase your new condo before selling your present home, you need to pay the Additional Buyers Stamp Duty (ABSD) as it deems the condo your second property.
The ABSD amounts to a whopping 12% of your condo price.
That’s going to amount to a whopping 12% of your condo price, so you will plan your finances properly before making a purchase.
The first step of Buying A Condo In Singapore is understanding how much money is involved.
Here’s a general rundown of the cost, assuming you want a modest $1.2 million condo.
Most Singaporean struggle to find the optimal age to buy THAT condo.
It would be best if you were young enough to get your 80% loan and have SAVED sufficient money for the 5% Cash with a 20% value of CPF to withdrawal and other expenses.
The next step of Buying A Condo In Singapore is the Loan Tenure.
The maximum Loan Tenure of 30 years for private properties puts a damper to buying a Singapore condo.
According to the Trading Economics global macro models and analysts’ expectations, they expect the Retirement Age Men in Singapore to reach 62.00 by the end of 2020.
So qualifying for the maximum LTV of 80%, you need to accumulate enough down payment by 32 to pay for your condo by the time you retire at 62.
Is it Possible to Buy A Second or Third Condo In Singapore?
Are you motivated to purchase a second or third property to grow your wealth – you need to ask yourself what you intend to do with multiple properties.
Are you investing for
- a source of passive income
- keeping the property for your children
- keeping the property for capital appreciation
- naturally use it as a source for retirement income
If you’re buying intention is for rental yields, you will require to be more selective in terms of
- Choice of Location
- Property Size
- Future Development
- Job Market
- Potential Tenants
- Number of Listings and Vacancies
- Average Rents
You will need to look at the location and property size that suit potential tenants’ needs in Singapore.
In school districts, the probability of renting out your house in the area is higher if you were to purchase a larger apartment that can accommodate a family of four.
For areas with a high percentage of a single working ex-pat, get a smaller unit for singles.
Likewise, suppose you plan to acquire a foreign property for similar reasons.
In that case, you need to decide if you will manage the house remotely by yourself OR engage professionals who handle your assets on your behalf.
Most people are time-poor.
While you may incur additional costs – you quickly find that you’re saving more money than you ever thought by freeing your time to grow your other businesses.
Using Your CPF To Buy A Second Property
While you can use your CPF money to buy your second investment property, the Singapore government enforces specific conditions if your first house is a Housing Development Board (HDB) home.
• Build-to-Order (BTO) flats
• resale HDB flats
• executive condo (EC
• Design, Build and Sell Scheme (DBSS) flats.
The first thing you must know is HDB’s 5-year Minimum Occupation Period (MOP) requirement, where you must live in the flat for a minimum of 5 years before buying, selling, or renting out your flat.
Singaporean HDB or DBSS public housing owners who purchase a second property must continue to live in their flat unless HDB allows you to sublet the unit.
Total Debt Servicing Ratio (TDSR)
The total of your monthly loan repayments (home mortgages plus all other outstanding loans) cannot exceed 60 percent of your monthly income.
Are Singaporeans unhappy over the prime property prices?
What do you think?
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Property Investors: Buying A Condo In Singapore for Investment
For investors, the multiple cooling measures have quietened the market.
However, it has led to a more sustainable market for buyers and sellers with ample financial backing.
Whether you’re investing in real estate for rental yield or capital appreciation, the private property prices in Singapore have been up trending.
Since Buying A Condo In Singapore Is Not Affordable, Maybe I Can Buy One In Malaysia?
It reduces many to renting a roof over their heads for first-time homeowners as it is almost impossible to save the 10% down payment for a condo if your salary is on the low end of the scale at $1500.00.
If you’re thinking of buying a home in Johor, Malaysia, the prices of houses there are just as high.
The advantage is our robust Singapore Dollar.
The disadvantage is the dreaded daily commute.
Singapore dollars will help in the conversion, but you will need to factor in the time, cost of petrol, and vehicle maintenance for commuting.
Daily, the most daunting task is the journey via the Causeway from Johor into Singapore for work, come rain or shine.
Take a moment and look at the prices before you jump in and buy the next property launch in Johor Bahru.
An unfurnished Serviced Residence in Johor Bahru, Johor;
Singapore observes only 11 paid Public Holidays a year, according to the Ministry of Manpower.
Under the nation’s Employment Act, workers get a maximum of 14 days of paid annual leave.
With Saturday and Sundays off, that’s 104 days on which you can stay at home.
For the rest of your working days
You will need to pay for toll and petrol for 365–11–14–104 = 236 days.
Which works out to an average of $20 per month (based on $1 per day).
If we revert the toll charges to prior 2018, the average cost is $1534/236 /12 = $128
Possible Moderation Of Prices In Some Of The Most Unaffordable Markets
“Over the past year, there has been a moderation of house prices in some of the most unaffordable markets,” noted the report.
“In some property markets, the prices have stabilized, while in other actual returns have occurred.
However, none of the cost drops has improved housing affordability.
These developments could, in the long run, be a further sign of the estimated volatility exhibited associated with stronger land use regulation.”
Affordable Housing Markets In the USA
“There are nine affordable major housing markets–all in the United States,” noted the report.
“Pittsburgh and Rochester are the most affordable, with a Median Multiple of 2.6. Oklahoma City has a Median Multiple of 2.7, while Buffalo, Cincinnati, Cleveland, and St. Louis each have a 2.8 Median Multiple. Indianapolis (2.9) and Detroit (3.0) are also affordable.”
“The Property Market In The USA Is The Most Affordable In The World”
I’m not recommending that you acquire a residence in the USA and move over so that you can invest in a property.
Instead, we can share some data on what we face in Singapore, Malaysia, and Southeast Asia.
Most of us felt the burden of paying off our first home mortgage and only daydreamed of owning a second property.
It is not uncommon for someone to own more than one property in the USA.
Americans can do this because of the laws in the United States.
Buying into the USA property market for an investment is not an obstacle for a Singaporean or anyone who is not a US citizen.
You do not require a green card or any visa to be eligible to own a property in any of the low median states in America.
Buying properties in the USA is not a problem for foreigners.
Next, we will update this article with the rules, Law, and Tax topics if you invest in the United States.
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