When expatriates move to Singapore, they are often faced with sticker shock – rental prices for housing are often higher than what they might expect, and are on par or even higher than cities like San Francisco, New York, and Tokyo. They might therefore inquire about buying a property instead, only to be further shocked by the sheer cost of buying a piece of property in Singapore.
Yes, real estate in Singapore isn’t cheap and like most immovable assets, require a time commitment. However, our property market does have relatively lower barriers of entry for foreigners and good long term capital appreciation, factors which continue to tempt expatriates and other foreign buyers.
If you’re an expat, and are thinking about about this question, here are four questions you should consider when thinking about buying or renting in Singapore.
1. What can I buy or rent?
There are a few different property classes in Singapore: public housing, or HDB flats, in which the majority of the populace live in and isn’t available for foreigners to purchase; private residential property, which is costlier, but has lesser restrictions on foreign ownership; and executive condominiums, a public-private hybrid, where foreigners can only purchase 10 years after completion of construction.
Private property then becomes the primary option for foreigners looking to purchase in Singapore. Non-landed private property, i.e., condominium projects and apartment buildings, do not have restrictions on foreign ownership and is the common choice of expatriates and foreigners. Landed property, i.e., a house or bungalow, have a few more hoops to jump through, with foreigners required to seek approval from the Land Dealings Authority Unit before they can purchase, unless the house is part of a larger condominium project, or located on the luxury enclave of Sentosa Cove.
All property types, including public housing, are available for rental to foreigners and expatriates. For public housing, only Singaporean citizens can rent out their entire flats, and will need to fulfill a five-year minimum occupancy period before they can lease out to you. If you are looking to rent a public housing flat, do check if the owner / landlord has fulfilled these criteria, because the state will evict you if they find out that the flat has been illegally rented out.
2. Long-term, medium-term or short-term?
Expats buying in Singapore need to consider how long they intend to hold on to the property for. The Singapore government levies a Sellers Stamp Duty (SSD) for any individual selling a home within the first four years of purchase. If you think your stint in Singapore is going to be less than four years, and you will want to sell your Singaporean home before that window, it might be more worth it to simply rent a place.
Of course, given Singapore property’s capital appreciation over the long term in the past ten years, holding on to a piece of property over a number of years will definitely give you a nice nest egg for when you retire. However, you’d then need to think about the next factor.
Even if you do end up moving out of Singapore early, it’s definitely possible to rent out the property for passive income. In general, the gross rental yield for Singapore property is between 2.5 – 5 percent, but is dependent on market conditions and the property in question.
3. How much are you willing to pay to buy a property in Singapore?
Private property in Singapore isn’t cheap, and you’d need to think about the dollars and cents of owning a property in Singapore. While the major banks will loan mortgages to non-Singaporeans who can demonstrate the necessary income, regulations stipulate that they can only loan you up to 80 percent of the value of the apartment. Given the cost of an apartment in the expat-popular city fringe, you can expect to pay upwards of SGD$200,000 in downpayment alone, with prices rising the closer you move to the core.
Furthemore, the Singapore government, to curb foreign speculation, also imposes an Additional Buyers Stamp Duty (ABSD) of 15 percent on foreign buyers, above the regular Buyer’s Stamp Duty (BSD) that every purchaser is subject to. However, if you’re a citizen or permanent resident of countries under certain free trade agreements, such as Iceland, Lichtenstein, Norway, Switzerland and the USA (citizens only), you’ll be exempt from ABSD.
4. What’s the opportunity cost of owning a property?
By locking yourself into a piece of property and a mortgage, there are definitely certain trade-offs. For instance, one of the best things about being a renter in Singapore is to be able to live in different areas, each with their unique characteristics. By prematurely locking yourself into a home before you might become really familiar with Singapore, you might end up with buyer’s remorse in the future.
Putting down that chunk of change in a downpayment is another opportunity cost, as that money could be used for other investments, like mutual funds or stocks, or to buy real estate in another market.
Furthermore, given the cost of a servicing a mortgage and overall homeownership in Singapore, it might leave you over-stretched if you also had to pay down a property in your own home country as well.
As several members of our multinational staff can attest, many expatriates come to Singapore, fall in love with the country and end up living here for years or even decades. In the long run, ownership is definitely more worthwhile than renting, but if your stint here is short, then renting and experience the many facets of Singapore might be the way to go.