Despite significant property cooling measures in Singapore, many homeowners are still buying a second property for themselves, and with good reason. While a second property can serve as an investment and a passive source of income, here are some things to consider before purchasing one.
Note: This article was updated in June 2023 to reflect changes in policy (i.e. ABSD rates, TDSR threshold, etc.) only.
Eligibility
The Singapore government imposes certain restrictions if your first house is a Housing Development Board (HDB) housing, be it Build-to-Order (BTO) flats, resale HDB flats, executive condos (ECs), or Design, Build and Sell Scheme (DBSS) flats.
For starters, the first thing you’ll need to know is the Minimum Occupation Period (MOP) requirement. Before you buy, sell or rent out your flat, you’ll typically need to live in the flat for a minimum of five years, excluding periods of subletting or non-occupation of the flat. However, the MOP does not apply if you purchased a resale flat without the CPF Housing Grant prior to 30 August 2010.
Additionally, Singaporean owners of HDB or DBSS flats who purchase a second property must continue to stay in their flats unless given permission by HDB to sublet it. Singapore PRs will need to notify HDB of their purchase and move out of their flat within 6 months of the private property purchase.
Remember, these restrictions only apply to public housing. If you have a private property, then you’re not bound by these rules.
Loans
If you have taken a loan for your first home, your loan eligibility for the second property may differ. Here are two key things to note:
1. The Loan to Value (LTV) Ratio
The LTV ratio determines the amount you can loan from banks for a particular property. It is expressed as a percentage of the property’s value. An LTV ratio of 65% means you can borrow up to 65% of the property’s value and pay the remaining 35% in the form of a down payment.
Your LTV ratio decreases with each subsequent housing loan. As such, your LTV ratio for the second property will be much lower if you are still paying off your first housing loan. To enjoy the same LTV ratio, it is better to pay off your previous housing loan before buying a second residential property.
2. The Total Debt Servicing Ratio (TDSR)
The TDSR is the percentage of your gross monthly salary that can be used to service all your loans in a month. The current TDSR set by the government is 60%. This means that all your loans must be serviced with not more than 55% of your gross monthly income.
Other Financial Considerations
Eligibility and loan restrictions aside, here are other financial aspects to take note of:
1. Minimum Cash Down Payment and use of CPF money
The minimum cash down payment for a second residential property is 25%, compared to 5% for a first property. With enough funds, you can use your CPF funds to pay part of the downpayment for your second property. However, only funds from your CPF Ordinary Account can be used.
2. Additional Buyer’s Stamp Duty (ABSD)
ABSD is a property cooling measure introduced by the government and imposes an additional tax on buyers of residential property in Singapore, with increasing rates for every subsequent property purchase. Here are the ABSD rates (as of 28 April 2023)
| Buyer profile | ABSD amount (rates on/after 27 April 2023) |
| SCs buying their first property | 0% |
| SCs buying their second property | 20% |
| SCs buying their third and subsequent properties | 30% |
| SPRs buying their first property | 5% |
| SPRs buying their second property | 30% |
| SPRs buying their third and subsequent properties | 35% |
| Foreigners buying any property | 60% |
| Entities (companies or associations) buying any property | 65% |
| Trustees for any residential property | 65% |
| Housing developers for any residential property | 35% (additional 5%; non-remittable) |
Several conditions have been put in place for buying a second property. While the notion of passive income is appealing, cooling measures such as those highlighted could result in a purchase that is eventually unprofitable. It is therefore important to take these measures into account before buying a second residential property in Singapore.
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