Make sure that you check your eligibility before purchasing a TOP property.
If you are currently a homeowner, you have a possible source of funding for an upcoming TOP purchase.
Selling an existing property and channelling the sales proceeds into a new one is one way you can fund a home upgrade or investment property purchase.
However, the two transactions must be handled with precision and the advice of a lawyer to ensure that you minimise the amount of stamp duty to be paid and can take possession of your new TOP unit immediately after the completion of the sale of your own property.
Find an affordable TOP property to purchase
Figuring out your budget before beginning to hunt for potential TOP purchases is essential.
Factors to take into consideration include how much cash and CPF funds you have on hand, how much selling your existing property can fetch you and how much you can borrow.
Once you know how much you can afford to pay, do research on existing and upcoming TOP projects within your budget. To ensure you are not overpaying, also do research on the per square foot (psf) price of similar properties in the area.
At the TOP stage, developers sometimes lower the prices of unsold units to attract buyers. You should be able to find records of previous selling prices in the same development to determine whether the developer has lowered or raised prices.
Sell your property at a good price
The main reason for the sale of your existing property is to finance the purchase of a new one, so you want to ensure your returns are as high as possible.
Know the current psf market rate of properties of a similar size and with similar amenities in your neighbourhood so you can ensure you are receiving a fair price for your sale.
While an agent is not mandatory considering the number of self-help platforms that enable sellers to promote their properties, it is highly advisable to engage one when you are making a sale to finance a concurrent purchase as your timelines are much tighter.
Research the area
Location is king in Singapore. The area in which your new TOP purchase is located is at least as important as the features and amenities of the actual property, and can have a huge impact on its rentability and future resale value.
So, take care to research not just the development but also the area and surrounding amenities and transport links.
Ideally, you want the area in which your TOP project is situated to have good growth potential. Read up on the Urban Redevelopment Authority (URA) and Land Transport Authority’s (LTA) plans for the area, as well as any private developments that are expected in the future.
Transport links are some of the most important influencers of a property’s value relative to other homes in the area. Being located within easy walking distance of an upcoming MRT station tends to bode well for property values.
Upcoming amenities such as shopping malls and hawker centres can also be a good sign that property prices in the area will rise in future.
You’ll also want to consider your own personal preferences. For instance, if you have children, you will want to consider proximity of schools in the area.
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Estimate your projected rental yield
As a TOP purchaser, you have the advantage of being able to rent out your property from the get-go. The rent you collect from your tenants can be put towards repaying your home loan.
It is thus important that you consider the rental yield of a prospective TOP project when selecting a unit for purchase.
If the current rental yield is a major consideration for you, you might do better to purchase a property in areas that have already benefitted from improvements in transport and infrastructure.
Conversely, if the area is currently being revitalised and it will be some years before the full benefit of upgrading works can be enjoyed, be warned that your rents will likely not reach their full potential until these improvements are completed.
Work out how much you will need to borrow
Of course, even if you sell an existing property to finance your TOP purchase, there is a chance you will still need to borrow some money to cover the balance.
Figure out what home loans are available to you ahead of time.
Eugene Huang, director of Redbrick Mortgage, says, “When it comes to home loans, most financial institutions in Singapore offer floating rates for both constructed and under-construction properties. On the other hand, fixed rates are usually only offered for properties that are completed. That said, fixed rates are available for properties that have obtained the TOP.”
When you apply for your loan matters, too.
“In the event the housing loan application for the new property is made before the existing property is sold, the maximum loan for the new property applies at 50 percent, assuming tenure ends at 65 years of age, or 30 percent if loan tenure expires at 75 years of age,” says Huang.
Find out your stamp duty liabilities
As a buyer, you will need to know your Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD) liabilities before you commit to the purchase.
BSD is computed using the same formula for all property purchases.
But ABSD liability and its computation depends on whether the buyer is a Singapore resident, PR or foreigner, as well as the number of residential properties owned by the buyer.
If you are a Singapore citizen and own one residential property other than the one you intend to sell to finance your TOP purchase, you will be eligible for ABSD of seven percent. This figure rises to 10 percent if you already own two or more residential properties.
PRs must pay ABSD of five percent if they have no other properties, and 10 percent if they have one or more residential properties.
If you are a non-PR foreigner, expect to be charged heftier ABSD rates of 10 percent if you have no other properties, and 15 percent if you already own one property other than the property you will be selling.
You will also need to consider the possibility of paying Seller’s Stamp Duty (SSD) on the property you are selling. Whether you need to pay SSD depends on when you bought that property and how soon after your purchase you are selling it.
Note that if you have already applied for citizenship or PR, you will not enjoy lower ABSD liabilities unless you receive approval from the Immigration and Checkpoint Authority (ICA) no later than the date of purchase.
In most cases, the SSD will not apply if you are selling your property after three or four years.
If the existing property is owned by a married couple, remission of ABSD only applies if the new property is owned by both parties. However, ABSD must be paid upon exercising of the option for the new property and remission applies if existing property is sold within 6 months.
Check your eligibility
If you are not a Singapore citizen or PR, you will need to check if you are eligible to buy a particular TOP property.
While there are no restrictions on foreign ownership for non-landed private property, which includes condominiums, foreigners must obtain approval from the Land Dealings Authority Unit (LDAU) before they can purchase landed property. The LDAU approves only a fraction of applications, so beware.
Coordinate the sale and purchase
To avoid paying inflated ABSD rates, you will need to instruct your lawyer to coordinate your sale and purchase so that the property you are selling will not be considered in the computation of ABSD.
Do not enter into a sales contract for the TOP project before the buyer of your property has exercised the option-to-purchase.
The completion of the sale of your existing property will also need to be timed such that you receive the sales proceeds in time to use them to finance the purchase of the TOP project.
This a delicate balancing act that should only be done by a legal professional trained in conveyancing.
Communicate closely with your lawyer so you have a clear idea of the timelines ahead of you and the deadlines for all the tasks you must accomplish so that your sale and purchase can be effected at the right time.