4 Simple Strategies to Help Future Homeowners Save Money
TLDR When it comes to being a new homeowner, it's essential to prioritize regular maintenance to avoid costly repairs down...
Read More
TLDR
When navigating the complexities of purchasing a second property in Singapore, ensure you meet eligibility criteria, consider affordability factors like TDSR and LTV ratios, and understand the impact of intent on property tax rates. Look out for new regulations on living trusts affecting ABSD, changing property tax rates, and guidelines for using CPF for a second property. Make strategic decisions based on whether the property will be an investment or a second home, keeping in mind tax implications. Seek expert advice to make informed choices and maximize success in your real estate journey.
Singaporeans boast one of the highest rates of homeownership in the world due to most owning at least one property.
Purchasing multiple properties as an investment is commonplace for Singaporeans, allowing for rental income generation.
However, before investing in a second home, be sure to evaluate the criteria of eligibility, affordability and intent.
1. Eligibility
Remember the Minimum Occupancy Period (MOP)
If you already own a HDB flat, you must wait at least five years before you can purchase a second property in Singapore – this applies to both new and resale flats.
As a reminder, Executive Condominiums remain classified as HDB properties until the 10th year of ownership, so the MOP still applies in this case.
2. Affordability
How Much Can You Borrow For Your Second Property?
The determining factors for your loan eligibility that banks consider are primarily these two:
1. Total Debt Servicing Ratio (TDSR)
The Total Debt Servicing Ratio (TDSR) encourages individuals to avoid devoting more than 55% of their monthly income to paying off any combination of loans, such as car, home, personal or even student loans. Furthermore, the maximum amount a borrower should contribute towards their HDB flat’s repayment instalment is 30% of their gross monthly salary.
2. Loan-To-Value (LTV) ratio
In Singapore, banks and HDB may not necessarily offer you the maximum Loan-To-Value ratio (LTV). Both entities are allowed to set a lower LTV depending on the borrower’s age and the existing number of properties they own. HDB loans typically have an LTV of 85%, while bank loans come with an LTV of 75%.
The Minimum Cash Down Payment
You must pay up to 25% of your property’s down payment in cash for your second property. The amount is calculated based on either the property’s valuation or purchase price, whichever is lower, plus any additional sum over the valuation limit.
The Additional Buyer’s Stamp Duty (ABSD)
Singaporeans will be subject to a 17% Additional Buyer’s Stamp Duty when acquiring a second residential property, with Permanent Residents facing a 25% ABSD and foreigners capping off at 30% after December 2021 – whichever figure is greater.
Take a look at the ABSD rates for buyers of different profiles, depending on how many properties they own!
As of May 9, 2022, new regulations will be in place regarding residential properties that have been placed in a living trust.
The government is closing the loophole of not having to pay Additional Buyer’s Stamp Duty (ABSD) of 35% when transferring residential property into a living trust, even if there is no identifiable beneficial owner. This ABSD (Trust) must now be paid upfront when the transfer is made.
Property Tax
At the Singapore Budget on February 18, 2022, the government declared that the Property tax rates for both owner-occupied and non-owner-occupied residential dwellings would be adjusted over two years, commencing from 2023.
For owner-occupied homes with an annual value over $30,000, the taxes will be elevated to 5-23 percent in 2023, followed by an additional increase of 1-9 percent in 2024.
As for non-owner-occupied dwellings, including investment properties, the taxes will rise steadily, jumping from the current 10-20 percent, to 11-27 percent in 2023 and a whopping 12-36 percent in 2024.
Using CPF for your second property
If you’re looking to purchase a second property with your CPF, you’ll need to make sure you have not already used your CPF for the first property, and that you have set aside the Basic Retirement Sum (BRS).
Additionally, there is a limit of 120% of the valuation limit when it comes to using CPF savings to buy private residential properties – once you have reached the Withdrawal Limit, you will have to make the remaining home loan payment in cash.
3. Intent
Decide Whether The New Property Will Be An Investment Or A Second Home
Are you thinking of investing in the second property or using it as a primary residence for your family members? It matters, because the type of usage will influence your property tax rate.
Generally speaking, if you’re using it as an owner-occupied residence, you’ll have to pay between 0-16% in taxes, whereas if it’s being rented out, the rate goes up to 10-20% of the annual value – which is calculated by the IRAS based on its potential yearly rental income.
If The Second Property Is An Investment, Ensure There Is A Clear Exit Plan For The Asset
Before committing to a second property in Singapore, it would be prudent to devise a plan that takes into account a variety of factors, including the length of your intended stay, a cut-off point in case rental income is not up to scratch, and expected capital gains. Refrain from merely seeking more money, as this may not lead to a satisfactory Return On Investment.
Create a strategy that maximizes your prospects for success!
Frequently Asked Questions Before Buying A Second Property
1) Can I Manage The Downpayment If I Have An Outstanding Home Loan?
Buying a second property is a major financial undertaking, so it’s a smart idea to ensure you have plenty of savings before taking the plunge. If you need assistance assessing the situation, I’m here to provide you with a comprehensive evaluation.
2) What Is The Most Suitable Property For Rental?
If you’re planning to rent out your property, the type of property you have can determine the kind of tenant you draw in.
For instance, a shoebox unit in the heart of Orchard Road may attract single, high-income expats. Get the best advice and find the perfect solution for you by speaking me.
3) Will The Government Decide To Build A Skyscraper In The Future Next To My Second Property?
You can take a look at the URA’s Master Plan, the legal blueprint that will shape Singapore’s growth over the next decade and a half.
4) Is It Worth Getting A Second Property Near Good Schools?
If you’re searching for a home close to a prestigious primary school, you may find yourself in the midst of a bidding war! With high demand, properties located within a 2 km radius of the school can sell for a hefty premium.
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
You May Also Like …
Are You Ready to Take on the Singapore Property Market in 2023? 12 Reasons to Be Hopeful (Or Wary)!
2022 sure was a rollercoaster ride for the property market, and the world! From war in Europe to skyrocketing interest...
Read More
Top 5 Places to Watch Fireworks in Singapore
Singapore is known for its stunning skyline and vibrant celebrations, especially during events like National Day and New Year's Eve....
Read More
Tips for Young Adults to Begin Saving for Their Future Home
TLDR When aiming to purchase a home, it is crucial to gain knowledge about the buying process and track your...
Read More
Singapore’s Housing Phenomenon: A Success Tale Calling for Tweaks – Insights from the Experts
TLDR Singapore's housing system has been praised for its effectiveness in meeting citizens' homeownership desires. The public housing program by...
Read More
Unlock The Key To Selling A Home With A Perceived Disadvantage Like Being West-Facing Or Close To A Rubbish Chute – Here’s How!
TLDR When selling your house, turn perceived disadvantages into advantages. For sun-facing homes, use UV sheets and blinds to manage...
Read More
5 Things to Know About the Singapore Property Tax System
5 Things to Know About the Singapore Property Tax System Here are 5 things you need to know about the...
Read More
Why The URA Master Plan Matters For Your Property’s Potential
TLDR The URA Master Plan entails significant shifts like the relocation of Paya Lebar Airport or creation of Punggol Digital...
Read More
Discover the 3 Top Factors Impacting HDB Resale Valuation in Singapore: What Every Buyer Must Know!
TLDR The blog post discusses the increased demand for HDB resale flats and the impact on prices. It emphasizes the...
Read More
Exciting News: Affordable Housing in Singapore by 2024?
TLDR The real estate market in Singapore is experiencing shifts in housing supply and demand, influenced by factors like mortgage...
Read More
5 Resources That Can Help You Find Your Dream Home In Singapore
It's 五新房产, Finding your dream home can be a daunting task, but with the right resources, it can be a...
Read More
5 Smart Techniques That Resourceful Homebuyers Utilize to Overcome Restrictions on Home Loans
TLDR When it comes to navigating the complex world of home loans and property acquisition, it's crucial to be aware...
Read More
Where to Find the Most Affordable New Launches in 2023 – Starting at $1.31 Million
TLDR When looking for an affordable new launch condo in Singapore as of January 2023, consider projects like 10 Evelyn,...
Read More
Discover 7 New Condos Close to an MRT Station in 2023
TLDR When it comes to finding the perfect home near MRT stations in Singapore, several exciting new launches stand out...
Read More
Is 2024 the Perfect Moment to Refinance Your Home Loan? Discover What Homeowners Should Consider!
TLDR The article covers the shift to SORA for home loan rates, urging consideration of refinancing options amidst rising rates....
Read More
5 Unexpected Factors That Make Some New Launch Condos Sell Like Hotcakes
TLDR The Singapore property market for new condo launches in 2023 saw varying degrees of success. Factors like limited competition,...
Read More
Top 5 Street Food Markets in Singapore
Singapore, a melting pot of diverse cultures, offers an incredible array of street food that tantalizes the taste buds of...
Read More
Top 5 Places to Learn About Singapore’s Diversity
Singapore, a vibrant city-state in Southeast Asia, is well-known for its diverse culture and rich history. A melting pot of...
Read More
Singapore Property Investing: Is It Better To Flip Or Hold?
Investing in Singapore property can be a profitable venture, but investors must choose the right strategy to maximize their returns....
Read More
Top 5 Places to Learn About Singapore’s History
Singapore, a thriving metropolis with a rich history and diverse cultural heritage, offers numerous opportunities for visitors and locals alike...
Read More
