Top 5 Places to Watch the Sunset in Singapore
Singapore, a bustling city-state known for its modern architecture and vibrant culture, is also home to some of the most...
Read More
TLDR
When considering buying a second property in Singapore, ensure eligibility by meeting the Minimum Occupancy Period (MOP) and understanding loan eligibility based on Total Debt Servicing Ratio (TDSR) and Loan-to-Value (LTV) Ratio. Be prepared for the Additional Buyer’s Stamp Duty (ABSD) and Property Tax implications. Consider using CPF and clarify your intent – whether the property will be an investment or a second home. Have a clear exit plan if it’s an investment. Lastly, analyze market conditions to decide whether to buy, sell, or wait for the right opportunity.
Most Singaporeans own at least one property, giving Singapore one of the highest rates of homeownership in the world.
It is also not uncommon for homeowners to buy more than one property as a form of investment, generating rental income from it.
But before buying your second home, consider these three factors first: eligibility, affordability and intent.
1. Eligibility
Remember the Minimum Occupancy Period (MOP)
Those who already own a HDB flat cannot buy a second property until they meet the five-year MOP. The MOP applies to both new and resale flats in Singapore.
Keep in mind that Executive Condominiums (EC) are only privatised after the 10th year. Until then, ECs are still HDB properties and hence bound by such rules as the MOP.
2. Affordability
How Much Can You Borrow For Your Second Property?
Banks assess your loan eligibility based mainly on these two criteria, which are:
1. Total Debt Servicing Ratio (TDSR)
The TDSR states that you should not have more than 55% of your gross monthly salary devoted to servicing your loans in a month. This can include all types of debt, including car, home, personal, and even student loans.
In the case of loans taken to purchase HDB flats, the monthly repayment instalment cannot exceed 30% of a borrower’s gross monthly income.
2. Loan-to-Value (LTV) Ratio
In Singapore, HDB loans have a maximum LTV of 85%, whereas for bank loans it is 75%. However, HDB and banks are not required to offer you the maximum LTV. They can choose to lower it if they think it would be more appropriate. Age and the existing number of properties also play a part in the LTV ratio.
The Minimum Cash Down Payment
For your second property, you will need to pay up to 25% of your property’s down payment in cash. This will be measured against the property’s valuation limit, which is determined by the property value or purchase price, whichever is lower and any excess above the valuation.
The Additional Buyer’s Stamp Duty (ABSD)
In addition, Singaporeans will have to pay a 20% ABSD on either the property value or purchase price of a second residential property, whichever is higher. Permanent Residents (PR) will pay 30% ABSD for a second residential property and foreigners will cap off at 60% after April 2023.
Below are the various ABSD rates for buyers of different profiles and depending on the number of properties they own:
New laws from 9 May 2022 with regard to residential properties transferred into a living trust:
Additional Buyer’s Stamp Duty (ABSD) of 65% will now apply on any transfer of residential property into a living trust. ABSD will be payable even if there is no identifiable beneficial owner at the time the residential property is transferred into a trust. So this new change closes a loophole.
This ABSD (Trust) is to be paid upfront when the transfer is made.
Property Tax
During the Singapore Budget on February 18, 2022, the government announced that the Property taxes rates for both owner-occupied and non-owner-occupied residential properties will be revised in 2 steps starting from 2023.
Rates for owner-occupied homes with an annual value in excess of $30,000 will be raised – ranging from 5 to 23 percent in 2023, to 6 to 32 percent in 2024.
For non-owner-occupied homes, which includes investment properties – taxes will be hiked across the board: from the current 10-20 percent, to 11-27 percent in 2023 and 12-36 percent in 2024.
Using CPF for your second property
CPF can be used to buy a second property. However, if you have already used your CPF for your first property, you may only use your CPF Ordinary Account savings for your second property after setting aside the Basic Retirement Sum (BRS).
However, there is a limit on the amount of CPF savings you can use to buy private residential properties at 120% of the valuation limit. Once you have reached the Withdrawal Limit, you will not be allowed to use further CPF savings, and you will need to pay the remaining home loan in cash.
3. Intent
Decide whether the new property will be an investment or a second home
Do you plan on using the second property for an investment or as a primary residence for your family members? This is because the type of usage will impact your property tax rate.
Currently, the property tax for owner-occupied residential properties ranges from 0% to 16% on a tiered basis, while properties that are rented out have a tax of between 10% to 20% of annual value.
The annual value is determined by IRAS and is based on how much rental income the property could generate per year.
If the second property is an investment, ensure there is a clear exit plan for the asset
It would be wise to develop a strategy for the second property, considering factors such as: how long you intend to hold it, when and how you plan to cut losses if it becomes a liability due to low rental income, and what kind of capital gains to expect.
Buying a second property in Singapore just to “make more money” is not a sound plan. You should work out the potential rental yield and capital appreciation, and determine the probable Return On Investment.
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 …
How Much You Need to Earn to Afford a Condo 2023
TLDR When considering investing in a private property in Singapore, it's important to understand your borrowing capacity. Financial experts recommend...
Read More
Top 5 : Tips To Plan Your Retirement in Property Investments in Singapore
Planning for retirement is a crucial aspect of financial management, and property investment has emerged as a popular strategy for...
Read More
Budget 2024: What To Expect For The Singapore Residential Market?
TLDR In 2025, owner-occupiers of residential properties can benefit from property tax relief based on the Annual Value Band. Retirees...
Read More
5 Reasons Why Condos Are The Best Real Estate Investment in Singapore
Investing in a condo in Singapore is a popular choice for both locals and foreigners. Condominiums offer a range of...
Read More
5 Reasons Why Districts 9 and 10 are the Next Big Thing in Singapore Real Estate
Singapore is renowned for its thriving real estate market, with many desirable neighborhoods and top-notch properties. However, when it comes...
Read More
Why Can’t We Have More Housing Options For Singles?
TLDR The blog post discusses the evolving regulations for single individuals to purchase public housing in Singapore. It highlights the...
Read More
Top 5 Singaporean Dishes to Try
Singapore, a melting pot of diverse cultures and flavors, is known for its rich culinary heritage. With influences from Chinese,...
Read More
7 Essential Tips for Finding Your Perfect Retirement Home
TLDR Searching for a forever home should balance heart and practicality. Avoid homes with stairs, high cabinets, big kitchens, and...
Read More
UNCOVERING the Secret to Profitable Small Boutique Condos!
TLDR Boutique condos, with fewer than 100 units, are known for price fluctuations due to infrequent transactions and higher upkeep...
Read More
Building A World-Class Nation: Top 5 Facts About Singapore’s Developed Infrastructure
Building A World-Class Nation: Top 5 Facts About Singapore's Developed Infrastructure Singapore is known for its high standard of living,...
Read More
Top 5 Reasons : Why Investing In Singapore’s Property Market Is Recession-Resistant
Singapore's property market has long been considered a safe haven for investors, even during times of economic uncertainty. The city-state's...
Read More
With a population of 6.04 million in Singapore, who are the winners and losers in the property market?
There has been significant outcry regarding Singapore’s population hitting a record high of 6.04 million, largely due to an increase...
Read More
HDB Owners Missing Out on the “Ultimate Upgrade” to Landed Living
TLDR Over the past two decades in Singapore, the trend of HDB residents upgrading to landed properties has fluctuated. While...
Read More
5 Tips : How To Buy A Property In Singapore As A Foreigner
Singapore's property market is a popular choice for both locals and foreigners looking to invest in real estate. However,...
Read More
Top 5 Reasons : Is It Still Worth It For A Foreigner To Invest In Singapore
Singapore, a small yet prosperous city-state in Southeast Asia, has long been an attractive destination for foreign investors. Its strategic...
Read More
Single, Over 35, and Searching for a Home? Here’s Your Guide to Choosing Between an HDB and a Condo!
At the age of 35, a single Singaporean starts a significant year, highlighted by the long-awaited chance to buy their...
Read More
Top 5 Reasons : Why Developers Seem Hesitant To Commit To New Projects In Singapore
Singapore, a thriving global city-state, has long been known for its robust economy and attractive real estate market. However, in...
Read More
How to Maximise Your Home Value Before Selling : 6 Simple Steps
TLDR When looking to sell your home, consider simple ways to boost its value without costly renovations. Organize living spaces,...
Read More
6 Hot Property Market Trends in Singapore 2024: What Buyers Should Anticipate
TLDR When diving into Singapore's property market, expect a rollercoaster ride as trends shift drastically in 2024. Landlords and tenants...
Read More
