Buying Scenario: A 3-Bedroom Apartment in the CBD of Singapore

The buying of a 3-bedroom apartment in the CBD area of Singapore is an expensive undertaking, requiring considerable financial outlays for its purchase and continued occupancy.

Processes and costs

Identify the apartment to buy

A direct approach to a seller is an option though you will likely have more luck acting through an estate agent.

Appoint a solicitor

Both parties must agree on the solicitor.

The solicitor will help hasten the transaction and handle the purchase process, including mortgage or withdrawals from the CPF savings (whichever is applicable).

As the buyer, you must ensure that you have sufficient funds before signing any contracts otherwise you may forfeit any deposits you have paid before signing an agreement.

Financing the purchase

If you opt to take out a mortgage to pay for your home apartment, you will need the appropriate documents and a clean financial record.

Singaporeans typically get 90% of the property value while foreigners are given 80%.

Singaporeans may also opt to withdraw funds from the CPF savings to pay for any deposit.

As a foreigner, you may have to provide 20% in cash up front to pay for the deposit and other related fees.

Documentary processes

You will need to familiarize yourself with other documents that are related to the purchase such as:

An Option to Purchase agreement: this gives the buyer a 14-day period to decide to purchase the apartment.

A 1% fee of the total purchase value is paid upon the signing of the agreement.

An Offer to Purchase agreement: a 14-day consideration period waived in favor of a direct binding offer between you (the buyer) and seller.

If this is acceptable to the seller, your solicitor will prepare an agreement to this effect, also stating the price, the completion date plus other conditions you may wish to include.

Upon the signing of the this agreement, you will need to pay 5% or 10% of the agreed price as a down payment.

At about this stage, your solicitor will submit a caveat to prevent any other transactions taking place on the apartment and coordinate with the bank or CPF board and draw up contracts (which will take up to 10 weeks to complete).

Fees and commissions

In addition to the above payments, you must also meet other transaction costs:

Solicitor’s fee

The solicitor’s fees are paid by you as the buyer and will hover between 0.3% – 0.6% of the selling price.

Additional legal fees will apply if the solicitor has been involved in preparing withdrawal papers for CPF funds for the purchase.

The seller pays 0.15% of the total selling value to the solicitor.

Mortgage fee

Banks normally charge administration and valuation fees for the mortgage, which is around SG$200-300, and you may also need to pay for an insurance policy on the apartment.

Loan-to-Value Eligibility

Loan-to-value (LTV) affects mortgage lending eligibility and requirements. As part of a recent round of cooling measures for the hot real-estate market, the government has put a limit on the amount available to borrowers based on whether an individual or company is taking out the mortgage.

For individual borrowers, the LTV limits are-

First loan of up to 30 years: 80%

First loan of 30 years or more: 60%

Second loan of up to 30 years: 50%

Second loan of 30 years or more: 30%

Third+ loan of up to 30 years: 40%

Third+ loan of 30 years or more: 20%

For companies, the LTV limits affect loan tenure of up to 30 years: 20%.

Stamp duty

The payment of this fee to the Revenue Authority of Singapore within 14 days is mandatory, when you have exercised the Option to Purchase or you have signed the Sales and Purchase Agreement (when you have purchased the apartment from a developer). The stamp fee is 3%.

Additional Stamp Duties

Normal stamp duties are 3%, payable on the purchase of the real estate. As part of a recent round of cooling measures (January 2013), however, the Singaporean government has laid out an additional set of stamp duties.

For Singaporean citizens:

First purchase: no additional stamp duty

Second purchase: 7%

Third purchase: 10%

For foreigners who hold Permanent Residency (PR) in Singapore:

First purchase: 5%

Second purchase: 10%

Third purchase: 10%

For foreigners:

Second purchase: 15%

Note that foreigners from the US, Norway, Switzerland and Lichtenstein are treated as Singaporean citizens in terms of stamp duties.