While other real estates in financial centers across the world are feeling the pressure of global economic turmoil, Singapore is grappling with an opposite problem, as the city-state continues to see ongoing growth and development for real estate and private property coming from foreign investors.
Following decades of government public housing policies and subsidies, homeownership levels peaked at 90% in 2021, as annual real wages have been steadily growing by 20% since 2017.
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While other financial centers, including Hong Kong, New York, London, and Sydney, among others, are experiencing major economic headwinds led on by the pandemic and inflationary pressure, Singapore is stepping out to become a globalized financial hub for foreign investors eager to take on the local property boom.
During the same recorded period as previously mentioned, non-landed private residential property prices grew 4.1% Quarter-over-Quarter (QoQ) and roughly 13.2% Year-over-Year according to data by Knight Frank.
This snapshot reveals that although the country has seen continued interest rate hikes to steady inflation and lower the cost of living, other major hubs such as Hong Kong, which is considered to be one of the world’s least affordable residential property markets, could see prices plummet by a staggering 30% by the end of the year.
While the market seems to be steadily slowing down, foreign investors opting to navigate the somewhat complex, yet rewarding investment opportunity of the Singaporean real estate market should consider some of the following steps before jumping in head first.
Understand How The Local Property Market Works
It's one thing to have the finances to purchase an investment property in a foreign market, but it could become a tumultuous experience if you haven’t yet familiarized yourself with local economic conditions, government regulations, and market forecasts.
Although the city-state has seen an influx of foreigners buying an investment property, there are several factors to consider along the way.
According to Jae Hei, real estate advisor at Pinetree Hill, they suggest that potential foreign buyers look at several factors, including:
- Local rates and taxes on the foreign-bought property.
- Buyer Stamp Duty (BSD) and Additional Buyer Stamp Duty (ABSD).
- Property availability for foreigners.
- The legal requirement for foreign property ownership.
- Limitations on the number of properties a foreign investor or buyer can own at once.
Singapore has a dynamic property market, and the government has spent decades developing a system that ensures foreigners can be properly incentivized for their investment, but certain limitations may apply.
Seek Financial Guidance
Foreigners may have several financing options available in Singapore, including bank and personal loans, among others.
While domestic financing options allow for more accessible investment, they can come with related challenges if not approached with caution and well-researched.
Experts suggest that the best is to research property market trends, to see what real estate options you have available as a foreigner. Next is to estimate a budget that will help determine the amount you will be spending. It’s essential to include local property taxes, legal fees, and other fees that might come with the purchase of property as a foreigner.
As a foreigner, you can also consider your financing options, by comparing interest rates, loan terms, and predetermined eligibility requirements. Keep in mind that not all banks or financial institutions may operate on similar eligibility requirements.
For peace of mind, it’s suggested to seek guidance from a local financial expert or consult with a property advisor on the matter.
Familiarize Yourself With Approval Requirements
Another step to consider before becoming a foreign property owner in Singapore is to familiarize yourself with the approval requirements from the relevant authorities.
For starters, foreign property buyers and investors will need to apply and submit the required documents to the Singapore Land Authority (SLA). Foreigners will need to obtain approval from the SLA well in advance if they seek to purchase property in restricted residential areas.
For those that will be financing their property purchase with a bank loan, you will need to apply for approval from the Monetary Authority of Singapore (MAS). This government entity oversees due diligence of lending practices and ensures that foreign buyers are acquainted with domestic requirements to become property owners.
Furthermore, it’s good to keep in mind that the application process both at the SLA and MAS can take up to several weeks. More so, foreigners will be required to submit the relevant information and supporting documentation and will need to pay a processing fee to receive clearance.
Work With Property Experts
By now it should be clear that not all private property pockets in Singapore will necessarily be available to foreign buyers and investors. With this in mind, it’s good to know that several neighborhoods in and around the city have been designated for foreign buyers.
This is where it becomes essential to work with a local property expert, as they will help guide you through the regulatory process, and showcase available listings based on your budget.
On the back of this, local property and real estate agents are well-versed in domestic legal and administrative procedures, and it’s in your best interest that you seek out an agent that has been licensed by the Council for Estate Agencies.
The CEA will have a track record of all real estate agents operating in the area, and you have the opportunity to work alongside a trusted and authoritative agent that can help make the entire experience more convenient.
Final Thoughts
As the Singaporean property market continues to grow, and with an influx of foreign buyers now targeting high-yielding private properties, potential investors will need to allocate their interest toward finding the right agents that can help them navigate the complex process.
Singapore has a dynamic economy, and the property market forms a big part thereof. While economic difficulties may persist throughout the year, following a structured plan and thoroughly doing your homework beforehand will help you scoop up a piece of valuable private property in one of the world’s fastest-growing city-states.
