Singapore is the world’s most expensive city, particularly for foreigners. To be blunt, I think you’re insane if you’re buying a private property here right now, and if your wealth manager hasn’t told you so, here’s a newsflash: they’re too afraid to disagree with you. But if you have the cash to burn, or you consider low taxes and a stable government to be more important, here are the things you absolutely must know:
1. It’s “low tax” only when you don’t consider the stamp duty rates
For most foreigners*, you’ll pay a Buyers Stamp Duty (BSD), as well as an Additional Buyers Stamp Duty (ABSD). The BSD rate is tiered:
| Price or value of the property | BSD rate |
| First $180,000 | 1% |
| Next $180,000 | 2% |
| Next $640,000 | 3% |
| Next $500,000 | 4% |
| Next $1,500,000 | 5% |
| Any outstanding amount | 6% |
The ABSD for foreigners is simply 60 per cent of the property price or value, whichever is higher.
So if let’s say you buy a $4 million condo unit. You’d pay a BSD of $179,600, and ABSD of $2.4 million, for a total tax of $2,579,600. That’s right; the tax alone is enough to pay for a whole apartment complex in some countries.
For all you mixed-nationality couples out there, keep in mind the highest ABSD rate applies.
If you buy a residential property with a Singaporean co-owner, for example, you’re still paying the 60 per cent rate.
Where the “low tax” argument kicks in is this: we have no capital gains tax when you sell. So you really hope the property appreciates enough that, by the time you liquidate it, it will more than cover the stamp duties plus loan interest and other costs.
*If you’re a United States citizen, or a citizen or permanent resident of Iceland, Liechtenstein, Norway, or Switzerland, you pay the same tax rates as a Singaporean: zero ABSD on the first residential property. We figure the sweaty weather here will be enough to dissuade – if not outright kill you – if you come from those places. You still have to pay the BSD though.
2. Our residential projects don’t last very long by American / European standards
Singaporeans love to tear down buildings and put up new ones. If you see a condominium here that’s older than 35 years, in our mind, we’re already placing it in the same timeframe as a T-Rex.
The condominium projects tend to last 19 to 24 years, with a few rare ones making it past their thirties. So I wouldn’t worry so much about the 99-year lease, because odds are the project will be gone before a third of that lease expires. It’s not entirely a bad thing, as you might get a nice pay-out from the developers buying it over.
Alternatively, you can listen to the property agent and buy a freehold project, because freehold projects cost roughly 15 to 20 per cent more, and result in a higher commission for the agent.
Oh, what’s that? You want another reason to pay more for freehold? Well in theory your ownership of the place lasts indefinitely, not just 99-years. In practice, let me repeat: 19 to 24 years on average, even if it’s freehold.
The exceptions are freehold landed properties, which you’re not allowed to buy as a foreigner anyway; not without special permission (read: you’re bringing enough cash to sink an aircraft carrier, and you’re investing it all here.) If you can get those properties though, they’re well worth the freehold premium. Just be prepared to pay an amount that would make Bill Gates uncomfortable.
Also, if you decide to buy in a prime location like Orchard (e.g., because you hate making money) most of the properties there are freehold. So you may not have a choice anyway.
3. Down here new properties are best bought early, or sometimes as late as possible
By new, I mean “just launched and not yet built.” Developers in Singapore have a constant fire lit under their ass, because they pay ABSD too: they fork out 40 per cent ABSD on the land price, and then they have five years to complete and sell the whole property. If they make it on time, they can claim ABSD remission (35 per cent of the land price; the remaining five per cent isn’t remissible.)
This is to stop developers from forming cartels and hoarding the land, to artificially drive up prices. Only one entity in this country gets to do that, and I’m definitely not going to say it’s the government.
For reasons that I don’t know – but which I think are the same as setting ants on fire with a magnifying glass, to watch them suffer – the government doesn’t care how big the development is. If it’s a massive condominium complex with 1,000 units? Five years. If it’s some tiny, super-exclusive project with just 10 homes? Five years also.
So developers need to sell fast, and they will usually offer the biggest discounts at the start. In theory, once they raise the prices by 10 or 15 per cent after the VIP preview, that’s instant profits in your pocket.
Except when it isn’t
Because if sales suck, and developers come really close to the five-year ABSD deadline, they might just launch a fire sale and bring prices down. It happens. So there’s no guarantee that the early discount you got is “for real.” But nonetheless, for the most part, it’s better to buy early if you’re going for a new project.
4. Older usually means bigger, and more parking lots too
Back in the 1990’s and before, our two-bedroom condo units could be over 1,000 sq.ft. But after the 2000’s, home sizes sort of shrunk – today, something around 700 sq. ft. can be considered a two-bedder. So for those of you willing to buy older resale properties, you may end up with more square footage, at an equivalent cost.
There’s also a carpark issue. Singapore hates cars, almost as much as its taxi drivers hate their government (ask one, you’ll find out). Newer condo projects, particularly those in the city centre or near a train station, are allowed to have fewer carpark lots; and this can be so extreme, visitors won’t have a place to park.
Just a little something to bear in mind, if you’re comparing between an older or newer property.
5. There’s no capital gains tax, but there is a Sellers Stamp Duty (SSD) if you sell too soon
The SSD is designed to prevent house flipping; so unlike some other countries, you wouldn’t really buy a run-down place, renovate it, and re-sell within a period of months. You could, but the SSD would eat into the gains.
If you sell within the first year of buying a property, you pay SSD of 12 per cent on the sale price. This drops to eight per cent in the second year, and four per cent in the third year. Fourth year onward is the sweet spot, as there’s no more SSD after that.
So while there isn’t a capital gains tax per se, there is a tax for trying to flip the property (just wait till at least the fourth year.)
Do you need help in buying a property in Singapore? I’m NOT the one to ask!
Look. I’m not a property agent, and I don’t earn so much as a can of Pringles for writing all this (I am an investor though.) I just want to get out a couple of things that foreign buyers should know. If you want to help me out, follow me on Single Digit Millionaire, and help share this around.
