Steps to buying a property in Singapore
It’s not news that for many, property will be the biggest investments in their lives. As such, it is important to make sure that everything is in order when making your property purchase. Today we will share with you the steps in buying a property while keeping in line with Singapore’s property law.
Conveyancing & Tenure
Conveyancing is the key process in making a property transaction. It is a legal process in which the ownership of a piece of property is transferred from one entity to another. There are 2 types of ownership, Freehold and Leasehold.
Leasehold, as its name suggests, means that the buyer is entitled to retain ownership of the piece of property for a given period of time. These lease periods typically last between 6 months and 99 years, especially for HDB flats.
Freehold on the other hand, grants the buyer the right to hold on to the piece of property indefinitely. These properties usually cost more than leasehold properties but are usually sold in en-bloc sales before 99 years even pass; no one really knows what will happen to these properties, yet. That said, the 999-year leasehold is considered as a freehold property due to its seemingly indefinite lease period.
While it sounds like a simple process, conveyancing actually has many legal processes involved and a property lawyer is almost always required to draft the required legal documents and guide you through the process.
Eligibility to purchase
Buyers looking to purchase a HDB flat should keep in mind the ethnic policy set by HDB. There is a limit to the number ethnic groups that can live in a single HDB block.
Familiarize yourself on the costs involved
There are additional costs to your property transactions, payable to the Inland Revenue Authority of Singapore (IRAS), that you should know about as they are quite significant. These costs are summarized as follows:
Buyer’s Stamp Duty (BSD)
Buyer’s Stamp Duty or BSD, is a form of property tax charged on the purchase of a property. It is mandatory to pay for BSD and it can cost up to 4% of the property’s value. Find out more about BSD here.
Additional Buyer’s Stamp Duty (ABSD)
Additional Buyer’s Stamp Duty or ABSD, is charged in addition to the BSD payable and is mandatory for Singaporean Citizens to pay on the purchase of their second property onwards. ABSD can cost up to 12% of the property’s value for Singaporean Citizens and up to 15% for permanent residents. Find out more about ABSD here.
Seller’s Stamp Duty (SSD)
Seller’s Stamp Duty or SSD, like BSD and ABSD, is a form of property tax chargeable when one sells their residential property. SSD is payable if you sell your property within 3 years of purchasing it and is charged on either the agreed selling price of the estimated market value – whichever is higher. Find out more about SSD here.
When you’ve decided to purchase
Once you have decided that you want to purchase a certain piece of property, your lawyer will start negotiations with the seller over contract terms. He will be responsible for any of your deadlines in handling paperwork and payments. It is at this moment where you will sign the ‘Option to purchase’ or ‘Sale and purchase’ agreement which will officially indicate your interest in purchasing the property. Your lawyer will also notify the Singapore Land Authority of your interest and you will now receive updates on any subsequent dealings and happenings that may affect the property deal.
Financing the purchase
At this point, your property lawyer will be the one communicating with the relevant entities. Your lawyer handles the mortgage documents and will communicate with the bank on your behalf and liaise the payment for the property and pass it on to the seller. If you are using CPF to pay for your property, your lawyer will issue a CPF charge to the CPF board and will collect payment and communicate with them from then on.
You are now ready to take over the property
If you have made it to this step, the property is ready to be handed over to you. At this point, the seller will leave the property in a state that is fit for occupation. What you need to do now is to inspect the property for any defects and if all goes well, congratulations, you are now the proud ofner of the property. You will receive a title certificate, transfer form and the keys to the property from the seller.
What if I don’t want to engage a lawyer?
While it is possible to complete the conveyancing process without a lawyer, it is highly recommended that you engage one to do so for you. A good lawyer will remove much of the hassle of the dealings and you should only do so yourself if you have a deep knowledge of property law. Furthermore, a lawyer can guide you on the appropriate course of action to take should any complications arise.
Though the process might sound simple, it is actually a complex process with the possibility of many problems and misunderstandings arising. As such it is important that you engage a lawyer that is able to guide and advise you through the conveyancing process as he is familiar with property law. It will leave you with a better peace of mind and help you avoid hassle.
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