Buying Landed Property in Singapore
Money cannot solve everything, but it can be used to buy a landed property in Singapore.
To buy a landed property in Singapore, just look for a landed listing in PropertyGuru, and the agent will contact you for viewing and conducting due diligence. There are around 9,690 listings and the cheapest landed home is SGD$0.59m for a Jalan Chempaka Puteh and the most expensive landed is around SGD$400m for a Good Class Bungalow near Cluny Road.
Leasehold Landed vs Freehold Landed
Given a choice, you should only buy freehold landed instead of leasehold, given their hard-to-predict appreciation and lower transaction volume that requires holding power.
For example, Jalan Chempaka Puteh is cheap because there are only 11 years left in the 70-years lease starting from 1964. Therefore you are like paying $4.4k/month rent for a depreciating asset that the government will take back for sure (given the history of the Geylang landed at 3 Lor Geylang).
Costs of Buying Landed Property in Singapore
Total Cost = one-time cost (Purchase Price + Stamp Duties + Professional Services + Property Agent Fees + Property Upgrades) and running cost (Property Tax + Mortgage Loan Cost + Home Insurance + Maintenance and Repairs + Utilities + Association Fees)
Here are some key components to consider when calculating the costs:
- Purchase Price: This is the initial cost of buying the landed property. It includes the property price
- Stamp Duties: Stamp duties include buyer stamp duties (around 3% to 5% based on purchase price tier) and additional buyer stamp duties (0% for 1st property or 20% for 2nd property for Singapore Citizens).
- Professional Services: You may require the services of professionals such as lawyers or conveyancers to handle the legal aspects of the property sale. Their fees will vary depending on the complexity of the transaction and the professional you engage.
- Property Agent Fees: If you engage a property agent for buying or selling your landed property, you may need to consider their fees or commissions which range from around 1% to 2%
- Property Upgrades or Additions: If you plan to make improvements or additions to your property, such as remodeling the kitchen or adding an extension, you'll need to factor in the associated costs.
Running Costs (Ongoing/Recurring):
- Property Tax (annual): Property tax is an annual tax imposed on property owners in Singapore. The tax amount is based on the annual value (AV) of the property, which is determined by the government.
- Mortgage Loan Cost: If you require a loan to finance your property purchase, you'll need to consider the interest rates and repayment terms associated with the mortgage. The loan amount, interest rate, and loan tenure will affect your monthly mortgage payments.
- Home Insurance (typically paid annually): It is advisable to have home insurance to protect your property against potential damages or losses. The insurance cost will depend on factors such as the property value and coverage.
- Maintenance and Repairs (varies based on needs and frequency): As a property owner, you are responsible for maintaining and repairing your landed property. These costs can include routine maintenance, repairs, renovations, and upkeep of the property.
- Utilities (monthly): You will need to account for monthly utility bills such as electricity, water, gas, and internet services.
- Association Fees or Management Fees (if applicable): If your landed property is part of a housing estate or development, there may be association fees or management fees to cover common area maintenance and facilities.
Costs of Selling a Landed Property in Singapore
To make a profitable investment, you need to consider the costs to sell your landed property in Singapore. While there is no capital tax, there are also costs involved in selling such as:
Stamp Duties: To prevent market speculation, there are seller stamp duties (up to 12%) if you sell the property too soon (i.e. within 3 years of your purchase).
Real Estate Agent Commission: If you engage a real estate agent to help you sell the property, you will need to pay a commission fee. The typical commission rate is around 1% to 2% of the property's sale price, but it can vary.
Professional Services: You may require the services of professionals such as lawyers or conveyancers to handle the legal aspects of the property sale. Their fees will vary depending on the complexity of the transaction and the professional you engage.
Home Staging or Renovations: In some cases, sellers opt for home staging or make renovations to enhance the appeal of the property to potential buyers. These costs will depend on the extent of the staging or renovations required.
Total Profit/Loss = Selling Price - Total Costs to Buy (One-time and Recurring Costs) - Total Costs to Purchase
Based on simple paper math, there are minimal costs of almost 10% on top of the purchase price (stamp duties, agent fees for buying and selling, mortgage loan costs, taxes) and a minimum holding period of 3 years (to avoid seller stamp duties).
You will need to be prudent and find undervalued properties given it is a very illiquid market. It is advantageous to be patient and don't be swayed by agents who will definitely claim it is always a good time to buy/sell as their income is based on activity.
Why Singaporean Don't Buy Landed
It might seem all good, but there are many reasons, even for me as a Singaporean not to buy a landed property.
While affordability is often a key factor, there are various reasons why Singaporeans may choose not to buy landed property. Here are some common reasons:
Slower price appreciation: Landed properties in Singapore tend to appreciate slower as they already cost so much. A sharp increase in price and demand usually happens when the overall wealth of the economy goes up and there is a lack of other opportunities (e.g. 13.3% in 2021 compared to 1.2% in 2020).
Maintenance and Upkeep: Landed properties typically require more maintenance and upkeep compared to apartments or condos since you owned the land. The responsibilities of maintaining the building, landscaping, and infrastructure fall on the property owner, which can be time-consuming and costly (which is why you tend to see lands that are poorly maintained or upgraded, giving the possibility to find undervalued lands to renovate and sell them).
Lifestyle Preferences: Some Singaporeans may prefer the convenience and amenities offered by high-rise apartments or condominiums. These options often provide facilities like swimming pools, gyms, and security services that may align better with their lifestyle preferences.
Location Constraints: Landed properties are often concentrated in specific areas of Singapore, and not all locations may be desirable to potential buyers. Factors such as proximity to work, amenities, transportation links, and lifestyle preferences play a role in determining the attractiveness of a particular location.
Height Limitation: Unlike condos, landed are constrained in height and usually do not exceed 3 stories. It is terrible compared to the 72-story high Skysuites@Anson which offers a majestic view of Singapore's city centre.
Changing Demographics: Multi-storey housing might not appeal to older people (of course you can install a private lift at a cost) as you need to climb up and down multiple times a day.
Nevertheless, if you still want to get a landed, there are 4 choices from the most expensive to the cheapest:
- Good Class Bungalows (around 2000 to 3000)
- Semi-Detached and Detached (around 22,000 semi-detached and 7,500 detached)
- Terraces (around 35,000 to 40,000, including corner terraces)
Buying landed property in Singapore is subject to certain regulations and restrictions, as the government tightly controls the supply of such properties to maintain a stable housing market. Landed properties in Singapore typically refer to houses, bungalows, or land on which these types of properties can be built.
Remember to conduct thorough research, engage professional advice, and familiarize yourself with the latest regulations and guidelines before proceeding with a landed property purchase in Singapore.
Sky Hoon. Read Full Bio
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He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.