Second Property
For homeowners who have been planning to acquire a second property, this could be a good time to start looking. Other than the cost of the property, there are several things you’d need to be mindful of when buying a second home, such as eligibility, affordability, and intention.
If you are not a Singapore citizen, you have to obtain approval from the Controller of Residential Property in Singapore Land Authority (SLA), before you can buy landed houses including but not limited to strata landed houses.
Property prices
Understanding prices of private residential units, conduct some research before purchasing your unit. Click here for Past Transaction records.
Eligibility
If you own a private property, then you will be free to buy a second private property without any legal implications. However, if your first property is a public housing, be it a Build-to-Order (BTO) flat, resale HDB flat, executive condo (EC), or Design, Build and Sell Scheme (DBSS) flats, then you’ll need to fulfil certain criteria before your purchase.
HDB flats come with a 5-year Minimum Occupation Period (MOP) requirement, that you need to occupy that property for a minimum of 5 years before you can sell or rent out your flat or purchase of a private property.
Only Singapore citizens will be able to own both an HDB and a private property at the same time. Singapore Permanent Residents (PRs) will need to dispose their flat within 6 months of the private property purchase.
Stamp duty
Stamp duty is a tax on dutiable documents relating to any immovable property in Singapore and any stocks or shares. Here are some stamp duty types related to property purchase;
Buyer’s Stamp Duty. You are required to pay BSD for documents executed for the transfer or sale and purchase of property located in Singapore. BSD will be computed on the purchase price as stated in the document to be stamped or market value of the property whichever is the higher amount.
| Price or Market Value of Property | BSD Rates for residential properties | BSD Rates for non-residential properties |
|---|---|---|
| First $180,000 | 1% | 1% |
| Next $180,000 | 2% | 2% |
| Next $640,000 | 3% | 3% |
| Remaining Amount | 4% | |
| BSD is rounded down to the nearest dollar, subject to a minimum duty of $1 | ||
Additional Buyer’s Stamp Duty (ABSD) ABSD is a property cooling measure introduced by the government and adjusted on 6 July 2018, you will need to pay additional buyer’s stamp duty (ABSD) when you buy a second residential property. The amount you’d need to pay depends on your profile.
For Singaporeans, ABSD will be levied on the second property purchased, and all subsequent property purchases.
For Singapore Permanent Residents (PRs), ABSD will be levied on all purchases, with the first purchase at a lower rate.
For entities, ABSD will be levied on all purchases at a similar rate, including the first purchase. (additional 5% if the entity is housing developer; non-remittable)
| 1st Property | 2nd Property | 3rd Property | |
|---|---|---|---|
| Singaporean | NA | 17% | 25% |
| Permanent Residents | 5% | 25% | 30% |
| Foreigners | 30% | 30% | 30% |
| Entities | 35% | 35% | 35% |
You can use your CPF Ordinary Account (CPF OA) to pay for the stamp duties. However, the CPF monies may not be disbursed in time to meet the 14-day requirement. This would require you to pay in cash first, and then be reimbursed from your CPF later.
Loan-to-Value (LTV) Ratio
The usual loan-to-value (LTV) ratio for bank loans is capped at 75% of the property price or value (whichever is lower). This means that if you’re buying your first home with a bank loan, your downpayment is 25%.
If you haven’t finished paying off your first mortgage, however, the LTV will be lower when taking a second loan. For loans on residential properties where the OTP is granted on or after 6 July 2018, the following LTV limits apply:
| Outstanding loans | LTV limit | Minimum cash downpayment |
|---|---|---|
| None | 75% or 55% | 5% for LTV of 75% |
| 10% for LTV of 55% | ||
| One | 45% or 25% | 25% |
| Two or More | 35% or 15% | 25% |
| Apply the lower LTV limit if the loan tenure exceeds 30 years (or 25 years for HDB flats), or the loan period extends beyond the borrower’s age of 65 years. | ||
Use of CPF saving for Multiple Property purchase
As you can see, buying a second property would need significantly more cash. While it is possible to use your Central Provident Fund (CPF) to buy a second property, if you have already used your CPF for you first home;
For Multiple Property bought from 10 May 2019:
You are required to set aside the following before you can use the excess savings in your OA for the Multiple Property
The latest BRS if you have at least one property bought using CPF or the property that you are buying can cover you till age 95*
The latest Full Retirement Sum (“FRS”) if you do not have any property that can cover you till age 95
Buying a second property comes with a lot more financial responsibility compared to your first one, and it is advised to be clear about your objective for buying the second property. Is it for investment, or are you using it as a second home?
Like any other investments, you’d need to work out the potential rental yield and capital appreciation, as well as determine the estimated return on investment. Since a property purchase is a large investment, you should also have a strategy that consider factors such as:
What is your investment horizon? Do you aim to sell for a profit after five years, or to hold on to it for the long-term to collect rent?
When and how will you cut losses, if any? If your mortgage payments are higher than the low rental income, how long will you hold on before selling it off?
What sort of capital gains you are expecting?
Research on areas for your target tenants
Purchasing a property in Singapore is capital-intensive and buying a second home will require even more financial prudence. Any miscalculation can have significant financial consequences. As such, set up a clear plan and consult a property agent to help you with possible blind spots.
