Updated: May 6
Buying a condo in Singapore is one that requires adequate thought and planning put into it as it is a big-ticket item and a financial commitment. Today, we will share on the 3 important factors to consider when buying a condo in Singapore.
Do also take note that when you buy a condo in Singapore, you are not able to buy and sell on the very next day due to the Seller Stamp Duty. Selling within your first year of purchase will cause you to have to pay a 12% tax on your selling price, 8% on the 2nd year and 4% on the 3rd year.
So it is important to ensure that besides having the downpayment for it, you are also aware of the repayments and costs that you will incur over the next 3 years (in case you intend to take a sabbatical leave, or make a change in your industry or career after you have purchased the property).
Here are the 3 important factors when buying a condo in Singapore to help you in making a more informed decision:
Consideration #1: What Can You Afford to Buy?
Financial planning is the first and foremost factor to look at when it comes to any type of property purchases; and even more crucial when it comes to a condo or any other forms of private properties due to the high amount of capital outlay.
General rule of thumb is to first start with an official loan IPA (In-Principle-Approval) first to check on the loan amount that you are eligible for. This can be done with any banks in Singapore.
There might be some slight discrepancies in the IPA loan amount due to different calculations by different banks, but this indicative value is usually close and helps you to have a better idea.
But do take note that an IPA does not translate to the full picture of the purchase price you should be looking at.
Let’s take this for an example:
One of the banks come back to you with an IPA stating that you are eligible for a $1,500,000 mortgage loan. Given that bank loans are now granted on 75% of the purchase price, you might naturally think that you should be looking at $2 million in terms of the purchase price if we work backwards.
But if we really break this $2 million purchase price down into numbers:
5% cash downpayment - $100,000
20% cash/CPF downpayment - $400,000
Buyer Stamp Duty - $64,600
This is the amount of cash or CPF you will need to have upfront for the downpayment and taxes, and this does not include the legal fees, the MCST fees and your monthly instalments yet.
More often than not, a better way would be to look at your cash and CPF OA on hand first, figure out the purchase price, then check if your salary or income is eligible for the loan amount that you are looking at. Always figure out your budget first before you move on further from here.
We would also recommend taking into account 3 to 6 months of your income as a safety net left untouched if possible, either in cash or CPF, in the event of unforeseen circumstances.
Secondly, it is to ask yourself which region in Singapore do you prefer and how many bedrooms do you intend to purchase? Outside Central Region (OCR), Rest of Central Region (RCR) or Core Central Region (CCR)? 1 bedroom, 2 bedroom, 3 bedroom, or 4 bedroom and above?
You can refer to this Singapore District Map: Defining the CCR, RCR and OCR by the 28 Districts and see which region or district you prefer to stay in. Bedroom wise it depends on how many people will you be staying with.
Thirdly, based on your preferred region, you will then need to do some research and find out the property prices - Can you afford a new launch condo or a resale condo, or both?
For resale condo, all you need to do is to go to Property Guru and search by district, number of bedrooms, condominiums to see the resale condo units available within your budget.
For new launch condo, do not refer to the new launch condo prices on Property Guru. More often than not, the prices are inaccurate or are simply clickbaits.
For latest new launch condo, floor plans and prices in the OCR region, you may click on this link to get the latest updates and to schedule a viewing through our team: OCR new launch condo
For latest new launch condo, floor plans and prices in the RCR region, you may click on this link to get the latest updates and to schedule a viewing through our team: RCR new launch condo
For latest new launch condo units, floor plans and prices in the CCR region, you may click on this link to get the latest updates and to schedule a viewing through our team: CCR new launch condo
Lastly, do take note that resale condo may often come with a Cash Over Valuation (COV), which then affects your mortgage loan and would likely burst your budget more than you would expect.
The meaning of Cash Over Valuation is for example, a seller is selling his/her unit at $1.5 million. Based on the bank's valuation, the unit is valued at only maximum $1.2 million. If you do go ahead with the purchase price of $1.5 million, your 75% loan is only on $1.2 million instead of $1.5 million. Here's the breakdown for clarity:
Cash over valuation - $300,000 (cash only)
5% cash on valuation - $60,000
20% cash/cpf on valuation - $240,000
75% bank loan on valuation - $900,000
Total cash + cpf outlay = $600,000
**And do take note Buyer stamp duty (taxes) is calculated on purchase price, not valuation**
Here's buying a resale condo at the actual bank valuation itself. The seller is selling his/her unit at $1.5 million and the bank matches the valuation at $1.5million:
5% cash on valuation - $75,000
20% cash/cpf on valuation - $300,000
75% bank loan on valuation - $1,1250,000
Total cash + cpf outlay = $$375,000
Cash over valuation will most likely burst your budget by a whole lot more than you would expect. So, be sure to engage an experienced real estate agent to guide you and help you through the whole journey. (No commission is payable when you engage a real estate agent to purchase a private property in Singapore.)
Note: For new launch condo, there is no COV involved.
Consideration #2: What Is the Intention Behind Your Purchase?
It is important to determine the objective behind your purchase and what you aim to achieve: are you buying this property more for your own stay needs, or is this purely as an investment property?
For those looking to buy purely for investment, this will be easy to shortlist as we have property data and past historical trends to derive from on the types of condo characteristics that can potentially make the most amount of profits in the shortest time frame, or properties that have the highest rental income.
For those looking to buy more for your own stay, this could then be a little trickier as with emotions involved, the property that you like or favor may or may not have the most investment potential.
And for those that are looking at both...….
Then what we would recommend is that you speak to a real estate agent to assist you with the process. This is because experienced real estate agents analyze properties day in and day out. They will be in a better position to give you advice based on the potential growth of the property, or in fact they would be able to shortlist the ones that marries both your own stay and investment requirements before recommending it to you.
Our personal take is that we do not see properties as merely just a shelter but they can also serve the purpose of a potential investment asset.
Many home owners or investors in Singapore have managed to leverage on the growth of their private properties to upgrade to better homes, make property investments or even upgrade to a landed home. And all these will contribute to their retirement plans down the road.
Do think through properly about the reasons why you are buying a condo so that you have a clearer thought process.
Consideration #3: How Long Do You Intend to Hold This Property For?
Many times, in life, things change and do not quite go as we have planned.
- You might be a single at 30 years old now, but you managed to find someone at the age of 35 and you decide to settle down and have kids. You might then need to sell and change to a bigger space.
- Or as a married couple, do you have plans to have more kids and might need a bigger space down the road?
- Or do you have plans for your parents to move in together with you?
These are just some of the possibilities and plans that everyone might encounter in life and there is no harm in discussing with your family members. It is very common and likely for buyers in their early 30s to 40s to change a few properties along the way due to changing family needs, wants or goals.
Should you be looking at a shorter holding period of under 10 years, you can actually opt for a 99 years leasehold property due to the more affordable entry prices.
For those buying and selling based on investment goals, you can simply decide to sell when your property price trends have reached stagnation, or when you have spotted the next opportunity to reinvest your capital into.
The length of your holding will help to determine the type of condo that will be the most suitable for you.
Everyone has different wants, need and goals to achieve. It just depends on what you are looking at to achieve or attain.
Do speak to us directly if you require any planning for your property purchase/investment needs. **Note - No commission is payable should you decide to engage us to help you with purchasing a new launch executive condo (EC), resale executive condo (EC), a new launch condo or a resale condo.
More About Us:
Here at The Open House SG, we help home buyers & investors find their dream home or make better-informed investment decisions.
We also help property owners market and sell their properties at the most optimal price & in the shortest time possible through digital marketing, home styling and creating buyer experiences.
Contact us directly if you need any assistance with your property buying & selling needs.