Singapore: Overview
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Singapore's boom and then pause
Singapore’s property market took off last year. The residential property price index rose by 31.2% in 2007, after 2006’s 10.2% rise. However, prices in prime districts rose by considerably more. Capital values for non-landed freehold homes in the prime districts increased by 55% in 2007, according to figures from DTZ Debenham Tie Leung, to $1,480 psf.
Yet now there is a pause. Since the end of the past year, the global credit crunch has pushed the Singapore market into holding pattern. Prices are not falling, but both buyers and sellers are being cautious.
According to an analysis of private residential transactions by DTZ, foreigners bought 6,536 non-landed homes from the secondary market in 2007, which could account for more than 50% of secondary market transactions – a record.
The reason, it seems, is that Singapore is experiencing an influx of expatriates, and some foreigners prefer to buy rather than face escalating rentals, especially if they are going to be in Singapore for more than a couple of years. Rents of prime apartments and condominiums increased 45% year-on-year in 2007 according to DTZ figures.
RENTAL YIELDS
Slightly higher yields in Singapore at 3.5%
Gross rental income on apartments in Singapore have increased but are still considered very poor. The average yield is at 3.52%, with smaller units getting returns only as high as 4.19%.
Apartments at the centre are still expensive, with a 120-sq. m unit selling at US$10,723 per sq. m. Prices average around US$13,686 per sq. m.
TAXES AND COSTS
Rental income tax in Singapore is high
Effective Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 15.1% | 15.1% | 15.1% |
| Click here to see a worked example | |||
Source:
Disclaimer
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Rental Income: Net rental income earned by non-residents is taxed at 20%. Property tax, insurance, maintenance and repairs are all deductible from gross rental income.
Property Tax: Property tax for rental properties is set at 10% of the annual value (i.e. the estimated rent if rented out). Foreigners pay an additional 10% surcharge.
Capital Gains: There is no capital gains tax.
Inheritance: Inheritance of properties located in Singapore is subject to estate duties at 5% and 10%.
Residents: Residents are taxed on their income at progressive rates, ranging from 3.75% to 21%.
BUYING GUIDE
Roundtrip buying costs in Singapore can reach 6.45%
The total roundtrip costs are about 3.15% to 6.45%. Stamp duty is around 1% to 3%, and estate agent’s fee at 3% (2% paid by the seller and 1% paid by the buyer). Because Singapore uses a common database of all property listings, there is no sense in hiring more than one agent. To register the property, there are three procedures, typically done in nine days.
LANDLORD AND TENANT
Singapore favours landlords
With the passage of the Control of Rent (Abolition) Act in 2001, the law in Singapore became clearly pro-landlord.
Rents: The parties can freely determine the rent and the rate of rent increase. Tenants usually pay a security deposit of one month’s rent for every year of lease.
Dispute Resolution: Most landlord and tenant disputes are resolved through mediation or Alternative Dispute Resolution, usually through groups such as the Consumer Association of Singapore (CASE) and Singapore Mediation Center (SMC).
ECONOMIC GROWTH
Small city-state is an economic giant
Singapore is a small island-nation (only 93 sq. km.) at the tip of the Malaysian Peninsula in Southeast Asia. With a population of 4.5 million, it also has one of the highest population densities in the world. It boasts of a high standard of living (one of the highest in Asia and the world at US$32,082) per capita, world class infrastructure, a highly competitive electronics export industry, and a wild array of experiences for tourists.
Singapore is remarkable in many aspects of development. But it is heavily dependent on trade, making it vulnerable to shocks in the global economy. This fact was highlighted by the contraction in 1998 due to the Asian Crisis, and a recession in 2001 due to various international events, primarily the 9-11 terrorist attack on the US.
The recent recovery in the housing market is mainly due to strong economic growth, boosted by strong manufacturing sector growth. The GDP growth rate in 2007 was 7.7%, after 7.9% growth in 2006, which again followed strong GDP increases in 2005 (6.4%) and 2004 (8.7%).
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Bubble fears prompt foreign ownership limits in China
America & Caribbean
The slowdown of the U.S. housing market
Middle East and Africa
Bahrain is open to foreigners and sizzling hot
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): $10,723 For a 120 sq. m. property, usually an apartment. | Rental Yield: 3.97% For a 120 sq. m. property, usually an apartment. |
| Rent/month: $4,255 For a 120 sq. m. property. | Income Tax: 15.13% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
4.7%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice. | |
APRIL 2008
- Singapore SWF in recession warning - Financial Times
MARCH 2008
- Developers hold off launches in quiet market - Asia One business
- HDB imposes checklists on resale flats - Singapore Property P
- Speculators holding out for higher prices - Lushhome
FEBRUARY 2008
- Singapore firms buys the World's Nova island - Arabian Business
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