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Navigating Property Purchase for First-Time Homebuyers in Singapore
- Anthea
- Sep 24, 2023
- 4 min read
Updated: Oct 1, 2023
Owning a home is a dream and significant milestone for most individuals and families, yet the process of getting there is never easy. In Singapore, a country known for its vibrant economy and thriving real estate market, this aspiration is no different. Yet, the struggle for first-time homebuyers is real and the journey can be daunting, considering the myriad of options available and the complexities of the property market. As such, it is necessary to make sense of the various considerations and explore the possible options towards being first-time homebuyers in Singapore. In the process, I aim to help you make an informed decision that aligns with your dreams, your needs and most importantly within your financial capabilities.
Before we dive into specific options, it is vital to have an overview and understanding of the Singapore property landscape. The city-state's property market is characterised by a diverse range of housing options, each catering to different lifestyles, budgets and preferences.
Common types of residential properties available for purchase in Singapore are as follows:
Housing and Development Board (HDB) Flats
These are public housing and the units are managed by the HDB. HDB was first established in February 1960, aimed at providing quality and affordable homes, currently a popular choice for first-time homebuyers. Based on the latest data, about 78% of Singapore citizens (SC) & Singapore Permanent Residents (SPR) reside in HDB flats. HDB flats can either be bought brand new through the Build-To-Order (BTO) exercise from HDB or in the resale market.
Executive Condominiums (ECs)
ECs are built and sold by property developers to eligible Singaporeans who meet the restrictions. The lure is that they are available at affordable prices, within the reach of middle-income Singaporeans families who have aspirations of owning private ownership. This stems from the fact that ECs are considered private property after ten years.
ECs can either be purchased brand new through the property developer or in the resale market. Resale ECs in the 6th to 10th year after TOP can only be sold to SC or SPRs.
Condominiums (Condos)
Condos are private residential properties that offer a wide range of amenities such as swimming pools, BBQ pits, tennis courts etc. within the development. Lower density developments tend to have lesser amenities within the development as compared to those of higher density. Condos are either leasehold (99 or 999 years) or freehold, and can either be purchased brand new through new launch developer sales or via the resale market.
Landed Properties
These are private residential properties which include terrace houses, semi-detached houses, and bungalows. Landed properties provide exclusive privacy and space and therefore typically come with a higher price tag. Foreigners who wish to purchase landed properties require approval from the Land Dealings Approval Unit (LADU).
First-Time Homebuyers Summary Guide
| HDB Flats | ECs | Private |
Eligibility | Varies between BTO and resale - Citizenship - Age - Income Ceiling - Schemes - Property Ownership | Brand New (BN) - Citizenship - Age - Income Ceiling - Schemes - Property Ownership 6th to 10th year after TOP - Only for SC & SPR | Everyone is eligible. However, SPRs and Foreigners subjected to Additional Buyer’s Stamp Duty (ABSD) |
Financing |
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Mortgage/ Loan Limitations | *MSR & *TDSR | BN – *MSR & *TDSR Resale – **TDSR | **TDSR |
Minimum Occupation Period (MOP) | 5 years 10 years for Plus Flats & Prime Location Public Housing (PLH) | 5 years for BN | While private properties are not subjected to MOP, selling them within 3 years of purchase would incur Seller's Stamp Duty (SSD) |
^CPF Grants available for eligible buyers of HDB flats and brand new ECs.
^^Deferred Payment Scheme only for brand new ECs.
*MSR: Mortgage Servicing Ratio – Monthly mortgage instalments cannot exceed 30% of gross monthly income.
**TDSR: Total Debt Servicing Ratio – Total monthly loan commitments cannot exceed 55% of gross monthly income.
Essential Considerations for First-Time Homebuyers
Buying a home entails a number of key considerations and this all exist on a continuum that is unique for each individual or household. The considerations for first-time homebuyers is dependent on their individual preferences but heavily influenced by factors sometimes beyond their control. To make an informed decision, the following factors should be accounted for which help to narrow down the options and ensure that the best decision can be made.
Affordability
Homeownership is a significant financial commitment hence determining your budget and assessing your financial readiness is the first step any first-time homebuyer will need take. You may speak to a real estate agent, like myself, who will be able to assist in the financial assessment. It is important not to forget the additional expenses such as stamp duties, legal fees, renovation expenses as well as costs of furnishings. There is also a need to consider your job stability and overall financial health to ensure that the home purchase does not become a burden. Being well-informed about the costs and responsibilities of homeownership will help you make a sound financial decision as a first-time homebuyer.
Location
When it comes to choosing the location of your home, your lifestyle, daily needs and priorities are all important considerations. These include proximity to workplaces, parents’ home, schools, public transport nodes, as well as amenities. Shorter commutes can save you time and money in the long run especially with the highly connected public transport network in Singapore. With rising car prices, finding homes near transport hubs like bus interchanges and MRT stations is ideal. Choosing a home near amenities not only provide convenience that enhance your quality of life but the proximity of amenities like transport hubs, shopping malls and popular schools can also significantly affect property values.
Timeline of Moving In
If time is a crucial consideration for the moving in date, this essentially narrows down the possible options, with the resale market being a more viable option as opposed to a HDB Build-To-Order (BTO) exercise or a newly launched ECs or condominiums, which takes a number of years to be complete. Another possibility is to look for projects nearing their TOP.
TOP stands for Temporary Occupation Permit, issued by the Commissioner of Building Control that allows owners to occupy the building temporarily. This is usually issued when the essential services and main building works are completed, and it is safe to occupy the building. For residential properties, this means that homeowners can move into their new homes once the TOP is issued, even though minor works might still be ongoing.
Capital Appreciation Potential
In making an informed decision, one key consideration is often the potential for capital appreciation and future developments such as new MRT lines of the area of interest. This has considerable impact on the resale potential and exit strategy of the property in concern. Reviewing the historical price trend relative to Singapore property prices also serves as a guide.
Long-Term Plans
Another vital consideration when deciding on the type of housing as well as size of property is to give due consideration for your long-term plans, such as expanding family size etc. This is especially so with the current market outlook and rising costs of owning a property. This will put you in a position of strength and flexibility as you move into the next stage of your life.
Be sure to check out my next blog post as I dissect the HDB realm and share my personal experience as a first-time home buyer and my home ownership journey!
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